ALPINE 4 HOLDINGS, INC. - Annual Report: 2015 (Form 10-K)

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-K

(Mark One)

[X]	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2015

[  ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission file number:  000-55205

 

Alpine 4 Technologies Ltd.

(Exact name of registrant as specified in its charter)

Delaware	46-5482689
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
4742 N 24th St. Suite 300
Phoenix AZ	85016
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number, including area code: (855) 777-0077

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered under Section 12(b) of the Exchange Act:
None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.0001 par value per share
(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o  No þ

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 2 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ  No o

 

Indicated by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o

 

Indicate by check mark if disclosure of delinquent filings pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

[  ] Large Accelerated Filer	[  ] Accelerated Filer
[  ] Non-accelerated Filer (do not check if a smaller reporting company)	[X] Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2015, was $0.  For purposes of the foregoing calculation only, directors and executive officers and holders of 10% or more of the issuer's common capital stock have been deemed affiliates.

 

The number of shares of the Registrant's Class A common stock outstanding as of March 25, 2016, was 208,705,690.  The number of shares of the Registrant's Class B common stock outstanding as of March 25, 2016, was 16,000,000.

 

 

ALPINE 4 TECHNOLOGIES LTD.

FISCAL YEAR ENDED DECEMBER 31, 2015

ANNUAL REPORT ON FORM 10-K

 

TABLE OF CONTENTS

 

 

			Page
PART I
ITEM 1.	BUSINESS		1
ITEM 1A.	RISK FACTORS		7
ITEM 1B.	UNRESOLVED STAFF COMMENTS		16
ITEM 2.	PROPERTIES		16
ITEM 3.	LEGAL PROCEEDINGS		16
ITEM 4.	MINE SAFETY DISCLOSURES		16
PART II
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		16
ITEM 6.	SELECTED FINANCIAL DATA		17
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		18
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		23
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		23
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		24
ITEM 9A.	CONTROLS AND PROCEDURES		24
ITEM 9B.	OTHER INFORMATION		25
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		26
ITEM 11.	EXECUTIVE COMPENSATION		27
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  AND RELATED STOCKHOLDER MATTERS		30
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		31
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES		32
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		33
SIGNATURES			36

 

PART I

Special Note Regarding Forward-Looking Statements

 

Information included or incorporated by reference in this Annual Report on Form 10-K contains forward-looking statements. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Forward-looking statements may contain the words "believes," "project," "expects," "anticipates," "estimates," "forecasts," "intends," "strategy," "plan," "may," "will," "would," "will be," "will continue," "will likely result," and similar expressions, and are subject to numerous known and unknown risks and uncertainties. Additionally, statements relating to implementation of business strategy, future financial performance, acquisition strategies, capital raising transactions, performance of contractual obligations, and similar statements may contain forward-looking statements. In evaluating such statements, prospective investors and shareholders should carefully review various risks and uncertainties identified in this Report, including the matters set forth under the captions "Risk Factors" and in the Company's other SEC filings. These risks and uncertainties could cause the Company's actual results to differ materially from those indicated in the forward-looking statements. The Company disclaims any obligation to update or publicly announce revisions to any forward-looking statements to reflect future events or developments.

 

Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading "Risk Factors Related to Our Business" below, as well as those discussed elsewhere in this Annual Report on Form 10-K. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We file reports with the Securities and Exchange Commission ("SEC"). You can read and copy any materials we file with the SEC at the SEC's Public Reference Room, 100 F. Street, NE, Washington, D.C. 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

 

We disclaim any obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

ITEM 1.                      BUSINESS.

Our Business

Company Background and History

Alpine 4 Technologies Ltd. ("Alpine 4" or the "Company") was incorporated in Delaware on April 22, 2014, as ALPINE 4 Inc. From inception, the Company was in the developmental stage and conducted only limited business operations, and was formed as a vehicle to pursue a business combination. The Company selected December 31 as its fiscal year end.

On June 30, the Board and shareholders approved an amendment to the Company's Certificate of Incorporation to change the name of the Company to Alpine 4 Automotive Technologies Ltd.  Subsequently, on June 1, 2015, the Company filed a Certificate of Amendment (the "Amendment") to the Certificate of Incorporation with the Secretary of State of Delaware to change the name of the Company to Alpine 4 Technologies Ltd.

Business Strategy

Who We Are

Alpine 4 is a publicly held enterprise with four principles at the core of its business: Synergy, Innovation, Drive, and Excellence (S.I.D.E.).  At Alpine 4, we believe synergistic innovation drives excellence. By anchoring these words to our combined experience and capabilities, we are able to aggressively pursue opportunities within and across vertical markets. We deliver solutions that not only drive industry standards, but also increase value for our shareholders.

At Alpine 4, we understand the nature of how technology and innovation can accentuate a business. We strive to develop strategic synergies between our holdings to create value and operational excellence within a unique long-term perspective.

Our Core Business

We are a technology holding company with a heavy concentration in the automotive industry. We provide a distinctive and powerful advantage to management, sales, finance and service departments at automotive dealerships in order to increase productivity, profitability and customer retention through 6^th Sense Auto. Our flagship program, 6^th Sense Auto, uses disruptive technology to improve inventory management, reduce costs, increase sales and enhance service. The 6^th Sense Auto program serves a two-fold solution addressing both business to business and business to consumer market needs. The 6^th Sense Auto product is discussed in more detail below.

Market Size and Growth

There are approximately 60,000 auto dealerships in the United States. This includes, new car dealerships affiliated with an auto manufacturer and independent used car dealerships ranging from small lots to megadealers such as AutoNation. In 2014, 40.5 million used vehicles were sold representing approximately two and half times the number of new vehicles sold. Total used vehicle sales by new car dealers increased 8 percent in 2014 to 15 million units, the highest level since 2005. Having almost 55.5 million vehicles sold each year, our 6^th Sense Auto program has a $12 billion dollar market opportunity.

Diversification

In addition to our push for marketplace adoption of our 6^th Sense Auto product, we have also been actively pursuing diversification through planned acquisitions of other businesses.   It is our goal to help drive Alpine 4 into a leading multi-faceted holding company with diverse products and services that not only benefit from one another as whole but also have the benefit of independence.  This type of corporate structure is about having our subsidiaries prosper through strong onsite leadership, while working synergistically with other Alpine 4 holdings.   Alpine 4 has been set up with a holding company model, with Presidents who will run each business, and Managers with specific industry related experience who, along with Kent Wilson, the CEO of Alpine 4, will help guide our portfolio of companies as needed.  Alpine 4 will work with our Presidents and Managers to ensure that our motto of S.I.D.E (Synergistic, Innovation, Drives, Excellence) is utilized.  Further, we plan to work with our subsidiaries and capital partners to provide the proper capital allocation and, to work to make sure each business is executing at high levels.  

For the greater part of 2016, Alpine 4's primary interests will lie in the following: automotive and green energy technologies, logistics, companies that provide energy infrastructure manufacturing or those companies that support these industries.  At the core of our acquisition strategy is our focus on existing smaller middle market operating companies with revenues of $5 to $50 million.  In this target-rich environment, we believe that businesses generally sell at more reasonable multiples, present greater opportunities for operational and strategic improvements and have greater potential for growth.

Developed Products

Alpine 4 has a portfolio of consumer and professional software applications called 6thSenseAuto, which consists primarily of the Company's two products previously branded as LotWatch™ and ServiceWatch™, which together are now presented as 6^th Sense Auto.

LotWatch – Integrated Inventory Management System

LotWatch™ is a product that was designed and developed by Alpine 4 in the United States. By using information gathered from the OBD (On Board Diagnostics) port in almost any newer vehicle, and by utilizing both GPS technology and cellular based service, the LotWatch™ module gives car dealerships vehicle-specific, real-time, accurate information about your fleet of new vehicles. This information can be easily accessed and viewed on Alpine 4's user-friendly interface anywhere the dealership has internet access. LotWatch™ uses wireless data transmission technology.

LotWatch™ provides better inventory management by:

-	Knowing when a vehicle has left a specific geo-fence that a dealership can establish in Alpine 4's proprietary system. With this product, dealership management can know the location of its inventory.
-	Knowing how many days any vehicle has been in the dealership's new car inventory. The dealership's sales team will know where the oldest vehicle on the lot is, resulting in a substantial savings in flooring fees.
-	Eliminating lost sales because the dealership team did not know a vehicle's battery needed to be charged or the vehicle refueled before the customer did.  The LotWatch provides information about the vehicle's status, including battery charge, fuel status, and the last time it was driven.
-	Keeping the dealership informed of customer and employee driving habits when a new vehicle leaves the lot.
-	Recording events specific to each of the dealership's vehicles. Dealership management will know when and how many times any new vehicle on its lot has been driven!
-	Generating customized reports  on a pre-determined basis.  Dealership management can determine the scope and frequency of reports generated by the system.

ServiceWatch – Personalized Assistance and Diagnostic Solution

ServiceWatch is a product that uses information gathered from the OBD (On Board Diagnostics) port in almost any newer vehicle, and utilizes GPS technology and cellular based services.  The ServiceWatch module provides personalized assistance and diagnostic solutions to both the vehicle owner and the dealership that sold the vehicle. ServiceWatch is also designed to transmit information to a dealership's service department to help improve customer service levels.

The benefits of ServiceWatch include:

-	Vehicle Awareness: real-time notifications of check-engine diagnostics and vehicle maintenance are sent to the owner of the vehicle and the selling dealership service department via text message or email.
-	Nationwide Service Support: the mobile application provides location-specific services, which can help refer a vehicle owner to the nearest dealership and recommend driving distances, based on diagnostics from the check-engine light and information obtained from the vehicle's on board computer.
-	Convenient Access: the mobile app and a proprietary web-based interface provide vehicle owners with 24-hour convenient and easy access to vehicle information or location.
-	Lost or Stolen Vehicle Support: the embedded GPS feature enables the vehicle owner to assist local police departments with locating a lost or stolen vehicle through Alpine 4's toll-free customer service line.
-	Personal Assistance: ServiceWatch includes Personal Assistance as an additional benefit.  Services include directory assistance, driving directions, and dining suggestions and reservations are examples of features that are available. Typical arrangements include a three-year contract for the vehicle owner which can be renewed directly with Alpine 4 if the owner desires.
-	Usage Visibility: this feature permits parents to effectively manage the safety of younger drivers by utilizing GPS services online or via the mobile app. The ability to obtain new driver habits, top speeds, panic stops, quick accelerations, curfew notifications and geo-fence guidelines are examples of the features available in ServiceWatch.

