ITEM 1. BUSINESS.
Our Business
Company Background and History
Alpine 4 Holdings, Inc (“we”, “our”, “Alpine 4”, the “Company”) was incorporated under the laws of the State of Delaware on April 22, 2014. We are a publicly traded conglomerate that is acquiring businesses that fit into our disruptive DSF business model of Drivers, Stabilizers, and Facilitators. At Alpine 4, we understand the nature of how technology and innovation can accentuate a business. Our focus is on how the adaptation of new technologies even in brick and mortar businesses can drive innovation. We also believe that our holdings should benefit synergistically from each other and that the ability to have collaboration across varying industries can spawn new ideas and create fertile ground for competitive advantages. This unique perspective has culminated in the development of our Blockchain-enabled Enterprise Business Operating System called SPECTRUMebos.
As of the date of this Report, the Company was a holding company that owned fourteen operating subsidiaries:
–A4 Corporate Services, LLC;
–ALTIA, LLC;
–Quality Circuit Assembly, Inc.;
–Morris Sheet Metal, Corp;
–JTD Spiral, Inc.;
–Excel Construction Services, LLC;
–SPECTRUMebos, Inc.;
–Vayu (US), Inc.;
–Thermal Dynamics International, Inc.;
–Alternative Laboratories, LLC.;
–Identified Technologies, Corp;
–ElecJet, Corp.;
–DTI Services Limited Liability Company (doing business as RCA Commercial Electronics); and
–Global Autonomous Corporation.
Starting in the first quarter of 2020, we also created additional subsidiaries to act as silo holding companies, organized by industries. These silo subsidiaries are A4 Construction Services, Inc. (“A4 Construction”), A4 Manufacturing, Inc. (“A4 Manufacturing”), and A4 Technologies, Inc. (“A4 Technologies”), A4 Aerospace Corporation (“A4 Aerospace”), and A4 Defense Services, Inc. (“A4 Defense Services”). All of these holding companies are Delaware corporations. Each is authorized to issue 1,500 shares of common stock with a par value of $0.01 per share, and the Company is the sole shareholder of each of these subsidiaries.
In March 2021, the Company announced the combination of its subsidiaries Deluxe Sheet Metal, Inc. (Deluxe) and Morris Sheet Metal Corporation (Morris) to become one of the largest sheet metal contractors in the Midwest region of the United States. Both companies will be under the Morris Sheet Metal brand. The Company’s management believes that the
combination of these businesses will create a more harmonious relationship between the two companies. The combining of resources should empower Morris to strengthen its brand through its strategic banking relationship, eliminate duplicative and competitive interests, and expand its footprint beyond the Indiana home base.
On May 5, 2021, the Company acquired all of the outstanding shares of stock of Thermal Dynamics International, Inc., a Delaware corporation (“Thermal Dynamics”).
On May 10, 2021, the Company acquired all of the outstanding membership interests of KAI Enterprises, LLC, a Florida limited liability company, the sole asset of which was all of the outstanding membership interests of Alternative Laboratories, LLC, a Delaware limited liability company (“Alt Labs”).
In June 2021, the Company announced the combination of its subsidiaries Impossible Aerospace (“IA”) and Vayu (US) (“Vayu US”) to become Vayu Aerospace Corporation (“VAYU”). The Company’s management believes that the combination of these businesses will create a more harmonious relationship between the two companies. The combining of resources should empower VAYU to strengthen its brand through its strategic banking relationship, eliminate duplicative and competitive interests, and expand its footprint beyond the Michigan home base.
On October 20, 2021, the Company, and the Company’s subsidiary, A4 Aerospace, Inc., a Delaware corporation (“A4 Aerospace”), entered into a Stock Purchase Agreement with Identified Technologies Corporation, a Delaware corporation with foreign registration in Pennsylvania (“Identified Technologies”). Pursuant to the Stock Purchase Agreement, A4 Aerospace purchased all of the outstanding shares of capital stock of Identified Technologies, a total of 6,486,044 shares of Identified Technologies’ capital stock (the “ITC Shares”). The total purchase price for the ITC Shares was $4,000,000 and was paid in shares of the Company’s Class A common stock, issued to the Shareholders. Following the closing of the transaction, A4 Aerospace owned 100% of the capital stock of Identified Technologies.
