Item 8.01 Other Events.
Annual Letter to Shareholders
Dear Shareholders and Employees,
What a year 2019 was! So many areas of growth, so many areas of advancement, and
yet we are just beginning to experience all we can be. It is said that at
Alpine 4 we have an inherent ability to ignore naysayers and a healthy disregard
for the impossible. I can resoundingly say that this disregard is what has
driven us to accomplish what many told us was unattainable. Think about it for a
second. In 2016 with no institutional backing of our DSF acquisition strategy,
and one investment bank after another saying "we love the idea but come back
later", we as a company, we're able to pull off the impossible with our first
acquisition of Quality Circuit Assembly, Inc. Shortly after that, we finished
our acquisition of AutoTek's IP, then American Precision Fabricators and the
list goes on. We choose to do the impossible not because it was easy, but
because we knew it was the only path available to succeed with our plan. In
hindsight, the success in our plan has brought much attention to Alpine 4, and
there is rarely a week that goes by that I am not asked how we are able to
accomplish our DSF acquisition plan. This is something to be proud of and is
definitely something that uniquely defines what Alpine 4 is.
Link to CEO Annual Letter / Video 2020: https://youtu.be/VR09subA5CU
Swimming vs Surfing
While sitting in church recently, I heard our missions pastor discussing the
progress the church has made abroad. He used the analogy of swimming vs. surfing
and I felt it really sums up Alpine 4 and where we are today. When you are
swimming you are using your body to create motion and movement. Something that
Alpine 4 has done for the past 5 years. But now in 2020 our momentum is building
from external sources, much like surfing where your body is benefiting from
motion applied from an external source. Last year 2019 brought with it many
changes both fundamentally and perception wise. We added two new stabilizer
subsidiaries companies; Morris Sheet Metal and Deluxe Sheet Metal added various
new customers, rode through turbulent times with the tariffs and there adverse
effects on both APF and QCA, eliminated our toxic variable debt, and saw the
value of our stock increase by 112% over last year at this time. These
"swimming" efforts in 2019 will allow us to do more "surfing" in 2020.
2020 is Our Year
As I communicated in my 2019 Annual Shareholder letter, my plan to silo our
subsidiaries into sector-specific holding companies, we have begun the creation
of those siloed subsidiary holding companies. Those silos or holding
subsidiaries are; A4 Manufacturing, Inc., A4 Construction Services, Inc., and A4
Technologies, Inc. They were created as wholly-owned Delaware corporations, and
by the end of Q2, we will have incorporated our subsidiaries into them into. We
also created the long-awaited operating company for SPECTRUMebos under the name
SPECTRUMebos, Inc. and we will begin to move the IP assets and development work
into that entity in 2020 in preparation for commercialization of the product in
2021.
In 2019 our employee base also grew so quickly that we felt it necessary to
create our own internal employee benefits and payroll services company called A4
Corporate Services, LLC (A4CS) to more effectively handle the growing needs of
our employees. A4CS will not only allow our subsidiaries more uniform handling
of benefits and other related employer corporate services, it will also reduce
our cost basis greatly. In the prior 12 months of using Insperity as our
benefits and payroll provider, our fee cost to be in their platform was in
excess of $260k. annually. Bringing this into the Alpine 4 family of companies
reduces our cost from $260k annually to just under $120k an annual cost savings
of $140k.
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We also made several key promotions at Alpine 4 and within our subsidiaries. We
promoted; Tabatha Jones to SVP of Corporate Accounting of Alpine 4, Bill Boggle
to President of American Precision Fabricators, Tom Laubhan to President of
Morris Sheet Metal, and Director of Construction Services at Alpine 4, Jason
Sergeant to VP of Operations at Deluxe Sheet Metal, and John Walczewski to VP of
Sales at Deluxe Sheet Metal. I know I speak for all of us at Alpine 4 of how
proud we are of you!
For 2020 we are expecting our current subsidiaries to deliver on annual revenue
of between $41m to $44m, an increase of between 46%-57% over 2019. Further, we
also expect to add at least $15m-$40m in new revenue from new potential
acquisitions that we are currently in due diligence with.