As of the date of this Report, Alpine 4 had concluded installations at four automobile dealerships in Arizona, California, and Indiana for the 6^th Sense Auto Product. Ending in the 1^st quarter 2016 , Alpine 4 finished a beta launch of its 6^th Sense Auto product.  That launch consisted of beta testing at the dealerships located in Arizona, California and Indiana.

Alpine 4 personnel provide training in the installation of the devices, creation of the customized user interface, and use of the inventory management system.  Additionally, personnel introduce and explain the details of the products to a dealership's sales staff, train the finance managers on the benefits of 6^th Sense Auto and the registration process, and provide other training and support as agreed upon with the dealership.

Alpine 4 has an agreement with one principal manufacturer and supplier of the devices, CalAmp (discussed below).

Alpine 4 has an agreement with one principal manufacturer and supplier of the devices.

CalAmp Wireless Data Systems, Inc.

Additionally, in August 2014, Alpine 4 entered into a CalAmp Connect – PULS^TM Master Service Agreement (the "CalAmp Agreement") with CalAmp Wireless Data Systems, Inc. ("CalAmp"), pursuant to which Alpine 4 is entitled to access the CalAmp Connect Device Enablement Platform, and the Programming Update Logistics System (PULS) Application Services platform and use CalAmp's services related to the devices.  CalAmp sells hardware devices (the "CalAmp Devices") that collect and report real-time information about vehicles through the CalAmp platform of application services (the "CalAmp Application Services").  Pursuant to the CalAmp Agreement, CalAmp granted to Alpine 4 a license to use CalAmp's Application Services with CalAmp device(s) and ancillary accessories that directly interface with CalAmp's software application(s), including but not limited to PULS and the device enablement platform.  CalAmp's Application Services include fleet management and tracking, features which, when incorporated with Alpine 4's proprietary software solutions, provide automobile dealerships with real-time information about vehicle inventory.  Pursuant to the CalAmp Agreement, Alpine 4 agreed to pay monthly fees for each installed device.  The fees include access to a set amount of pooled data per device, transmitted over CalAmp's contract network.  The initial term of the CalAmp Agreement was for one year from the effective date (August 15, 2014), with automatic month-to-month renewals following the initial term. Alpine 4 has purchased devices from CalAmp, pursuant to purchase orders rather than a separate manufacturing agreement.

The agreement with CalAmp was previously filed as an exhibit to the Company's Registration Statement/Proxy Statement on Form S-4.

Business Seasonality and Product Introductions

Following the acquisition of the AutoTek source code assets, the Company expects to experience higher net sales in its first and third quarters compared to other quarters in its fiscal year due in part to seasonal holiday demand and the automotive industry model year end that typically concludes in the third quarter of each year. Additionally, new automotive models introductions can significantly impact our products ability to communicate properly and therefore product costs and operating expenses may rise. Product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new product inventory following a product introduction, and often, channel inventory of a particular product declines as the next related major product launch approaches. Net sales can also be affected when consumers and dealerships anticipate a vehicle introduction.

Recent Developments

AutoTek Special Meeting, Results

Share Exchange; Issuance of Shares

Change in Capital Structure

Pursuant to the Second Amended and Restated Certificate of Incorporation, Alpine 4 is authorized to issue two classes of common stock: Class A common stock, which will have one vote per share, and Class B common stock, which will have ten votes per share. Any holder of Class B common stock may convert his or her shares at any time into shares of Class A common stock on a share-for-share basis. Otherwise the rights of the two classes of common stock will be identical. The rights of these classes of common stock are discussed in greater detail below.

Alpine 4's authorized capital stock consists of 605,000,000 shares, each with a par value of $0.0001 per share, of which:

•	500,000,000 shares are designated as Class A common stock. The previously issued shares of common stock are redesignated as Class A common stock
•	100,000,000 shares are designated as Class B common stock.
•	5,000,000 shares are designated as preferred stock.

Common Stock

Holders of our Class A and Class B common stock have identical rights, except that holders of our Class A common stock are entitled to one vote per share and holders of our Class B common stock are entitled to ten votes per share. Holders of shares of Class A common stock and Class B common stock will vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless otherwise required by law. We have not provided for cumulative voting for the election of directors in our certificate of incorporation.

Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of Class A common stock and Class B common stock shall be entitled to share equally in any dividends that our board of directors may determine to issue from time to time. In the event a dividend is paid in the form of shares of common stock or rights to acquire shares of common stock, the holders of Class A common stock shall receive Class A common stock, or rights to acquire Class A common stock, as the case may be, and the holders of Class B common stock shall receive Class B common stock, or rights to acquire Class B common stock, as the case may be.

Upon our liquidation, dissolution or winding-up, the holders of Class A common stock and Class B common stock shall be entitled to share equally all assets remaining after the payment of any liabilities and the liquidation preferences on any outstanding preferred stock.

Our Class A common stock is not convertible into any other shares of our capital stock.

Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock shall convert automatically into one share of Class A common stock upon any transfer, whether or not for value, except for certain transfers described in our certificate of incorporation.

Once transferred and converted into Class A common stock, the Class B common stock shall not be reissued. No class of common stock may be subdivided or combined unless the other class of common stock concurrently is subdivided or combined in the same proportion and in the same manner.

The foregoing description of the Second Amended and Restated Certificate of Incorporation is qualified in its entirety by reference to the text of the Amendment attached as Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on August 27, 2015, and incorporated therein by reference. 

Employees

As of the date of this Report, we had 6 full-time and 2 part-time employees. We believe our relationships with our employees is good. Other than as disclosed in this Report, we have no employment agreements with our employees.

ITEM 1A.                      RISK FACTORS

Because of the following factors, as well as other factors affecting the Company's financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

Alpine 4 is an "emerging growth company," and the reduced disclosure requirements applicable to "emerging growth companies" could make our common stock less attractive to investors.

Alpine 4 is an "emerging growth company," as defined in the JOBS Act. For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding advisory "say-on-pay" votes on executive compensation and shareholder advisory votes on golden parachute compensation. We will remain an "emerging growth company" until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more; (ii) the last date of the fiscal year following the fifth anniversary of the date of the first sale of common stock under the Company's first filed registration statement; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; and (iv) the date on which we are deemed to be a "large accelerated filer" under the Exchange Act. We will be deemed a large accelerated filer on the first day of the fiscal year after the market value of our common equity held by non-affiliates exceeds $700 million, measured on October 31.

We cannot predict if investors will find our common stock less attractive to the extent we rely on the exemptions available to emerging growth companies. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

A Company that elects to be treated as an emerging growth company shall continue to be deemed an emerging growth company until the earliest of (i) the last day of the fiscal year during which it had total annual gross revenues of $1,000,000,000 (as indexed for inflation), (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common stock under the Company's first filed registration statement; (iii) the date on which it has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (iv) the date on which is deemed to be a 'large accelerated filer' as defined by the SEC, which would generally occur upon it attaining a public float of at least $700 million.

However, we are choosing to "opt out" of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Additionally, the management of future growth will require, among other things, continued development of Alpine 4's financial and management controls and management information systems, stringent control of costs, increased marketing activities, and the ability to attract and retain qualified management, research, and marketing personnel.  The loss of key executives or the failure to hire qualified replacement personnel would compromise Alpine 4's ability to generate revenues or otherwise have a material adverse effect on Alpine 4.  There can be no assurance that Alpine 4 will be able to successfully attract and retain skilled and experienced personnel.

•	the number of customers Alpine 4 is able to attract and retain over time;
•	the economy, and in periods of rapidly declining economic conditions, customers may defer purchases of new vehicles, which will impact the sales and deployment of products such as ours;
•	the competitive environment in the automotive aftermarket product market may force us to reduce prices below our desired pricing level or increase promotional spending; and
•	the ability to anticipate changes in consumer preferences and to meet customers' needs in a timely cost effective manner.

•	the ability to establish, maintain and eventually grow market share in a competitive environment.
•	delivery of its information globally, geopolitical changes, changes in liquor regulations, currency fluctuations, natural disasters, pandemics and other factors beyond our control may increase the cost of items it purchases, create communication issues or render product delivery difficult which could have a material adverse effect on its sales and profitability.

☐	The competitive environment in the automotive repair service industry that may force us to reduce prices below the optimal pricing level or increase promotional spending;
☐	Our ability to anticipate changes in consumer preferences and to meet customers' needs for our products in a timely cost effective manner; and
☐	Our ability to establish, maintain and eventually grow market share in a competitive environment.

☐	there is no guarantee that we will enter into definitive agreements with distributors and on acceptable terms;
☐	hiring and training qualified personnel in local markets;
☐	managing marketing and development costs at affordable levels;
☐	cost and availability of labor;
☐	the availability of, and our ability to obtain, adequate supplies of ingredients that meet our quality standards; and
☐	securing required governmental approvals in a timely manner when necessary.

•	announcements of new products, brands, commercial relationships, acquisitions or other events by us or our competitors;
•	regulatory or legal developments in the United States and other countries;
•	fluctuations in stock market prices and trading volumes of similar companies;
•	general market conditions and overall fluctuations in U.S. equity markets;
•	variations in our quarterly operating results;
•	changes in our financial guidance or securities analysts' estimates of our financial performance;
•	changes in accounting principles;
•	our ability to raise additional capital and the terms on which we can raise it;
•	sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;
•	additions or departures of key personnel;
•	discussion of us or our stock price by the press and by online investor communities; and
•	other risks and uncertainties described in these risk factors.