On November 29, 2021, the Company, and a newly formed and wholly owned subsidiary of the Company named ALPP Acquisition Corporation 3, Inc. a Delaware corporation (“AC3”), entered into a merger agreement with ElecJet Corp., a Delaware corporation (“ElecJet”) and the three ElecJet shareholders. Pursuant to the Agreement, AC3 merged with and into ElecJet. AC3 was created solely for the purpose of the merger with ElecJet, and ElecJet was the surviving entity following the merger.
On December 9, 2021, the Company, and A4 Technologies, Inc., a Delaware corporation and wholly owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement with DTI Services Limited Liability Company (doing business as RCA Commercial Electronics), an Indiana limited liability company (“DTI”), Direct Tech Sales LLC, (also having an assumed business name of RCA Commercial Electronics), an Indiana limited liability company (“Direct Tech”), PMI Group, LLC, an Indiana limited liability company (“PMI”), Continu.Us, LLC, an Indiana limited liability company (“Continu.Us”), Solas Ray, LLC, an Indiana limited liability company (“Solas”), and the two individual owners of these entities. DTI, Direct Tech, PMI, Continu.Us, and Solas were referred to in the Membership Interest Purchase Agreement collectively as “RCA.” Pursuant to the Membership Interest Purchase Agreement, the Company acquired all of the outstanding membership interests of RCA.
Alpine 4 maintains our corporate office located at 2525 E. Arizona Biltmore Circle, Suite 237, Phoenix, Arizona 85016. ALTIA works out of the headquarters offices. QCA rents a location at 1709 Junction Court #380 San Jose, California 95112. Morris Sheet Metal and JTD Spiral are located at 6212 Highview Dr, Fort Wayne, Indiana 46818. Excel Construction Services’ office and fabrication space are located at 297 Wycoff Cir, Twin Falls, Idaho 83301. Vayu (US) has its headquarters at 3753 Plaza Drive, Ann Arbor, Michigan 48108. The headquarters for TDI are located at 14955 Technology Ct, Fort Myers, Florida 33912. Alt Labs has its headquarters at 4740 S. Cleveland Ave. Fort Myers, Florida 33907. The Identified Technologies Corporation headquarters are located at 6401 Penn Ave, Suite 211, Pittsburgh, Pennsylvania 15206. ElecJet has its headquarters at 2525 E. Arizona Biltmore Cir. Suite 237, Phoenix, Arizona 85016. RCA Commercial Electronics has its headquarters at 5935 W 84th St, Indianapolis, Indiana 46278. Global Autonomous Corporation has its offices at 2525 E Arizona Biltmore Circle, Suite 237, Phoenix Arizona 85016.
Who We Are
Alexander Hamilton in his “Federalist paper #11”, said that our adventurous spirit distinguishes the commercial character of America. Hamilton knew that our freedom to be creative gave American businesses a competitive advantage over the rest of the world. We believe that Alpine 4 also exemplifies this spirit in our subsidiaries and that our greatest competitive advantage is our highly diverse business structure combined with a culture of collaboration.
It is our mandate to grow Alpine 4 into a leading, multi-faceted holding company with diverse subsidiary holdings with products and services that not only benefit from one another as a 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. The essence of our business model is based around acquiring B2B companies in a broad spectrum of industries via our acquisition strategy of DSF (Drivers, Stabilizer, Facilitator). Our DSF business model (which is discussed further below) offers our shareholders an opportunity to own small-cap businesses that hold defensible positions in their individual market space. Further, Alpine 4’s greatest opportunity for growth exists in the smaller to middle-market operating companies with revenues between $5 to $150 million annually. In this target-rich environment, businesses generally sell at more reasonable multiples, presenting greater opportunities for operational and strategic improvements that have greater potential to enhance profit.
Driver, Stabilizer, Facilitator (DSF)
Driver: A Driver is a company that is in an emerging market or technology, that has enormous upside potential for revenue and profits, with a significant market opportunity to access. These types of acquisitions are typically small, brand new companies that need a structure to support their growth.
