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ALPINE 4 AUTOMOTIVE TECHNOLOGIES LTD. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) 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. Since inception, the Company has been in the developmental stage and has conducted virtually no business operations. The Company owns no real estate or personal property. The Company was formed as a vehicle to pursue a business combination. The business purpose of the Company is to seek the acquisition of or merger with an existing company. The Company selected December 31 as its fiscal year end. The Company, based on proposed business activities, is a "blank check" company. The U.S. Securities and Exchange Commission defines those companies as "any development stage company that is issuing a penny stock, within the meaning of Section 3 (a)(51) of the Exchange Act of 1934, as amended, (the "Exchange Act") and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies." Under Rule 12b-2 of the Exchange Act, the Company also qualifies as a "shell company," because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements. The Company was organized to provide a method for a foreign or domestic private company to become a reporting company whose securities are qualified for trading in the United States secondary market such as the New York Stock Exchange (NYSE), NASDAQ, NYSE Amex Equities, formerly known as the American Stock Exchange (AMEX), the OTC Bulletin Board, and the OTC Markets, and, as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. The Company's principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. There is no assurance that following an acquisition we will be eligible to trade on a national securities exchange, or be quoted on the Over-the-Counter Bulletin Board. On June 24, 2014, the Company appointed Mr. Richard Battaglini as Chairman and President and Mr. Kent B. Wilson as Chief Executive Officer and Chief Financial Officer. Subsequently, on August 5, 2014, the Company entered into a Licensing Agreement (the "Agreement") with AutoTek Incorporated ("AutoTek"). AutoTek is the owner of technology, including software code, relating to two products designed to assist automobile dealerships: LotWatch and ServiceWatch. LotWatch provides real-time information relating to each vehicle on a dealer's lot. ServiceWatch interfaces with a new vehicle, and provides information to a dealership service department about the vehicle, designed to improve communications between a dealer and a customer, and to provide better service to the customer. Collectively, LotWatch and ServiceWatch are the "Licensed Technology." 10 -------------------------------------------------------------------------------- Pursuant to the Agreement, AutoTek granted to the Company an exclusive, transferable (including sublicensable) worldwide perpetual license of the Licensed Technology, to make, use, iport, lease, and sell products incorporating the Licensed Technology (the "Licensed Products"). The Company is required to pay to AutoTek royalty payments equal to $10 per ServiceWatch device activated using the Licensed Technology. The term of the Agreement runs 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 all of AutoTek's issued capital stock or all or substantially all of AutoTek's assets and intellectual property rights, or (B) the first annual anniversary of the effective date. As of the date of this Report, the Company had not engaged in any business activities that provide cash flow, although management anticipates that the Agreement likely will result in revenues to the Company in the third or fourth quarter of 2014. The intended purpose of the Company is to acquire the assets of AutoTek, Inc and other potential businesses and deploy those assets to the Company's customer base which consists of automotive dealerships in the United States. AutoTek designs, develops and markets telematics devices and software for the Automotive Industry. A portfolio of consumer and professional software applications, called LotWatch and ServiceWatch will be deployed to the Company's customer base. Further, these products will be sold in the United States from new car automotive dealership stores. Our management has had preliminary contacts and discussions with AutoTek Incorporated ("AutoTek"), as a prospective business combination partner. The Company's Chairman and President is an executive officer and majority shareholder of AutoTek. The Company recently entered into a Licensing Agreement (discussed above) with AutoTek. 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. Business Seasonality and Product Introductions Following the planned 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. 11 -------------------------------------------------------------------------------- Off-Balance Sheet Arrangements and Contractual Obligations 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-Q 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, valuation and impairment of marketable securities, inventory valuation and valuation of manufacturing-related assets and estimated purchase commitment cancellation fees, warranty costs, income taxes, and legal and other contingencies. 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. 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 $3,169 as of June 30, 2014. 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. Recent Developments New Management On June 24, 2014, the sole officer and director of the Company, Richard Chiang, entered into a Share Purchase Agreement (the "SPA") pursuant to which he sold an aggregate of 10,000,000 shares of the Company's common stock to Richard Battaglini at an aggregate purchase price of $40,000. These shares represented 100% of the Company's issued and outstanding common stock. Also on June 24, 2014, before the closing of the SPA, Richard Chiang elected Richard Battaglini as a Director of the Company and as Chairman of the Company's Board of Directors. Immediately following the election of Mr. Battaglini to the Company's Board of Directors, Mr. Battaglini, acting as the sole Director of the Company, accepted the resignation of Richard Chiang as the Company's President, Chief Executive Officer, Chief Financial Officer, Secretary and Chairman of the Board of Directors. Mr. Chiang's resignation was in connection with the consummation of the SPA between Mr. Chiang and Mr. Battaglini and was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices. 12 -------------------------------------------------------------------------------- Following