As of the date of this Report, there was no public market for our Class A Common Stock or Class B Common Stock. The Company is working with a market maker to apply to have the Class A common shares quoted on the OTC Markets. The OTC Markets are a regulated quotation service that displays real-time quotes, last sale prices and volume information in over-the-counter securities. The OTC Markets are not an issuer listing service, market or exchange. To be eligible for quotation on the OTC QB or QX Markets, issuers must remain current in their filings with the SEC or applicable regulatory authority. Market makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. We cannot guarantee that our application will be accepted or approved and our stock listed and quoted for sale. If our application is rejected, our stock may then be traded on the "Pink Sheets," and the market for resale of our shares would decrease dramatically, if not be eliminated. As of the date of this filing, there have been no discussions or understandings between Alpine 4 and anyone acting on our behalf, with any market maker regarding participation in a future trading market for our securities. If no market is ever developed for our Class A common stock, it will be difficult for you to sell any Alpine 4 Class A common shares. In such a case, you may find that you are unable to achieve any benefit from your investment or liquidate your shares without considerable delay, if at all. In addition, if we fail to have our Class A common stock quoted on a public trading market, your Class A common stock will not have a quantifiable value and it may be difficult, if not impossible, to ever resell your shares, resulting in an inability to realize any value from your investment.

 

ITEM 1B.                   UNRESOLVED STAFF COMMENTS.

Not applicable to Smaller Reporting Companies.

ITEM 2.                      PROPERTIES.

We do not own any real property used in the operation of our current business. We maintain our corporate office in rented offices at 4742 N. 24^th Street, Suite 300, Phoenix, AZ 85016. The monthly rent obligation is approximately $1,700 per month.

ITEM 3.                      LEGAL PROCEEDINGS.

None.

ITEM 4.                      MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5.                      MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET PRICES AND DIVIDEND DATA

Stock Prices

As of the date of this Report, there was no established public trading market for Alpine 4's common stock, and a regular trading market may not develop, or if developed, may not be sustained. A stockholder in all likelihood, therefore, will not be able to resell his or her securities should he or he desire to do so when eligible for public resale.  Alpine 4 plans to work with a market maker and other professionals with a view to having Alpine 4's common stock accepted for trading on the OTC Markets or the OTC Bulletin Board following the closing of the Asset Purchase Transaction and the Share Exchange.

Shareholders

As of the date of this Report, Alpine 4 had 397 shareholders of record.

 

Dividends

Alpine 4 has not declared any cash dividends on its common stock since inception and does not anticipate paying such dividends in the foreseeable future. Any decisions as to future payments of dividends will depend on Alpine 4's earnings and financial position and such other facts, as the Board of Directors deems relevant.

Securities Authorized for Issuance under Equity Compensation Plans

None.

 

Recent Sales of Unregistered Securities

Private Offerings of Shares

Since inception, the Company has also issued an aggregate of 452,506 shares in connection with private offerings to accredited investors.  Each investor signed a subscription agreement and indicated his or her status as an accredited investor, and made other representations, including that he or she was purchasing with investment intent, for his or her own account and not with an intent to distribute the shares, and that he or she had received sufficient information about the Company to make an informed decision about investing in the Company.

During the quarter ended December 31, 2015, the Company sold an aggregate of 85,958 shares of the Company's Class A common stock in privately negotiated transactions and private offerings to accredited investors. Each investor signed a subscription agreement and indicated his or her status as an accredited investor, and made other representations, including that he or she was purchasing with investment intent, for his or her own account and not with an intent to distribute the shares, and that he or she had received sufficient information about the Company to make an informed decision about investing in the Company.  The Company raised approximately $57.000 from the sales of the shares.

The shares of common were issued to these individuals without registration under the 1933 Act in reliance on Section 4(a)(2) of the 1933 Act and the rules and regulations promulgated thereunder. None of the transactions involved a public offering.

 

ITEM 6.                      SELECTED FINANCIAL DATA.

Not required for Smaller Reporting Companies.

ITEM 7.                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

There are statements in this Report that are not historical facts. These "forward-looking statements" can be identified by use of terminology such as "believe," "hope," "may," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy" and similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control. For a discussion of these risks, you should read this entire Report carefully, especially the risks discussed under "Risk Factors." Although management believes that the assumptions underlying the forward looking statements included in this Report are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated by these forward looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In the light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this Report will in fact transpire. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We expressly disclaim any obligation to update or revise any forward-looking statements.

 

Overview and Highlights

Company Background

ALPINE 4 Inc. was incorporated in the State of Delaware on April 22, 2014.  The Company was a start-up  company and conducted virtually no business operations.  On August 5, 2014, the Company entered into a Licensing Agreement (the "License Agreement") with AutoTek Incorporated ("AutoTek").  Pursuant to the License Agreement, AutoTek granted to Alpine 4 an exclusive, transferable (including sublicensable) worldwide perpetual license of the source code that could be developed into the LotWatch and ServiceWatch Products, to make, use, iport, lease, and sell products incorporating the LotWatch and ServiceWatch products (the "Licensed Products").  The Company was required to pay to AutoTek royalty payments equal to $10 per ServiceWatch device activated using the Licensed Technology.

 

The term of the License Agreement (as amended) ran from its execution through the earlier of (A) the execution and closing of the definitive purchase agreement by the parties and providing for the acquisition of AutoTek's assets and intellectual property rights relating to the source code, or (B) the second annual anniversary of the effective date.  

Following the entry into the Licensing Agreement, the Company and AutoTek negotiated an Asset Purchase and Share Exchange Agreement (the "Asset Purchase Agreement"), pursuant to which the Company would purchase the source code asset from AutoTek.  The Company agreed to pay $30,000, and to offer to all of the AutoTek shareholders to issue shares of the Company's common stock in exchange for shares of AutoTek's stock tendered.  The closing of the asset purchase transaction is conditioned upon receipt of the approval of a majority of the AutoTek shareholders.

The Company filed a registration statement/proxy statement on Form S-4 (the "Registration Statement") with the SEC on November 4, 2014.  The Registration Statement provided information about the Company and the asset purchase transaction to the shareholders of AutoTek, and provided that a special meeting of the AutoTek shareholders would be held where they could vote on the asset purchase transaction.  The registration statement/proxy statement was declared effective on December 7, 2015.  Following the effectiveness of the Registration Statement, AutoTek held its Special Meeting on December 21, 2015, where the AutoTek shareholders approved the asset purchase transaction, and the Company and AutoTek closed the transaction shortly thereafter.

As noted, the Company offered to issue shares of the Company's common stock to the AutoTek shareholders who elected to exchange their AutoTek shares.  The AutoTek shareholders were not required to exchange their shares, and any AutoTek shareholders who elected to not participate in the share exchange would remain AutoTek shareholders.  The AutoTek shareholders who elected to exchange their shares received six (6) shares of the Company's Class A common stock for each one share of AutoTek stock tendered for exchange.  The Share Exchange closed on February 4, 2016, by which date the AutoTek shareholders tendered an aggregate of 25,000,000 shares of AutoTek common stock, in exchange for which the Company issued an aggregate of 150,000,000 shares of the Company's Class A common stock.

Following the closing of the asset purchase transaction, the Company is continuing to use the source code acquired from AutoTek, as well as seeking to acquire other potential businesses, and deploy those assets to the Company's customer base which consists of automotive dealerships in the United States.  As of the date of this Report, the Company 4 has used AutoTek's source code (pursuant to the License Agreement) to design, develop and market telematics devices and software for the Automotive Industry.  The Company has begun to deploy a portfolio of consumer and professional software applications, called 6thSense Auto (discussed in more detail below), which combined the Company's two prior products that were based on the source code acquired from AutoTek, LotWatch and ServiceWatch, to the Company's customer base.  Further, management anticipates that these products will be sold in the United States from new car automotive dealership stores.

The Company owns no real estate or personal property. The Company selected December 31 as its fiscal year end.

Business Strategy

The Company is committed to bringing the best user experience to its customers through its innovative telematics hardware, software and services. The Company's business strategy is to leverage its unique ability to design and develop its own user interface operating systems, and third party hardware and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design. The Company believes continual investment in research and development, marketing and advertising is critical to the development and sale of innovative products and technologies. As part of its strategy, following the planned acquisition of certain assets of AutoTek, the Company plans to continue to expand its platform for the discovery and delivery of automotive related businesses, services and products. The Company believes a high-quality buying experience with knowledgeable salespersons who can convey the value of the Company's products and services greatly enhances its ability to attract and retain customers. Therefore, the Company's strategy also includes enhancing and expanding its own automotive dealership distribution network to effectively reach more customers and provide them with a high-quality sales and post-sales support experience.

Developed Products

6th Sense Auto ("6SA") can provide automobile dealerships with industry-leading sales team management information.  Utilizing our proprietary business intelligence platform, 6SA can help dealership sales departments; track customers from the time they enter a dealer's lot; let sales managers know in real-time when a salesperson is with a customer, on a test drive; or permit dealers and managers to review vehicles in inventory.  The 6SA system delivers a wide range of operational efficiencies, which the Company believes will maximize everything dealership sales managers need to know into one unique dashboard.  

·	Sales Personnel Management System:  6SA comes with a revolutionary Sales Personnel App for IOS, Windows and Android, which gives a dealership's sales team the ability to search for any car in inventory, know exactly where it is at, and check to see if the battery is charged and if it has fuel.  This revolutionary app also allows dealership sales teams to intake information about the "deal" such as customer profile info, driver's license information, and all needed vehicle trade information (including pictures), and then simultaneously push that information to the sales department, used car manager, or whoever the dealership or management designates.
·	Sales KPI Management Dashboards:  Anyone in management knows the challenges of managing multitudes of individuals.  The 6SA Sales Management Dashboard is essentially an enhanced virtual deal board.  It permits dealership management to get the latest up-to-date information on the sales team, how many customers are on the dealer's lot, how many test drives have occurred or are occurring, how many deals have been submitted, and much more.
·	Remote Management:  This component allows dealership personnel to manage the team and inventory from their smartphones, computers, or tablets. The 6SA app and web based UI lets the management team manage from anywhere, on or off of the lot.

 

Inventory Management and Vehicle Location:  The 6SA Inventory Management System easily allows dealership personnel to locate vehicles in inventory so their sales team can easily guide a customer to the exact car they are looking for, which allows them to: 

·	Locate the exact vehicle(s) they are looking for and not have to search the lot;
·	See if the vehicle has fuel and the battery is charged (Dead batteries kill deals!); and
·	Respond to customer's inquiries more quickly and as a result drive sales.

 

Customer Retention & Fix Ops Management:  The 6SA Customer Retention Platform (CRP) provides vehicle-specific, real-time, accurate information to a dealership's service department.   According to data provided by the National Automobile Dealers Association, it is estimated that at least 30% percent of a new car dealership's profit comes from its service department, and as such, new car dealerships spend roughly $34 per month retaining a new customer!  