Stabilizer: Stabilizers are companies that have sticky customers, consistent revenue and provide solid net profit returns to Alpine 4.
Facilitators: Facilitators are our “secret sauce”. Facilitators are companies that provide a product or service that an Alpine 4 sister company can use as leverage to create a competitive advantage.
When you blend these categories into a longer-term view of the business landscape, you can then begin to see the value-driving force that makes this a truly purposeful and powerful business model. As stated earlier, our greatest competitive advantage is our highly diversified business structure combined with a collaborative business culture, that helps drive out competition in our markets by bringing; resources, planning, technology and capacity that our competitors simply don’t have. DSF reshapes the environment each subsidiary operates in by sharing and exploiting the resources each company has, thus giving them a competitive advantage that their peers don’t have.
How We Do It:
Optimization vs. Asset Producing
The process to purchase a perspective company can be long and arduous. During our due diligence period, we are validating and determining three major points, not just the historical record of the company we are buying. Those three major points are what we call the “What is, What Should Be and What Will Be”.
•“The What Is” (TWI). TWI is the defining point of where a company is holistically in a myriad of metrics; Sales, Finance, Ease of Operations, Ownership and Customer Relations to name a few. Subsequently, this is usually the point where most acquirers stop in their due diligence. We look to define this position not just from a number’s standpoint, but also how does this perspective map out to a larger picture of culture and business environment.
•“The What Should Be” (TWSB). TWSB is the validation point of inflection where we use many data inputs to assess if TWI is out of the norm with competitors, and does that data show the potential for improvement.
•“The What Will Be” (TWWB). TWWB is how we seek to identify the net results or what we call Kinetic Profit (KP) between the TWI and TWSB. The keywords are Kinetic Profit. KP is the profit waiting to be achieved by some form of action or as we call it, the Optimization Phase of acquiring a new company.
Optimization: During the Optimization Phase, we seek to root up employees with in-depth training on various topics. Usually, these training sessions include; Profit and Expense Control, Production Planning, Breakeven Analysis and Profit Engineering to name a few. But the end game is to guide these companies to: become net profitable with the new debt burden placed on them post-acquisition, mitigate the loss of sales due to acquisition attrition (we typically plan on 10% of our customers leaving simply due to old ownership not being involved in the company any longer), potential replacement of employees that no longer wish to be employed post-acquisition and other ancillary issues that may arise. The Optimization Phase usually takes 12-18 months post-acquisition and a company can fall back into Optimization if it is stagnant or regresses in its training.
Asset Producing: Asset Producing is the ideal point where we want our subsidiaries to be. To become Asset Producing, subsidiary management must have completed prescribed training formats, proven they understand the key performance indicators that run their respective departments and finally, the subsidiaries they manage must have posted a net profit for 3 consecutive months.
Diversification
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 a 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 subsidiary 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 core principles of Synergy, Innovation, Drive, Excellence are implemented and internalized. 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.
In 2016, we saw the beginning of our plan for diversification take hold with the acquisition of Quality Circuit Assembly, Inc. (“QCA”), when Alpine 4 acquired 100% of QCA’s stock effective April 1, 2016. Additional information relating to our acquisition of QCA can be found in our Current Report on Form 8-K, filed with the SEC on March 15, 2016.
In October 2016, we formed a new Limited Liability Company called ALTIA (Automotive Logic & Technology In Action) to create an independent subsidiary for Alpine 4’s 6th Sense Auto product and its BrakeActive product. The company holds two patents on this technology.
In April 2018, we acquired 100% of American Precision Fabricators (APF) Additional information relating to our acquisition of APF can be found in our Current Report on Form 8-K, filed with the SEC on April 10, 2018.
Effective January 1, 2019, we purchased Morris Sheet Metal Corp., an Indiana corporation, JTD Spiral, Inc. a wholly owned subsidiary of MSM, an Indiana corporation, Morris Enterprises LLC, an Indiana limited liability company and Morris Transportation LLC, an Indiana limited liability company (collectively “Morris”).
