| Note 2 - Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as of June 30, 2016 (Successor) and December 31, 2015 (Predecessor). Significant intercompany balances and transactions have been eliminated. Basis of presentation 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. Use of estimates 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 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. Major Customers For all periods presented the Company had two customers that made up approximately 50% of total revenues. All other customers were less than 10% each of total revenues in each period. For all periods presented the Company had two customers that made up approximately 50% of outstanding accounts receivable. All other customers were less than 10% each of total accounts receivable for each period presented. Accounts Receivable 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 Inventory is valued at the lower of the inventorys 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. Inventory is segregated into four areas, raw materials, WIP, finished goods, and In-Transit. Below is a breakdown of how much inventory is in each area as of June 30, 2016 (Successor) and December 31, 2015 (Predecessor). Jun 30, 2016 (Successor) December 31, 2015 (Predecessor) Raw materials $ 414,105 $ 391,845 WIP 388,715 351,697 Finished goods 340,798 192,820 In Transit 13,000 13,000 $ 1,156,618 $ 949,362 Property and Equipment Property and equipment are carried at cost less depreciation. Depreciation and amortization are provided principally on the straight-line method over the estimated useful lives of the assets, which range from five years to 39 years as follows: Buildings 39 years Equipment 5 years Maintenance and repair costs are charged against income as incurred. Significant improvements or betterments are capitalized and depreciated over the estimated life of the asset. Below is a table of Property and Equipment Property and Equipment Jun 30, 2016 (Successor) Dec 31, 2015 (Predecessor) Machinery & Equipment $ 1,256,885 $ 1,191,843 Office furniture & fixtures - 164,868 Building 3,895,000 - Less: Accumulated Depreciation (71,170) (1,190,448) $ 5,080,715 $ 166,263 Purchased Intangibles and Other Long-Lived Assets The Company amortizes intangible assets with finite lives over their estimated useful lives, which range between five and fifteen years as follows: Leasehold Improvements 15 years Non-compete agreements 5 years Software development 5 years Below are tables for Intangibles and Other Long-Lived Assets Intangibles Jun 30, 2016 (Successor) Dec 31, 2015 (Predecessor) Leasehold Improvements $ 69,000 $ - Software 165,050 - Noncompete 100,000 - Other 50,000 - Less: Accumulated Amortization (19,166) - $ 364,884 $ - Other Intangibles consist of QCA trade name, long lived customer relationships and customer lists. Other Non-Current Assets Jun 30, 2016 (Successor) Dec 31, 2015 (Predecessor) Restricted Cash $ 525,270 $ - Deposits 46,667 - $ 571,937 $ - Impairment of Long-Lived Assets The Company accounts for long-lived assets in accordance with the provisions of FASB Topic 360, Accounting for the Impairment of Long-Lived Assets. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the estimated future cash flows from the use of the asset are less than the carrying amount of that asset. During the three months ended June 30, 2016 (Successor), the period from January 1, 2016 through March 31, 2016 (Predecessor) and the six months ended June 30, 2015 (Predecessor), there have been no impairment losses . Goodwill In financial reporting goodwill is not amortized, but is tested for impairment annually in the fourth quarter of the fiscal year or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. We review goodwill for impairment by performing a two-step goodwill impairment test. The first step of the two-step goodwill impairment test is to compare the fair value of the reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the second step of the two-step goodwill impairment test is required to measure the goodwill impairment loss. The second step includes valuing all the tangible and intangible assets of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting units goodwill is compared to the carrying amount of that goodwill. If the carrying amount of the reporting units goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying amount. The Company has recorded no impairment of goodwill. Fair Value Measurement The Companys financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, convertible notes, notes and line of credit. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements. Revenue Recognition 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. The Company also derives revenue from the sale of circuit boards and wire harnesses and recognizes revenue either FOB Origin or FOB Destination dependent upon the contract with the customer. We consider revenue recognizable when persuasive evidence of an arrangement exists, the price is fixed or determinable, goods or services have been shipped or delivered, and collectability is reasonably assured. These criteria are assumed to have been met if a customer orders an item, the goods or services have been shipped or delivered to the customer, and we have sufficient evidence of collectability, such a payment history with the customer. Our records for all periods presented have been sufficient to satisfy all of the four requirements. Leases Leases are reviewed by management and examined to see if they are required to be categorized as an operating lease, a capital lease or a financing transaction. Earnings (loss) per share 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. Stock-based compensation 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) Accounting Standards Codification (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 is reached or completion of performance by the provider of goods or services as defined by FASB ASC 505-50. Income taxes 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 Companys 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 Companys 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. Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815 Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 Debt with Conversion and Other Options for consideration of any beneficial conversion features. Related Party Disclosure FASB ASC 850, "Related Party Disclosures" requires companies to include in their financial statements disclosures of material related party transactions. The Company discloses all material related party transactions. Related parties are defined to include any principal owner, director or executive officer of the Company and any immediate family members of a principal owner, director or executive officer. Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. 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 periods 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. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases (FAS 13) 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. |