 

6th Sense Auto Customer Retention Platform reduces that monthly expense by passing that expense to the consumer.

 

The CRP lets the service department know in real-time the status of a customer's vehicle.  The system can track information with respect to any Diagnostic Trouble (DTC) codes or check engine lights, actual mileage of the vehicle, and if there are any recommended services that are needed at the time, and also communicates that information to the consumer via email, text, or phone.

 

Management believes that this will increases a dealership's profitability by:

 

·	Increasing quantity of Repair Orders;.
·	Bringing the customer back to the dealership more often;
·	Connecting the Customer and the Service Advisor in real-time every time their vehicle needs service or when a notification alert is sent.

 

Customer Vehicle Knowledge & Location System:  The 6SA Vehicle Knowledge & Location System is a consumer product that gives automobile owners real-time information about their car such as:

 

·	Vehicle Location;
·	DTC & Check Engine Lights;
·	Service Alerts;
·	Battery & Fuel Information Alerts;
·	If their car is being towed;
·	Exiting or Entering a Geo Fence; and
·	Speed History.

As of the date of this Report, Alpine 4 had concluded installations at four automobile dealerships in Arizona, California, and Indiana for the 6SA system.

Alpine 4 personnel provide training in the installation of the devices, creation of the customized user interface, and use of the inventory management system.  Additionally, personnel introduce and explain the details of the products to a dealership's sales staff, train the finance managers on the benefits of ServiceWatch and the registration process, and provide other training and support as agreed upon with the dealership.

Business Seasonality and Product Introductions

Following the acquisition of the AutoTek assets, the Company expects to experience higher net sales in its first and third quarters compared to other quarters in its fiscal year, due in part to seasonal holiday demand and the automotive industry model year end that typically concludes in the third quarter of each year.  Additionally, new automotive models introductions can significantly impact our products ability to communicate properly and therefore product costs and operating expenses may rise. Product introductions can also impact the Company's net sales to its indirect distribution channels as these channels are filled with new product inventory following a product introduction, and often, channel inventory of a particular product declines as the next related major product launch approaches. Net sales can also be affected when consumers and dealerships anticipate a vehicle introduction.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and had accumulated a deficit of $14,009,214 as of December 31, 2015.  The Company requires capital for its contemplated operational and marketing activities.  The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

In order to mitigate the risk related with this uncertainty, the Company plans to issue additional shares of common stock for cash and services during the next 12 months.

Results of Operations 

Our revenues from inception to December 31, 2014 and for the year ended December 31, 2015, were $0 and $21,840, respectively.  We began selling our products and services during the second half of 2015, and expect our revenue to grow significantly over the next 12 months. Management's expectations of growth in revenues is based on management's contacts within the automobile dealership industry, and the anticipated increase in interest in Alpine 4's products and services as Alpine 4 increases its advertising and brand and product/service awareness campaigns beginning in the second quarter of 2015.

Our cost of revenues from inception to December 31, 2014 and for the year ended December 31, 2015 were $0 and $1,170, respectively.  We expect our cost of revenue to increase over the next 12 months as our revenue increases.  

Our general and administrative expenses from inception to December 31, 2014 and for the year ended December 31, 2015, were $605,234 and $13,293,644, respectively. From inception to December 31, 2014 and for the year ended December 31, 2015, $275,220 and $12,671,750 of our general and administrative expenses were non-cash expenses related to the issuance of our common stock for services.  The significant increase in general and administrative expenses is due to the issuance of common stock for services and the expansion of our business in 2015.  We expect that our general and administrative expenses will increase significantly over the next 12 months as we ramp up our operations.  As we increase our advertising and brand and product/service awareness campaigns and as we hire additional personnel as needed and as operations permit, management anticipates that such actions will result in significantly increased expenses to the Company.  The addition of more dealerships also will increase expenses relating to installations, customer management, and operational costs.

Liquidity and Capital Resources

We have financed our operations since inception from the sale of common stock, capital contribution from stockholders and from the issuance of notes payable and convertible notes payable.  We expect to continue to finance our operations by selling shares of our common stock and by generating income from the sale of our products.  As noted above, management's expectations of growth in revenues is based on management's contacts within the automobile dealership industry, and the anticipated increase in interest in Alpine 4's products and services as Alpine 4 increases its advertising and brand and product/service awareness campaigns beginning in the third and fourth quarters of 2015.  Additionally, management anticipates that the new campaigns will result in the Company's adding new dealerships each month, which began in the second quarter and continues through the end of 2015.

Management expects to have sufficient working capital for continuing operations from either the sale of its products or through the raising of additional capital through private offerings of our securities. Additionally, as of the date of this Report, the Company was in negotiations to acquire two businesses, which management believes will provide additional operating revenues to the Company.  There can be no guarantee that the planned acquisitions will close or that they will produce the anticipated revenues on the schedule anticipated by management, or at all.

The Company also may elect to seek bank financing or to engage in debt financing through a placement agent.  If the Company is unable to raise sufficient capital from operations or through sales of its securities or other means, we may need to delay implementation of our business plans.

Contractual Obligations

Our significant contractual obligations as of December 31, 2015 are as follows:

		Payments due by Period
		Less than				One to				Three to				More Than
		One Year				Three Years				Five Years				Five Years				Total
Notes payable, related parties		$	111,635			$	-			$	-			$	-			$	111,635
Convertible notes payable			330,850				-				-				-				330,850
Interest on notes			25,158				-				-				-				25,158
Total		$	467,643			$	-			$	-			$	-			$	467,643

Off-Balance Sheet Arrangements

The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose the Company to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to the Company.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles ("GAAP") and the Company's discussion and analysis of its financial condition and operating results require the Company's management to make judgments, assumptions, and estimates that affect the amounts reported in its condensed consolidated financial statements and accompanying notes. Note 2, "Summary of Significant Accounting Policies" of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company's condensed consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.

Management believes the Company's critical accounting policies and estimates are those related to revenue recognition and inventory valuation. Management considers these policies critical because they are both important to the portrayal of the Company's financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.

Revenue Recognition

Inventory

Inventory is valued at the lower of the inventory's cost (weighted average basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower.  All of the inventory at December 31, 2015, is finished goods.

ITEM 7A.                QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for Smaller Reporting Companies.

ITEM 8.                  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and footnotes thereto are set forth beginning on page F-1 of this Report.

ITEM 9.                  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Dismissal of Anton & Chia, LLP

The Company disclosed the change in auditors in a Current Report on Form 8-K filed with the SEC on December 16, 2015.

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of December 31, 2015.  Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this Report, our disclosure controls and procedures were not effective..

During the most recent fiscal year, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:

-	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
-	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles;
-	provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and
-	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on  the framework in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management determined that our internal controls over financial reporting were not effective as of December 31, 2015, due to the following material weaknesses:

·	Inadequate segregation of duties;
·	Inadequate control activities and monitoring processes; and
·	Failure in the process for identification and disclosure of related party transactions.

 

Management plans to review these material weaknesses as well as alternatives to remediate the controls and procedures to resolve or remove these weaknesses.  Management believes that it will be able to begin to remediate these weaknesses during the second quarter of 2016, although the remediation efforts will be subject to the Company's operations, and there can be no guarantee that the Company will be able to remediate these weaknesses on the planned time schedule.

Generally, disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.  Nevertheless, an internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system reflects the fact that there are resource constraints, and the benefits of controls are considered relative to their costs. As noted above, we have determined that our disclosure controls and procedures and our internal controls over financial reporting were not effective as of December 31, 2015.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

ITEM 9B.               OTHER INFORMATION

Not applicable.

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

As of the date of this Report, the officers and directors of Alpine 4 were the following:

Name	Age	Officer/Position	Board Member/Position
Kent B. Wilson	43	President, Chief Executive Officer, Chief Financial Officer	Director
Charles Winters	39	-	Chairman of the Board
Scott Edwards	61	-	Director
Ian Kantrowitz	35	-	Director

 

Biographical Information for Kent B. Wilson

Mr. Wilson serves as the Chief Executive Officer, Chief Financial Officer, and Secretary for the Company. Previously, he has raised approximately two million dollars via seed capital and private placement funds to start Crystal Technology Holdings, Ltd./NextSure, LLC.  This company successfully designed, built, and brought two products to market, including an internet-based insurance rating engine that allowed prospective buyers to rate and buy their auto insurance online via a virtual insurance agent.  Since 2002 Mr. Wilson has been actively involved with all facets of corporate financial and operational planning and has held the title of CFO and CEO for several different companies.  Mr. Wilson has also consulted for various finance departments of publicly traded companies such as JDA Software and Switch & Data, Inc. to help them identify and develop best SOX and GAAP practices and procedures. In 2011, Mr. Wilson took over as CFO of United Petroleum Company and helped guide them from a small startup with less than $1 million in revenue to a company with $20 million in revenue and a growth path for 2013 and 2014.Mr. Wilson holds a BA degree in Management and holds an MBA from Northcentral University.​

On August 21, 2014, Mr. Wilson formed a corporation, WBK 1 Inc., a Delaware corporation.  On September 17, 2014, WBK 1 Inc. filed a Form 10 with the U.S. Securities and Exchange Commission.  WBK 1 Inc. is a "shell company" as defined in the rules of the SEC.  Mr. Wilson was the Chief Executive Officer, Secretary, Treasurer and Director of WBK 1 Inc. from its inception through December 28, 2014, when he sold all of his ownership in WBK 1 to an unrelated third party.  WBK 1 disclosed the change in ownership in a Current Report filed with the Commission on December 29, 2014.  There is no relationship between Alpine 4, AutoTek, and WBK 1 Inc.

Biographical Information for Charles Winters

Mr. Winters is an automotive executive with over 10 years of automotive dealership experience.  He is also a principal in several automotive dealerships and repair shops throughout the southwest.  Mr. Winters holds a Bachelor's Degree in Economics from Auburn University.

Biographical Information for Scott Edwards

Mr. Edwards is automotive sales and marketing executive with over 19 years of experience in the automotive industry.  He currently represents a large national automotive franchise distributorship and has extensive knowledge of the inner workings of the retail and wholesale automotive market.