On November 6, 2019, we completed our acquisition of Deluxe Sheet Metal, Inc., an Indiana corporation (“DSMI”), DSM Holding, LLC, an Indiana limited liability company (“DHL”), and the real estate assets of Lonewolf Enterprises, LLC, an Indiana limited liability company (“LWE,” and collectively with DSMI and DHL, “DSM”).
On February 21, 2020, the Company, through its holding subsidiary A4 Construction, completed the acquisition of Excel Fabrication, LLC, an Idaho Limited Liability Company (“EFL”). EFL subsequently changed its name to Excel Construction Services, LLC.
On November 13, 2020, the Company and a newly formed and wholly owned subsidiary of the Company named ALPP Acquisition Corporation 1, Inc. a Delaware corporation (“Merger Sub 1”), entered into a merger agreement (the “IA Agreement”) with Impossible Aerospace Corporation, a Delaware corporation (“IAC”), pursuant to which IAC merged with and into Merger Sub 1 (the “IA Merger”). On November 12, 2020, the Company created Merger Sub 1 and became its sole shareholder. Merger Sub 1 was created solely for the purpose of the IA Merger. The IA Merger closed on December 15, 2020.
On December 29, 2020, the Company and a newly formed and wholly owned subsidiary of the Company named ALPP Acquisition Corporation 2, Inc. a Delaware corporation (“Merger Sub 2”), entered into a merger agreement (the “Vayu Agreement”) with Vayu (US), Inc., a Delaware corporation (“VAYU”), pursuant to which VAYU merged with and into Merger Sub 2 (the “Vayu Merger”). On December 29, 2020, the Company created Merger Sub 2 and became its sole shareholder. Merger Sub 2 was created solely for the purpose of the Vayu Merger. The Vayu Merger closed on February 8, 2021.
As noted above, in 2021, the Company, either directly or through subsidiaries entered into the following acquisition and merger transactions:
–In May 2021, the Company acquired all of the outstanding shares of stock of Thermal Dynamics;
–In May 2021, the Company acquired all of the outstanding membership interests of KAI Enterprises, LLC, a Florida limited liability company, the sole asset of which was all of the outstanding membership interests of Alt Labs;
–In June 2021, the Company announced the combination of its subsidiaries Impossible Aerospace (“IA”) and Vayu (US) (“Vayu US”) to become Vayu Aerospace Corporation (“VAYU”);
–In October 2021, the Company, and the Company’s subsidiary, A4 Aerospace, Inc., a Delaware corporation, entered into a Stock Purchase Agreement with Identified Technologies;
–In November 2021, the Company, and AC3 entered into a merger agreement with ElecJet;
–In December 2021, the Company, and A4 Technologies entered into a Membership Interest Purchase Agreement with DTI, Direct Tech, PMI, Continu.Us, Solas Ray, and their individual owners to acquire all of the outstanding membership interests of RCA; and
–In January 2022, the Company formed Global Autonomous Corporation with several key employee and consultants. The Company owns 71.43%
As of the date of this Report, the Company was exploring additional acquisition and merger transactions, and additional information will be provided if and when such transactions are either binding or closed.
At the core of our business strategy is our focus on scalable corporate platform solutions. We have built a strong portfolio of manufacturing, software, and energy driven businesses with a focus on long-term value creation.
As of the date of the filing of this Annual Report, our subsidiaries and product groups consisted of the following:
Subsidiaries & Product Groups
As of the date of the filing of this Report, we had the following subsidiaries and product groups:
•ALTIA, LLC is an automotive technology company with several core product offerings:
–6th Sense Auto is a connected car technology that 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. 6th Sense Auto uses disruptive technology to improve inventory management, reduce costs, increase sales, and enhance service.
–BrakeActive™ is a safety device that can improve a vehicle’s third brake light’s ability to greatly reduce or prevent a rear end collision by as much as 40%. According to a National Highway Traffic Safety Administration report issued in 2010, rear end collisions could be reduced by 90% if trailing vehicles had one additional second to react. The Company’s new programmable technology and device aims to provide this additional reaction time to trailing vehicles.