Get a closer look at our subsidiaries QCA, APF and Morris Sheet Metal
Quality Circuit Assembly, Inc.: https://youtu.be/a8vGLYGdPhM
American Precision Fabricators, Inc.: https://youtu.be/fLhz-PkB03E
Morris Sheet Metal, Inc.: https://youtu.be/PaS6Bb_hMbg
Five Overarching Goals for 2020:
First, we need to begin to decouple ourselves from the debt burden we have taken
on from our acquisition strategy and transition to a more balanced debt to
equity capital ratio. This decoupling will reduce our cash flow burden by
millions of dollars annually, which will allow for capital reinvestments to
drive greater revenue and lower our overhead burden to help make all of our
subsidiaries even more competitive.
Second, we need to bring in a more balanced investor mix. Currently, we are too
top-heavy with retail investors making our stock more susceptible to large price
fluctuations. In 2020, we are moving towards bringing in institutional investors
to help balance our stock price out. If you are a long shareholder, you will
appreciate this move.
Third, we need to up-list to a national stock exchange. In order to bring in
institutional investors of merit, we need to be on a national exchange. Over the
past few months, as we have began to investigate the best exchange to up-list
to, it has become clear that the NYSE gives us a better path to accomplish our
goals while providing the most value to our shareholder base.
Fourth, we want to reward shareholders who seek to be a part of the Alpine 4
family post-up-listing to the NYSE. Management clearly understands some of the
perceptions relating to being a shareholder preceding and post the up-list
process. If the market supports the stock to meet the necessary NYSE threshold,
then no reverse will be needed, if it does not, we will reverse
accordingly. While there is more than ample data and examples of successful
reverse stock splits such as: Priceline, CitiBank, AIG and many others; the
board of directors and I want to ensure that we are being as transparent as
possible with our shareholders, and also let them know that we have their best
interests at heart too. Therefore, in the coming months, we will initiate
another Class C Dividend to our shareholders of record who are shareholders post
reverse and up-listing to the NYSE. We want to reward shareholders who stick it
out with us and understand the value of what NYSE brings to the long-term health
of Alpine 4. The value of that dividend has not been completely vetted out yet,
I anticipate that it will be close to the one we issued last summer which was 1
Class C share for every 10 class A shares.
Fifth, the continuation of our DSF acquisition model must include more
exploration of Driver companies to add to our portfolio. Driver companies are
typically pre-revenue companies and ones that show promise during the DD period
and will need to be purchased with equity and NOT debt. This will be much more
attractive to potential sellers of a Driver company if they can have equity in
Alpine 4 if it is listed on the NYSE. If 2019 was the year of the Stabilizer,
then it is our goal to add at least 1 more Driver company in 2020 that has a
large opportunity to be a home run company for the Alpine 4 family within 3-5
years.
The Path NYSE:
Of the listing requirements for NYSE MKT we believe that Standard 4a is our best
path to up-list.
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Meeting the $3 criterium: It has been recommended by our lead investment bank,
AGP, that we seek at least a $4-$5 stock price prior to listing on the NYSE in
order to meet the NYSE' minimum threshold of $3, and to ease any stock
fluctuations before the commencement of trading on the exchange. If we use a
common closing price over the last month of $0.20, then we would have to reverse
20 to 1 of our Class A stock in order to hit $4.
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Meeting the Market Cap of $75,000,0000: To achieve the value of the Market Cap
requirement and to reward shareholders who have been with us the longest, we
will not reverse the Class B or C shares and this action should bring our market
cap up to $95m.
* The following is a graphical representation based on today's share price,
share structure and market capitalization applied to a $4 share price.
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Meeting the Market Value of Public Float: We will have to back out the value of
the Class B stock and the value of insider shares. However, this is also met by
meeting the Market Cap standard.
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In late Q1 or early Q2, we will disseminate more information regarding our
up-listing plan, and if any of you have questions, please feel free to email
investorrelations@alpine4.com
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In closing, I believe that 2020 will be Alpine 4's most productive and
meaningful year in our history and that we are just beginning to see all the
potential of what we can be! We are excited about this next chapter in the life
of Alpine 4 and you should be too!
All My Best,
Kent Wilson
CEO/President
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