Biographical Information for Ian Kantrowitz

As Director of Investor Relations, Mr. Kantrowitz is accountable for creating and presenting a consistently applied investment message to our shareholders and the investment community on behalf of Alpine 4. Furthermore, he is responsible for monitoring and presenting management with the opinions of the investment community regarding the company's performance.

Prior to joining the Alpine 4 team, Mr. Kantrowitz was a project manager for two major homebuilders in Phoenix, AZ, Continental Homes and Engle Homes.  Mr. Kantrowitz has also been actively involved in the automotive industry where his in-depth knowledge of the auto industry lends a valuable perspective to our in house product, 6thsenseauto. Additionally, he was a top performing banker for Wells Fargo Bank, ranked number 5 in the country.

Our bylaws authorize no fewer than one director. We currently have four directors.

Term of office. Our directors are appointed for a one-year term to hold office until the next annual meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our Board and hold office until removed by the Board.

Family relationships. There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.

Director or officer involvement in certain legal proceedings. To the best of our knowledge, except as described below, during the past five years, none of the following occurred with respect to a present or former director or executive officer of the Company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

As of the date of this Report, we did not have a standing audit, compensation, or nominating committee of the Board of Directors.  The Company has determined that the Board of Directors does not have an "Audit Committee Financial Expert" as that term is defined in Item 407(d)(5) of SEC Regulation S-K.

Section 16(a) beneficial ownership reporting compliance. Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended December 31, 2015, the following persons failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended December 2015:

 

Name and Principal Position	Number of Late Reports	Transactions not  Reported in Timely Manner	Known Failures to File a Required Form
Kent Wilson, CEO, CFO, Director	1	2	None
Charles Winters, Director	1	1	None
Scott Edwards, Director	1	1	None

Code of Ethics. During the year ended December 31, 2015, the Board of Directors adopted a Code of Business Conduct that applies to the Board of Directors and to all employees of the Company, which includes our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.  The Company has provided a copy of the Company's Code of Business on the Company's website at: http://www.alpine4.com/#!code-of-conduct/c1bnw. (Please note: information contained on the Company's website does not constitute part of this Annual Report.)

As noted above, Alpine 4 entered into employment agreements with both Mr. Battaglini and Mr. Wilson in 2014.  On April 29, 2015, Mr. Battaglini resigned from all positions with Alpine 4, terminated his employment agreement, and waived all rights to any severance payments under the Employment Agreement.

Kent Wilson

Additionally, on July 16, 2014, the Company entered into an employment agreement with Kent B. Wilson (the "Wilson Agreement"), the Company's Chief Executive Officer, and Chief Financial Officer.  The Wilson Agreement provides, in part:

-	The term of Mr. Wilson's employment began on July 16, 2014 and automatically renews at the end of each year, unless Mr. Wilson's employment with the Company is terminated.
-	Mr. Wilson's principal duties, as Chief Executive Officer, include:

 

	o	Monitor the overall performance of Alpine 4 Technologies, Ltd.;
	o	Meet with management reporting to this position on a regular basis to establish goals, objective and long-range plans for:  Profit, Revenue, Expense, Capital, Sales & Marketing, and Business Development;
	o	Provide budgetary guidelines;
	o	Establish or approve all corporate policies, including: Operations Policy, Fiscal Policy, Sales and Marketing Policy, Compensation and Benefit Policy, Personnel Policy;
	o	Meet with Chief Financial Officer/Controller to monitor the overall financial condition of Alpine 4 Technologies, Ltd.;
	o	Establish and execute plans for purchase and/or replacement of equipment and facilities to ensure continued growth; and
	o	Ensure that adequate working capital is available to operate the business.

-

Mr. Wilson's principal duties as Chief Financial officer, include:

 

	o	Work with the CEO and the Board of Directors (BOD) in the financial management and planning of Alpine 4 Technologies, Ltd.;
	o	Plan:  Plan daily activities that accomplish correct completion of duties of financial reporting staff schedule to sufficiently maintain high levels of work processing and accuracy;

 

	o	Direct: Develop Assigned Task Lists (ATL) and supervise the completion of duties of the financial reporting staff to assure the accomplishment of departmental goals and objectives;
	o	Control: Performance is controlled through the Cash Flow, Executive Summary and Monthly Budget Variance Report and evaluating pertinent financial information and take action to correct variances; and
	o	Take any reasonable action necessary to carry out the responsibilities of the position, while it is consistent with 1) established company policy, 2) sound business judgment and 3) the achievement of profit.

 

-

Mr. Wilson's base salary during the initial 60 days of employment shall be $120,000 per year, until the company completes its first acquisition, at which time it will change to $200,000 per year.

Mr. Wilson is to devote full time efforts to the Company pursuant to the Wilson Agreement.

Summary Compensation Table

 

 

Name and principal position	Year		Salary ($)				Bonus ($)				Stock awards ($)				Option awards ($)				Nonequity incentive plan compensation ($)				Nonqualified deferred compensation earnings ($)				All other compensation ($)				Total ($)
(a)	(b)		(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)
Kent Wilson, Chief Executive Officer (Principal Executive Officer)	2014		$ 0 (see note 1)				$ 0 (see note 2)				$	12,320				0				0				0			$	18,000			$	30,320
2015			15,000				0				$5,000,000				0				0				0				$12,000				0
Richard Battaglini, President	2014		$	0			$	0			$	2,700				0				0				0			$	18,000			$	20,700
2015			0				0				0				0				0				0				0				0

 

1.	Mr. Wilson's base salary during the initial 60 days of employment shall be $120,000 per year, until the company completes its first acquisition, at which time it will change to $200,000 per year.
2.	In the event that the Company's stock price trades above $3.00 per share, the Company will pay Mr. Wilson a $250,000 performance bonus.
3.	As discussed more fully in this Annual Report, Mr. Battaglini agreed to cancel 78,000,000 of these shares (with an aggregate value of $7,800) on October 23, 2014, and agreed to cancel an additional 34, 623, 998 of these shares on April 29, 2015, in connection with his resignation from Alpine 4.

Outstanding Equity Awards

As of December 31, 2015, the Company had no outstanding equity awards (options, units of unvested stock, or incentive plan awards).

Director Compensation

The following table sets forth the amounts paid to the Company's directors for their service as directors of the Company.  Please note: the compensation of Mr. Battaglini and Mr. Wilson, who are also executive officers of the Company, is set forth above.

Name		Fees earned or paid in cash ($)				Stock awards ($)				Option awards ($)				Non-equity incentive plan compensation ($)				Nonqualified  deferred compensation earnings ($)				All other compensation ($)				Total ($)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)
Ian Kantrowitz		$	0				0			$	0			$	0			$	0			$	0			$	0
Kent Wilson		$	0				0			$	0			$	0			$	0			$	0			$	0
Charles Winters		$	0			$	100			$	0			$	0			$	0			$	0			$	100
Scott Edwards		$	0			$	100			$	0			$	0			$	0			$	0			$	100

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information regarding beneficial ownership of Alpine 4 common stock as of March 25, 2016, (i) by each person (or group of affiliated persons) who owns beneficially more than five percent of the outstanding shares of common stock, (ii) by each director and executive officer of Alpine 4, and (iii) by all of the directors and executive officers of Alpine 4 as a group.  The percentages are based on the following figures:

-	208,705,690 shares of Alpine 4 Class A common stock outstanding as of March 23, 2016; and
-	16,000,000 shares of Alpine 4 Class B common stock outstanding as of March 23, 2016.

Except as otherwise noted, the persons named in the table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable.

 

Name and Address of beneficial owner (1)		Amount of beneficial ownership of Class A  Common Stock				Amount of beneficial ownership  of Class B  Common  Stock				Percentage  of Class A  Common  Stock (2)				Percentage  of Class B Common  Stock				Voting Power (3)
Richard Battaglini, Former Chairman of the Board and Former President			21,232,302				0				10.17	%							10.17	%
Kent B. Wilson, Chief Executive Officer, Chief Financial Officer, Director(4)			24,316,890				10,000,000				11.65	%			62.50	%			59.57	%
Scott Edwards, Director (5)			2,520,000				2,000,000				1.21	%			12.50	%			10.79	%
Charles Winters, Director (6)			7,098,000				2,000,000				3.40	%			12.50	%			12.98	%
Ian Kantrowitz, Director (7)			5,210,940				2,000,000				2.50	%			12.50	%			12.08	%
All Officers and Directors As a Group (4 persons)			39,145,830				16,000,000				18.76	%			100.00	%			95.42	%

(1)	Except as otherwise indicated, the address of the stockholder is: Alpine 4 Technologies Ltd., 4742 N. 24th Street, Suite 300, Phoenix AZ 85016.
(2)	The percentages listed in the table are based on 208,705,690 shares of Alpine 4 Class A common stock outstanding as of March 23, 2016.
(3)	The Voting Power column includes the effect of shares of Class B common stock held by the named individuals, as indicated in the footnotes below. Each share of Class B common stock has 10 votes.  The total voting power for each person is also explained in the footnotes below.
(4)	Mr. Wilson owns 24,316,890 shares of Class A common stock, and 10,000,000 shares of Class B common stock, which represents an aggregate of 124,316,890 votes, or approximately 59.57% of the voting power.
(5)	Mr. Edwards owned as of the AutoTek Record Date, directly or indirectly, 420,000 shares of AutoTek common stock. Mr. Edwards participated in the Share Exchange and received 2,520,000 shares of Class A Common Stock Exchange Shares of Alpine 4 Common Stock for his 420,000 shares of AutoTek common stock in the Share Exchange.  Additionally, Mr. Edward owns 2,000,000 shares of Alpine 4 Class B Common Stock which together with the Exchange Shares will represent an aggregate of 22,520,000 votes, or approximately 10.79 % of the voting power.
(6)	Mr. Winters owned as of the AutoTek Record Date, directly or indirectly, 1,183,000 shares of AutoTek common stock. Mr. Winters participated in the Share Exchange and received 7,098,000 Shares of Class A Common Stock in the Share Exchange.  Additionally, Mr. Winters owns 2,000,000 shares of Alpine 4 Class B Common Stock which together with the Exchange Shares will represent an aggregate of 27,098,000 votes, or approximately 12.98% of the voting power.
(7)	Mr. Kantrowitz owned as of the AutoTek Record Date, directly or indirectly, 868,490 shares of AutoTek common stock. Mr. Kantrowitz participated in the Share Exchange and received 5,210,940 shares of Class A Common Stock in the Share Exchange.  Additionally, Mr. Kantrowitz owns 2,000,000 shares of Alpine 4 Class B Common Stock which together with the Exchange Shares will represent an aggregate of 25,210,940 votes, or approximately 12.08% of the voting power.