•Quality Circuit Assembly (“QCA”) - Since 1988, QCA has been providing electronic contract manufacturing solutions delivered to its customers via strategic business partnerships. Our abilities encompass a wide variety of skills, beginning with prototype development and culminating in the ongoing manufacturing of a complete product or assembly. Turnkey solutions are tailored around each customer's specific requirements. Conveniently located in San Jose, California, with close proximity to San Jose airport and all major carriers, QCA’s primary aim is to provide contract-manufacturing solutions to market leading companies within the industrial, scientific, instrumentation, military, medical and green industries.
•American Precision Fabricators (“APF”) – Based in Fort Smith, Arkansas, APF was a sheet metal fabricator that provided American made fabricated metal parts, assemblies and sub-assemblies to Original Equipment Manufacturers (“OEM”). The Company supplied several industries with fabricated parts that it created in-house. It offered several production capabilities with its state-of-the-art machinery. As of August 31, 2020 APF has ceased operations.
•Morris Sheet Metal FW (“MSM FW”) – Based in Fort Wayne, Indiana, MSM is a commercial sheet metal contractor and fabricator. MSM designs, fabricates, and installs dust collectors, commercial ductwork, kitchen hoods, industrial ventilation systems, machine guards, architectural work, water furnaces, and much more.
•JTD Spiral (“JTD”) - Based in Fort Wayne, Indiana, JTD is a sister company to MSM and provides specialized spiral duct work to MSM clientele.
•Deluxe Sheet Metal, Inc (“DLX”) – Based in South Bend, Indiana, DLX is a commercial sheet metal contractor and fabricator. MSM designs, fabricates, and installs dust collectors, commercial ductwork, kitchen hoods, industrial ventilation systems, machine guards, architectural work, water furnaces, and much more. In 2021, DLX merged its operations into MSM FW becoming MSM-SB.
•Excel Fabrication, LLC (name subsequently changed to Excel Construction Services) (“EXL”) –Based in Twin Falls, Idaho, EXL is an industrial service with customers in the Food, Beverage, Dairy, Mining, Petrochemical, Mineral, and Ammonia Refrigeration. EXL’s capabilities include a vast amount of field work including new fabrication, design build, installation, repairs, service, maintenance, turn arounds, down days planned or unplanned with quick and responsive teams for most any items required by the customer needs and demands.
•Impossible Aerospace (“IA”) builds high performance electric aircraft. Founded in 2016 by former Tesla engineer Spencer Gore, IA unveiled its US-1 aircraft in 2018, unique for its long endurance and US origin. At the time the company was backed by Bessemer Venture Partners, Eclipse Venture, and Airbus Ventures. IA is committed advancement of cutting edge airframes such as the US-1 and the upcoming US-2 which will be powered by Solid State Batteries from its sister company ElecJet. The IA team consists of experts in aviation, engineering, advanced imaging and law enforcement and come from some of the most progressive companies in the US including SpaceX, Tesla, NASA, FLIR Systems and Icon Aircraft. IA was merged into Vayu on January 7, 2022 and is operating at the Vayu location. The Company was renamed to Vayu Aerospace Corporation.
•Vayu Aerospace Corporation formally Vayu (US), Inc. (“Vayu”), has as its mission to solve the hardest and most critical logistics challenges, anywhere in the world. Vayu aims to set the standard and lead the market in safe, reliable, and affordable vertical take-off and landing (“VTOL”) aircraft. Vayu focuses on four key areas: medical, logistics, energy, and disaster relief.
–Medical – From blood products for transfusion and time-sensitive anti-venoms, to critical medications, vaccines, and surgical supplies, Vayu’s drones deliver vital supplies --anywhere, anytime. Vayu’s drone not only brings precious cargo to remote areas, but it can also pick up medical products, such as lab samples, and return them to a central laboratory for testing.
–Logistics - Mail. Spare parts. Consumer electronics. Time-sensitive documents. These are just a few examples of the use cases where Vayu’s vehicle can play a critical role. Delivery from hub-to-hub or to the ‘last mile’. Vayu’s vehicle can both decrease costs, due to its fuel efficiency and autonomous capability -- and increase market share.