Mr. Chiang's resignation, and effective as of the same date, to fill the vacancies created by Richard Chiang's resignations, the Board of Directors appointed Mr. Battaglini as Chairman of the Board of Directors and President. Further, the Board of Directors also appointed Kent B. Wilson as Chief Executive Officer, Chief Financial Officer and Secretary. Biographical Information for Richard Battaglini Mr. Battaglini has spent a total of 15 years working in the areas of Automotive Dealership Sales and Management. He has extensive experience as an Automotive Aftermarket Parts innovator and supplier. He began his automotive sales career by serving as a salesperson in Albuquerque, New Mexico, for Group 1 Automotive, a publicly traded conglomerate. After three years, Mr. Battaglini moved to a private dealership group to pursue an advancement into finance and insurance where he was responsible for securing financing for customers and funding from banks for the group. He then transitioned into dealership management where he was responsible for scheduling and managing a sales team consisting of more than 35 sales people. In this role he was responsible for inventory management and the customer retention program development. He has held every position on the variable side of a dealership, except for General Manager. In 2005, Mr. Battaglini left the retail side of the automotive industry and invented a safety product for cars that is currently being sold under several brand names such as Pulse, BrakeSafe, BrakeTek and BrakePlus. It has been proven by the NHTSA that when consumers have this installed in their vehicle, it reduced their chances of being involved in a rear-end collision by over 40%. This product was sold to the automotive dealership market as an aftermarket product to be front loaded on the new and used cars. With Mr. Battaglini's direction, this product is available in hundreds of dealerships nationwide and in 2012, it was voted one of the top 30 Automotive Technology products in the US by Automotive News and Autobytel. Selling his interest in this venture in late 2012 allowed Mr. Battaglini the opportunity to pursue another venture: LotWatch and ServiceWatch, products having a focus on Dealership Inventory Management and Real-time Customer Service Retention. 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. New Directors On July 15, 2014, the majority stockholder of the Company elected Charlie Winters, Kent B. Wilson, and Scott Edwards to serve as members of the Company's Board of Directors, effective immediately. 13 -------------------------------------------------------------------------------- Biographical Information for Charlie 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. Employment Agreements On July 16, 2014, the Company entered into an employment agreement (the "Battaglini Agreement") with the Company's Chairman and President, Richard Battaglini. The Battaglini Agreement provides, in part: - The term of Mr. Battaglini's employment began on July 16, 2014 and automatically renews at the end of each year, unless Mr. Battaglini's employment with the Company is terminated. - Mr. Battaglini's base salary during the initial 60 days of employment shall be $150,000 per year. Thereafter, his annual salary will be $300,000 per year. Compensation shall be payable twice per month and the Company is entitled to deduct any applicable deductions and remittances as required by law.He is also to be provided an annual increase of 10% in base salary automatically applied at the beginning of each year. Upon the event that the Company's stock price trades above $3.00 per share, the Company will pay Mr. Battaglini a $250,000 performance bonus. Additionally, the Company will issue to Mr. Battaglini, 123,200,000 restricted common shares of stock. - Mr. Battagliniis entitled to a company vehicle or a $1,500 per month car allowance. - Mr. Battaglini is required to devote full time efforts to the Company pursuant to the Battaglini Agreement. 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 Automotive 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 Automotive 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. 14-------------------------------------------------------------------------------- - 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 Automotive 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. Thereafter, his annual salary will be $300,000 per year. Compensation shall be payable twice per month and the Company is entitled to deduct any applicable deductions and remittances as required by law.He is also to be provided an annual increase of 5% in base salary automatically applied at the beginning of each year. Upon 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. Additionally, the Company will issue to Mr. Wilson, 27,000,000 restricted common shares of stock. - Mr. Wilson shall also be entitled to a company vehicle or a $1,500 per month car allowance. - Mr. Wilson is to devote full time efforts to the Company pursuant to the Wilson Agreement. Name Change; Increase in Authorized Capital On June 27, 2014, the Board of Director and majority stockholder of the Company approved an amendment to the Company's Certificate of Incorporation to change the name of the Company from ALPINE 4 Inc. to Alpine 4 Automotive Technologies Ltd. On that date, the officers of the Company filed a Certificate of Amendment relating to the name change with the State of Delaware. Additionally, on June 30, 2014, the Board of Director and majority stockholder of the Company approved a further amendment to the Company's Certificate of Incorporation to increase the authorized number of common stock from 100,000,000 shares of common stock to 500,000,000 shares of common stock. On that date, the officers of the Company fileda Certificate of Amendment relating to the increase in authorized capital with the State of Delaware. Available Information The Company's Registration Statement on Form 10, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are filed with the SEC. The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements, and other information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge by emailing the Company at [email protected] when such reports are available on the SEC's website. The public may read and copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents of these websites are not incorporated into this filing. Further, the Company's references to the URLs for these websites are intended to be inactive textual references only. |