On September 15, 2015, Ms. Rigney loaned $25,000 to the Company pursuant to a convertible promissory note.  The note is due on March 15, 2016, and accrues interest at a rate of 10% for each six-month period.  The note is convertible into shares of the Company's common stock at a price of $0.10 per share.

Related Party Notes

At December 31, 2015, the Company had three outstanding notes payable to officers and directors of the Company.  All the notes payable are unsecured, non-interest bearing and payable upon demand.  The notes payable amount outstanding at December 31, 2015 and 2014, was $111,635 and $50,000, respectively.

Related Party Convertible Notes

During the year ended December 31, 2015, the Company entered into convertible note agreements with investors, including related parties.  The convertible notes are unsecured; bear interest at 10-20% annually, and are due from March 16, 2016, to December 31, 2016.  All of the convertible notes payable contain a provision that allows the note holder to convert the outstanding balance into shares of the Company's common stock at $0.10 per shares.  The Company determined that the convertible notes payable contained a beneficial conversion feature which is limited to the face amount of the note.  This beneficial conversion feature amounting to $390,150 has been recorded in the financial statements to additional paid-in capital and as a discount to the convertible notes payable. The debt discount is being amortized over the terms of the convertible notes payable.  The Company recognized interest expense of $118,618 during the year ended December 31, 2015, related to the amortization of the debt discount.

Licensing Agreement

On August 5, 2014, the Company entered into a Licensing Agreement (the "Agreement") with AutoTek Incorporated ("AutoTek").  Richard Battaglini, the Company's former President, former Chairman and former majority shareholder of the Company, is also the President and Chairman of AutoTek.  Mr. Battaglini owns approximately 30% of the Company's common stock and has no stock ownership in AutoTek.

AutoTek was the owner of software source code which the Company used in its 6thSenseAuto products under the terms of the license agreement. The agreement provided that the Company has an exclusive, transferable (including sub licensable) worldwide perpetual license of AutoTek's technology.  The Company was required to pay to AutoTek royalty payments equal to $10 per ServiceWatch device activated using the technology.

The license term under the agreement and its amendments would last until the earlier of the closing of a transaction whereby Alpine acquired AutoTek's outstanding common stock or August 5, 2016. As discussed in Note 9, the Company closed the asset purchase transaction on February 4, 2016, which ended the term of the license.

 Anton & Chia

Anton & Chia, was the Company's independent registered public accounting firm from inception through 2014. Set below are aggregate fees billed by Anton & Chia for professional services rendered for the year ended December 31, 2014.

Audit Fees

The fees for the audit and review services billed and to be billed by Anton & Chia for the period from January 1, 2014, to December 31, 2014 were $25,000.

Audit Related Fees

The fees for the audit related services billed and to be billed by Anton & Chia for the period from January 1, 2014, to December 31, 2014 were $15,000.

Tax Fees

None.

Malone Bailey

As discussed above, on December 10, 2015, the Company's Board of Directors terminated the engagement of Anton & Chia, LLP ("Anton"), as the Company's independent certifying accountant, and approved the engagement of Malone Bailey LLP, of Houston, Texas ("Malone Bailey"), as the Company's independent registered public accounting firm for the year ended December 31, 2015.

Set below are aggregate fees billed by Malone Bailey for professional services rendered for the year ended December 31, 2015.

Audit Fees

Audit Related Fees

The fees for the audit related services billed and to be billed by Malone Bailey for the period from December 10, 2015, to December 31, 2015 were $0.

Tax Fees

The fees for the tax related services billed and to be billed by Malone Bailey for the period from December 10, 2015, to December 31, 2015 were $0.

PART IV

ITEM 15.                EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

15(a)(1). Financial Statements.

The following consolidated financial statements, and related notes and Report of Independent Registered Public Accounting Firm are filed as part of this Annual Report:

Reports of Independent Registered Public Accounting Firms

	Report of MaloneBailey, LLP	F-2
	Report of Anton & Chia, LLP	F-3
Financial Statements:
	Balance Sheets as of December 31, 2015 and 2014	F-4
	Statements of Operations for the Year Ended December 31, 2015, and for the Period from April 22, 2014 (Inception), through December 31, 2014	F-5
	Statements of Stockholders' Deficit for the Year Ended December 31, 2015,and for the Period from April 22, 2014 (Inception), through December 31, 2014	F-6
	Statements of Cash Flows for the Year Ended December 31, 2015, and for the Period from April 22, 2014 (Inception), through December 31, 2014	F-7
	Notes to Financial Statements	F-8

 

15(a)(2). Financial Statement Schedules.

None.

 

15(a)(3). Exhibits.

EXHIBIT INDEX

 

Exhibit Number		Description
2.1		Asset Purchase and Share Exchange Agreement (included as Annex A to the joint proxy statement/prospectus forming part of Alpine 4's registration statement, previously filed with the SEC).
3.1		Certificate of Incorporation of Alpine 4 Technologies Ltd. (incorporated by reference to Exhibit 3.1 to Alpine 4's Registration Statement on Form 10, filed May 8, 2014).
3.2		Certificate of Amendment to Certificate of Incorporation, dated June 27, 2014 (incorporated by reference to Exhibit 3.3 to Alpine 4's Current Report on Form 8-K filed July 18, 2014).
3.3		Certificate of Amendment to Certificate of Incorporation, dated June 30, 2014 (incorporated by reference to Exhibit 3.4 to Alpine 4's Current Report on Form 8-K filed July 18, 2014).
3.4		Second Amended and Restated Certificate of Incorporation, dated August 24, 2015 (incorporated by reference to Exhibit 3.1 to Alpine 4's Current Report on Form 8-K filed August 27, 2015)
3.5		By-Laws of Alpine 4 (incorporated by reference to Exhibit 3.2 to Alpine 4's Registration Statement on Form 10, filed May 8, 2014).
4.1		Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Alpine 4's Registration Statement on Form 10, filed May 8, 2014).
10.1		PULS™ Master Service Agreement by and between Alpine 4 and CalAmp Wireless Data Systems, Inc., dated as of August 15, 2014. Portions of this exhibit were redacted pursuant to a request for confidential treatment submitted to the Securities and Exchange Commission on January 15, 2015.
10.2		Clean Choice Solar Membership Purchase Agreement (incorporated by reference to Exhibit 99 to Alpine 4's Current Report on Form 8-K filed with the Commission on January 30, 2015)
10.3		First Amendment to Licensing Agreement between the Company and AutoTek Incorporated, dated August 4, 2015. (incorporated by reference to Exhibit 10.6 to Alpine 4's Quarterly Report on Form 10-Q filed with the Commission on August 14, 2015)
10.4		Stock Purchase Agreement dated as of October 19, 2015 (incorporated by reference to Exhibit 99 to Alpine 4's Current Report on Form 8-K filed with the Commission on October 21, 2015)

 

31		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101 INS	XBRL Instance Document*
101 SCH	XBRL Schema Document*
101 CAL	XBRL Calculation Linkbase Document*
101 DEF	XBRL Definition Linkbase Document*
101 LAB	XBRL Labels Linkbase Document*
101 PRE	XBRL Presentation Linkbase Document*

 

SIGNATURES

 

Pursuant to the requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

ALPINE 4 TECHNOLOGIES LTD.

 

Date: March 28, 2016	By:	/s/ Kent B. Wilson
	Name:	Kent B. Wilson,
	Title:	Chief Executive Officer (Principal ExecutiveOfficer), Chief Financial Officer (Principal Financial Officer), President and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

/s/ Kent B. Wilson	Chief Executive Officer, President	March 28, 2016
Kent B. Wilson	Chief Financial Officer, Director
/s/ Scott Edwards	Director	March 28, 2016
Scott Edwards
/s/ Charles Winters	Chairman of the Board	March 28, 2016
Charles Winters
/s/ Ian Kantrowitz	Director	March 28, 2016
Ian Kantrowitz

ALPINE 4 TECHNOLOGIES LTD.

FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

 

Table of Contents

		Page
Reports of Independent Registered Public Accounting Firms
	Report of MaloneBailey, LLP	F-2
	Report of Anton & Chia, LLP	F-3
Financial Statements:
	Balance Sheets as of December 31, 2015 and 2014	F-4
	Statements of Operations for the Year Ended December 31, 2015, and for the Period from April 22, 2014 (Inception), through December 31, 2014	F-5
	Statements of Stockholders' Deficit for the Year Ended December 31, 2015,and for the Period from April 22, 2014 (Inception), through December 31, 2014	F-6
	Statements of Cash Flows for the Year Ended December 31, 2015, and for the Period from April 22, 2014 (Inception), through December 31, 2014	F-7
	Notes to Financial Statements	F-8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Alpine 4 Technologies, Ltd.

Phoenix, Arizona

We have audited the accompanying balance sheet of Alpine 4 Technologies, Ltd. ( the "Company") as of December 31, 2015, and the related statements of operations, stockholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of Alpine 4 Technologies, Ltd. as of December 31, 2015, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred losses since inception and had an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

March 28, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

ALPINE 4 TECHNOLOGIES LTD.

BALANCE SHEETS

		December 31,				December 31,
		2015				2014
ASSETS
CURRENT ASSETS:
Cash		$	174,988			$	758
Accounts receivable			4,086				-
Inventory			222,930				224,100
Total current assets			402,004				224,858
TOTAL ASSETS		$	402,004			$	224,858
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable		$	434,381			$	359,626
Accrued expenses			13,019				16,498
Deferred revenue			1,617				-
Notes payable, related parties			111,635				50,000
Convertible notes payable, net of discount of $271,532 (including related parties of $14,698)			59,318				-
Total current liabilities			619,970				426,124
STOCKHOLDERS' DEFICIT:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized,none issued and outstanding			-				-
Class A Common stock, $0.0001 par value, 500,000,000 shares authorized,58,699,808 and 85,050,390 shares issued and outstanding			5,870				8,505
Class B Common stock, $0.0001 par value, 100,000,000 shares authorized,16,000,000 and 0 shares issued and outstanding			1,600				-
Additional paid-in capital			13,783,778				395,463
Accumulated deficit			(14,009,214	)			(605,234	)
Total stockholders' deficit			(217,966	)			(201,266	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	402,004			$	224,858

ALPINE 4 TECHNOLOGIES, LTD.
STATEMENTS OF OPERATIONS
						For the Period From
		Year				April 22, 2014
		Ended				(Inception) through
		December 31,				December 31,
		2015				2014
Revenue		$	21,840			$	-
Cost of revenue			1,170
Gross Profit			20,670				-
Operating expenses:
General and administrative expenses			13,293,644				605,234
Total operating expenses			13,293,644				605,234
Loss from operations			(13,272,974	)			(605,234	)
Other expenses
Interest expense			(131,006	)			-
Total other expenses			(131,006	)			-
Loss before income tax			(13,403,980	)			(605,234	)
Income tax			-				-
Net loss		$	(13,403,980	)		$	(605,234	)
Weighted average shares outstanding :
Basic			77,738,500				90,113,336
Diluted			77,738,500				90,113,336
Loss per share
Basic		$	(0.17	)		$	(0.01	)
Diluted		$	(0.17	)		$	(0.01	)

 

The accompanying notes are an integral part of these audited financial statements.

 

ALPINE 4 TECHNOLOGIES, LTD.
STATEMENT OF STOCKHOLDERS' DEFICIT
																		Additional								Total
		Class A Common Stock								Class B Common Stock								Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Deficit
Balance, April 22, 2014 (Date of inception)			-			$	-				-			$	-			$	-			$	-			$	-
Issue shares of common stock for cash			10,300,390				1,030												91,848								92,878
Issue shares of common stock for services			152,750,000				15,275												259,945								275,220
Cancellation of previously issued shares			(78,000,000	)			(7,800	)											7,800								-
Capital contribution from majority stockholder																			35,870								35,870
Net loss																							(605,234	)			(605,234	)
Balance, December 31, 2014			85,050,390				8,505				-				-				395,463				(605,234	)			(201,266	)
Issue shares of common stock for cash			152,116				15												99,835								99,850
Issue shares of common stock to officers and directors for services			19,500,000				1,950												10,573,050								10,575,000
Issue shares of common stock to consultants for services			3,741,000				374												2,096,376								2,096,750
Issue shares of common stock for purchase extension			250,000				25												162,475								162,500
Issue shares of common stock to related party for convertible note payable and accrued interest			630,300				63												62,967								63,030
Cancellation of previously issued shares			(34,623,998	)			(3,462	)											3,462								-
Beneficial converstion feature associated with convertible notes																			390,150								390,150
Exchange of Class A common stock for Class B common stock			(16,000,000	)			(1,600	)			16,000,000				1,600
Net loss																							(13,403,980	)			(13,403,980	)
Balance, December 31, 2015			58,699,808			$	5,870				16,000,000			$	1,600			$	13,783,778			$	(14,009,214	)		$	(217,966	)

 

ALPINE 4 TECHNOLOGIES, LTD.
STATEMENT OF CASH FLOWS
						For the Period From
						April 22, 2014
		Year				(Inception)
		Ended				through
		December 31,				December 31,
		2015				2014
OPERATING ACTIVITIES:
Net loss		$	(13,403,980	)		$	(605,234	)
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of common stock to officers and directors for services			10,575,000				-
Issuance of common stock to consultants for services			2,096,750				275,220
Issuance of common stock for purchase extension			162,500				-
Amortization of debt discounts			118,618
Change in current assets and liabilities:
Accounts receivable			(4,086	)			-
Inventory			1,170				(224,100	)
Accounts payable			74,755				359,626
Accrued expenses			2,251				16,498
Deferred revenue			1,617
Net cash used in operating activities			(375,405	)			(177,990	)
FINANCING ACTIVITIES:
Proceeds from issuances of notes payable, related party			86,435				50,000
Repayments of notes payable, related party			(24,800	)			-
Proceeds from convertible notes payable (including $82,300 from related party)			390,150				-
Repayments of convertible notes payable			(2,000	)			-
Proceeds from the sale of common stock			99,850				92,878
Proceeds from contributed capital from related party			-				35,870
Net cash provided by financing activities			549,635				178,748
NET INCREASE IN CASH			174,230				758
CASH, BEGINNING BALANCE			758				-
CASH, ENDING BALANCE		$	174,988			$	758
CASH PAID FOR:
Interest		$	-			$	-
Income taxes		$	-			$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Common stock issued to related party for convertible note payable and accrued interest		$	63,030			$	-
Discount on convertible debentures		$	390,150			$	-
Cancelation of 34,623,998 previously issued shares in 2015		$	-			$	-

Note 1 – Description of Business

Alpine 4 Technologies Ltd. (the "Company") was incorporated under the laws of the State of Delaware on April 22, 2014.  The Company was formed to serve as a vehicle to effect an asset acquisition, merger, exchange of capital stock or other business combination with a domestic or foreign business.  As of the date of this Report, the Company was a technology holding company with a heavy concentration in the automotive industry. The Company provides a distinctive and powerful advantage to management, sales, finance and service departments at automotive dealerships in order to increase productivity, profitability and customer retention through 6^th Sense Auto. The Company's flagship program, 6^th Sense Auto, uses disruptive technology to improve inventory management, reduce costs, increase sales and enhance service. The 6^th Sense Auto program serves a two-fold solution addressing both business to business and business to consumer market needs.

Note 2 - Summary of Significant Accounting Policies

The accompanying financial statements present the balance sheets, statements of operations, stockholders' deficit and cash flows of the Company. The financial statements have been prepared in accordance with U.S. GAAP.

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.  These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances.  Actual results could differ from those estimates.

Cash and cash equivalents consist of cash and short-term investments with original maturities of less than 90 days.  Cash equivalents are placed with high credit quality financial institutions and are primarily in money market funds.  The carrying value of those investments approximates fair value. As of December 31, 2015 and 2014, the Company had no cash equivalents.

 

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

 

Inventory is valued at the lower of the inventory's cost (weighted average basis) or market. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower.  All of the Company's inventory at December 31, 2015 and December 31, 2014, was finished goods inventory.

The Company has a portfolio of consumer and professional software applications called 6thSenseAuto, which consists primarily of the Company's two products previously branded as  LotWatch™ and ServiceWatch™.

 

 

LotWatch™ is a product for dealerships to give them vehicle inventory information. Our telematics devices use information gathered from the OBD (On Board Diagnostics) port, and by utilizing both GPS technology and cellular based service, the LotWatch™ module provides specific, real-time, accurate information about a dealership's fleet of new vehicles. This information can be easily accessed and viewed on Alpine 4's interface anywhere the dealership have internet access.

ServiceWatch™ is a product for the driving consumer that also uses information gathered from the OBD port.  By utilizing both GPS technology and cellular based service, the ServiceWatch™ module provides vehicle specific real-time, accurate information to a dealership's service department to increase sales all while improving their level of service.

When the Company enters into an agreement with a car dealership that wants to utilize its LotWatch™ service, a telematics device must be installed in each vehicle.  The Company will generally charge the car dealership a flat fee to install its telematics device in each vehicle.  The Company recognizes revenue when all the devices have been installed.  At the end of each month, the Company will charge the dealership a fee based on the average number of cars on the dealers lot during the month and revenue is recognized at that time (end of the month).

The Company will account for its revenue per the guidance in ASC 605-25-25 by allocating the total contract amount between the product and service elements.  When a vehicle is sold to the driving consumer who purchases the ServiceWatch™ service, the cost of the service is added to the price of the car and the amount collected by the dealership for this service is remitted to the Company.  At the time of the vehicle is purchased, the Company recognizes revenue for the retail value of the telematics device that has been installed in the vehicle and the remaining amount is recognized over the service period of generally 24 to 36 months.

Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. The only potentially dilutive securities outstanding during the periods presented were the convertible debentures, but they are anti-dilutive due to the net loss incurred.

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with Financial Accounting Standards Board ("FASB") ASC 718-10, Compensation – Stock Compensation, and the conclusions reached by FASB ASC 505-50, Equity – Equity-Based Payments to Non-Employees. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carry forwards. Accounting standards regarding income taxes requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, the Company's experience with operating loss and tax credit carry forwards not expiring unused, and tax planning alternatives.

 

The Company recorded valuation allowances on the net deferred tax assets.  Management will reassess the realization of deferred tax assets based on the accounting standards for income taxes each reporting period. To the extent that the financial results of operations improve and it becomes more likely than not that the deferred tax assets are realizable, the Company will be able to reduce the valuation allowance.

Significant judgment is required in evaluating the Company's tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting standards regarding uncertainty in income taxes provides a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely, based solely on the technical merits, of being sustained on examinations. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

Certain prior period amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no effect on the net loss or stockholders' deficit.

In May 2014, the FASB issued ASU No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for reporting periods beginning after December 15, 2016, and early adoption is not permitted. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the impact the adoption of ASU 2014-09 and has not determined the effect of the standard on our ongoing financial reporting.

In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.

In February, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-02 is not expected to have a material effect on the Company's financial statements. Early adoption is permitted.

In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805).  Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.  In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.  The adoption of ASU 2015-016 is not expected to have a material effect on the Company's financial statements.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future  financial statements.

Note 3 – Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and had accumulated a deficit of $14,009,214 as of December 31, 2015.  The Company requires capital for its contemplated operational and marketing activities.  The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

In order to mitigate the risk related with this uncertainty, the Company plans to issue additional shares of common stock for cash and services during the next 12 months.

Note 4 – Notes Payable, Related Parties

At December 31, 2015, the Company had three outstanding notes payable to officers and directors of the Company.  All the notes payable are unsecured, non-interest bearing and payable upon demand.  The notes payable amount outstanding at December 31, 2015 and 2014, was $111,635 and $50,000, respectively.

Note 5 – Convertible Notes Payable, Including Related Parties

During the year ended December 31, 2015, the Company entered into convertible note agreements with investors, including related parties.  The convertible notes are unsecured; bear interest at 10-20% annually, and are due from March 16, 2016, to December 19, 2016.  All of the convertible notes payable contain a provision that allows the note holder to convert the outstanding balance into shares of the Company's common stock at $0.10 per shares.  The Company determined that the convertible notes payable contained a beneficial conversion feature which is limited to the face amount of the note.  This beneficial conversion feature amounting to $390,150 has been recorded in the financial statements to additional paid-in capital and as a discount to the convertible notes payable. The debt discount is being amortized over the terms of the convertible notes payable.  The Company recognized interest expense of $118,618 during the year ended December 31, 2015, related to the amortization of the debt discount.

Convertible notes payable at December 31, 2015, consisted of the following:

Outstanding principal amount due under convertible note payable agreements		$	330,850
Debt discount			(271,532	)
Balance, December 31, 2015		$	59,318

 

A rollforward of the convertible notes payable is below:

Balance outstanding, December 31, 2014		$	-
Issuance of convertible notes payable			390,150
Repayment of convertible note payable			(2,000	)
Conversion of note payable to common stock – related party			(57,300	)
Beneficial conversion feature recognized			(390,150	)
Amortization of debt discount			118,618
Balance outstanding, December 31, 2015		$	59,318

 

Note 6 – Stockholders' Deficit

The Company is authorized to issue 5,000,000 shares of $.0001 par value preferred stock. As of December 31, 2015, no shares of preferred stock were outstanding.

On August 14, 2015, the Board of Directors approved an amendment to the Company's Certificate of Incorporation to change the capital structure of the Company, and recommended the amendment to the shareholders of the Company.  On August 24, 2015, the shareholders approved the filing of a Second Amended and Restated Certificate of Incorporation to change the capital structure of the Company.  On August 26, 2015, the Company filed a Certificate of Amendment (the "Amendment") to the Certificate of Incorporation with the Secretary of State of Delaware to change the capital structure of the Company and to file the Second Amended and Restated Certificate.  The Second Amended and Restated Certificate became effective on the date of filing.

Change in Capital Structure

Pursuant to the Second Amended and Restated Certificate of Incorporation, the Company is authorized to issue two classes of common stock: Class A common stock, which will have one vote per share, and Class B common stock, which will have ten votes per share. Any holder of Class B common stock may convert his or her shares at any time into shares of Class A common stock on a share-for-share basis. Otherwise the rights of the two classes of common stock will be identical. The rights of these classes of common stock are discussed in greater detail below.

 

The Company's authorized capital stock consists of 605,000,000 shares, each with a par value of $0.0001 per share, of which:

·	500,000,000 shares are designated as Class A common stock.  The previously issued shares of common stock were redesignated as Class A common stock.
·	100,000,000 shares are designated as Class B common stock.
·	5,000,000 shares are designated as preferred stock.

Liquidation Rights

Upon the Company's liquidation, dissolution or winding-up, the holders of Class A common stock and Class B common stock shall be entitled to share equally all assets remaining after the payment of any liabilities and the liquidation preferences on any outstanding preferred stock.

 

The Company had the following transactions in its common stock during 2015:

·	issued 152,116 shares of its Class A common stock in private placement transactions to investors, in exchange for capital raised of $99,850;
·	issued 19,500,000 shares of its Class A common stock to officers and directors of the Company for services rendered.  The value of the shares issued of $10,575,000 was the fair value of the Company's common stock at the date of issuance which is based on prior sales of the Company's common stock for cash;
·	issued 3,741,000 shares of its Class A common stock to consultants and professionals of the Company for services rendered.  The value of the shares issued of $2,096,750 was the fair value of the Company's common stock at the date of issuance which is based on prior sales of the Company's common stock for cash
·	issued 250,000 shares of its Class A common stock as consideration for an extension on the closing date for an acquisition. The value of the shares issued of $162,500 was the fair value of the Company's common stock at the date of issuance which is based on prior sales of the Company's common stock for cash;
·	issued 630,300 shares of its Class A common stock to a related party in connection with the conversion of a convertible note payable and accrued interest of $57,300 and $5,730, respectively;
·	canceled 34,623,998 shares of its Class A common previously issued to the Company's former CEO (there was no consideration given for the cancelation of these shares); and
·	issued 16,000,000 shares of its Class B common stock in exchange for an equal number of shares of Class A common stock which were canceled by the holders, who are also the Directors of the Company.

The Company had the following transactions in its common stock during 2014:

·	issued 10,000,000 shares of common stock for $1,000 in services to the founding shareholder of the Company. In addition, the founding shareholder made a contribution of $1,000 to the Company during the period ended June 30, 2014, which was recorded as additional paid-in capital;
·	issued to Mr. Battaglini 123,200,000 shares of the Company's restricted common stock. The value of the shares issued of $12,320 was the fair value of the Company's common stock at the date of issuance which is based on prior sales of the Company's common stock for cash.  In October 2014, Mr. Battaglini returned 78,000,000 shares of common stock for no consideration that were canceled by the Company;
·	issued to Mr. Wilson 27,000,000 shares of the Company's restricted common stock.  The value of the shares issued of $2,700 was the fair value of the Company's common stock at the date of issuance which is based on prior sales of the Company's common stock for cash;
·	issued an aggregate of 2,000,000 shares of common stock to two Directors of the Company in connection with their service to the Company.  The value of the shares issued of $200 was the fair value of the Company's common stock at the date of issuance which is based on prior sales of the Company's common stock for cash;

 

·	issued 300,390 shares of common stock in private placement transactions to investors, in exchange for capital raised of $91,878; and
·	issued 550,000 shares of common stock to two consultants of the Company.  The value of the shares issued of $260,000 was the fair value of the Company's common stock at the date of issuance which is based on prior sales of the Company's common stock for cash.

 

Mr. Battaglini made contributions totaling $35,870 to the Company during 2014, which was recorded as additional paid-in capital.

Note 7 - Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred tax assets as of December 31, 2015 and 2014, based on estimates of recoverability. The Company determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its new business model.  Because of the impacts of the valuation allowance, there was no income tax expense or benefit for the years ended December 31, 2015 and 2014.

A reconciliation of the differences between the effective and statutory income tax rates for years ended December 31:

		2015								2014
		Amount				Percent				Amount				Percent
Federal statutory rates		$	(4,557,353	)			34.0	%		$	(205,780	)			34.0	%
State income taxes			(670,199	)			5.0	%			(30,262	)			5.0	%
Allowance for uncollectible accounts			(8,140	)			0.1	%			8,140				-1.3	%
Permanent differences			5,051,619				-37.7	%			107,336				-17.7	%
Valuation allowance against net deferred tax assets			184,073				-1.4	%			120,566				-20.0	%
Effective rate		$	-				0.0	%		$	-				0.0	%

At December 31, 2015 and 2014, the significant components of the deferred tax assets are summarized below:

Deferred income tax assets:
Net operation loss carryforwards			312,213				120,566
Book to tax differences for allowance for uncollectible accounts			-				8,140
Total deferred income tax assets			312,213				128,706
Less: valuation allowance			(312,213	)			(128,706	)
Total deferred income tax asset		$	-			$	-

The valuation allowance increased by $183,507 and $128,706 in 2015 and 2014, respectively, as a result of the Company's generating additional net operating losses.

The Company has recorded as of December 31, 2015 and 2014 a valuation allowance of $312,213 and $128,706, respectively, as management believes that it is more likely than not that the deferred tax assets will not be realized in future years. Management has based its assessment on the Company's lack of profitable operating history.

 

The Company annually conducts an analysis of its tax positions and has concluded that it had no uncertain tax positions as of December 31, 2015.

 

The Company has net operating loss carry-forwards of approximately $800,000. Such amounts are subject to IRS code section 382 limitations and begin to expire in 2029. The 2014 and 2015 tax year is still subject to audit.

Note 8 – Related Party Transactions

 

Licensing Agreement

On August 5, 2014, the Company entered into a Licensing Agreement (the "Agreement") with AutoTek Incorporated ("AutoTek").  Richard Battaglini, the Company's former President, former Chairman and former majority shareholder of the Company, is also the President and Chairman of AutoTek.  Mr. Battaglini owns approximately 30% of the Company's common stock and has no stock ownership in AutoTek.

AutoTek was the owner of software source code which the Company used in its 6thSenseAuto products under the terms of the license agreement. The agreement provided that the Company has an exclusive, transferable (including sub licensable) worldwide perpetual license of AutoTek's technology.  The Company was required to pay to AutoTek royalty payments equal to $10 per ServiceWatch device activated using the technology.

The license term under the agreement and its amendments would last until the earlier of the closing of a transaction whereby Alpine acquired AutoTek's outstanding common stock or August 5, 2016. As discussed in Note 9, the Company closed the asset purchase transaction on February 4, 2016, which ended the term of the license.

Also see Notes 4 and 5, with respect to related party promissory notes, and Note 6, with respect to shares issued to related parties.

Note 9 – Share Exchange Agreement

As noted above, on December 21, 2015, the shareholders of AutoTek voted to approve a transaction whereby the Company would purchase the software source code from AutoTek. The transaction took the form of a Share Exchange wherein AutoTek stockholders could tender shares of AutoTek stock in exchange for Class A common stock in the Company.  The Share Exchange closed on February 4, 2016.  In conjunction with the Share Exchange, AutoTek shareholders had tendered an aggregate of 25,000,000 shares of AutoTek common stock, and the Company issued 150,000,000 shares of Class A Common Stock to the former AutoTek shareholders. In connection with the closing of the Share Exchange, on February 4, 2016, the Company and AutoTek finalized and closed the asset purchase transaction for the purchase of the source code asset.

Note 10 – Agreement

On September 30, 2015, the Company entered into an employment agreement with Shannon Rigney, pursuant to which Ms. Rigney agreed to serve as the VP of acquisitions.  Her duties will include identifying, evaluating, and defining acquisition strategies; implementation of negotiation strategies; negotiate letters of intent and definitive agreements; preparation of reports, demographics, and analyses; monitoring acquisition prospects through negotiation and closing; and other related duties. Pursuant to the agreement, the Company will pay Ms. Rigney an annual salary of $70,000. Additionally, the Company issued 3,500,000 shares of Class A common stock to Ms. Rigney.  She is also entitled to reimbursement for expenses incurred in accordance with the Company's reimbursement policies.  The agreement included non-disclosure provisions relating to the Company's confidential information, as well as a non-compete agreement for a period of 2 years following the termination of her employment.  Pursuant to the agreement, Ms. Rigney is an at-will employee, and either party may terminate the agreement at any time.

Note 11 – Subsequent Event