–Energy – Vayu’s drone can reach open-pit mines and offshore oil platforms. By transporting spare parts, or other commodities, Vayu’s vehicle can save a company from down-time and high costs of on-site stocking, while avoiding more costly forms of transportation.
–Disaster Relief – In times of crisis, when infrastructure is compromised, Vayu’s drones can reach areas otherwise completely inaccessible. Whether it’s after an earthquake, hurricane, or flooding, Vayu’s drones can take off and land anywhere, and reach populations in need.
–As noted above, in June 2021, the Company announced the combination of IA and Vayu to become Vayu Aerospace Corporation (“VAYU”)
•Alternative Laboratories (“Alt Labs”) - Based in Fort Meyers, Florida, Alt Labs operates as a contract manufacturer of dietary and nutritional supplements.
•Thermal Dynamics International, Inc. (“TDI”) is an international contracting, fabricator, and project management services company. TDI's primary client is the United States Federal Government, including the Department of Defense and Department of State. TDI specializes in managing complex projects, assets and infrastructure for its customers, including support and services for the engineering, design, logistics and installation of HVAC, Control and Electrical systems in government facilities outside the United States.
•Identified Technologies - Based in Pittsburgh, Pennsylvania, provides geospatial and 3D data to customers in Construction, Oil/Gas, Mining, and Quarries. Users capture the raw data on site with small Unmanned Aerial Systems
and use automated software to convert the raw imagery to geospatial data. Identified can both enable customers to deploy their own drone departments, and deploy certified pilots to capture the data as a service.
•ElecJet - Based in Phoenix, Arizona, ElecJet operates as a manufacturer of electronic components, a research and development company for graphene batteries.
•DTI Services Limited Liability Company, and Affiliates (collectively referred to as the “RCA”) is engaged in the design, manufacture and wholesale distribution of commercial LED lighting and electronics such as televisions, mounting solutions, projectors and screens, audio equipment, digital signage, mobile audio and video systems, and all wire and connecting products throughout the United States of America.
–In January 2022, the Company announced the formation of RCA Batteries Corporation (RCA Batteries), a joint venture between RCA Commercial and Elecjet. RCA Batteries will reside under the Company’s subsidiary RCA Commercial and will operate as the manufacturer and distributor of the ElecJet family of graphene batteries.
Recent Developments
Registered Direct Offering
On November 23, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers identified on the signature page thereto (the “Purchasers”), pursuant to which the Company sold to the Purchasers in a registered direct offering, an aggregate of 8,571,430 Shares of Class A Common Stock (the “Common Stock”) and Warrants the (“Warrants”) to purchase up to 4,285,715 Shares of Class A Common Stock (the “Warrant Shares”) underlying the Warrants, for aggregate gross proceeds to the Company of $24,000,000, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. At the closing, the Company issued an aggregate of 8,571,430 Shares and Warrants to purchase an aggregate of 4,285,715 Warrants Shares.
ElecJet Corporation
On November 29, 2021, the Company and a newly formed and wholly owned subsidiary of the Company named ALPP Acquisition Corporation 3, Inc. a Delaware corporation (“Merger Sub”), entered into a merger agreement (the “Agreement”) with ElecJet Corp., a Delaware corporation (“ElecJet”) and the three shareholders of ElecJet, Samuel Gong (“Gong”), Wade Lin (“Lin”), and John Doricko (“Doricko,” and collectively with Gong and Lin, the “Securityholders”). Pursuant to the Agreement, Merger Sub merged with and into ElecJet (the “Merger”). Additional information about this transaction can be found in the Current Report on Form 8-K filed by the Company on December 3, 2021.
Acquisition of DTI Services Limited Liability Company (doing business as RCA Commercial Electronics)
On December 9, 2021, the Company and A4 Technologies, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“A4 Technologies”), entered into a Membership Interest Purchase Agreement (the “MIPA”) with DTI Services Limited Liability Company (doing business as RCA Commercial Electronics), an Indiana limited liability company (“DTI”), Direct Tech Sales LLC, (also having an assumed business name of RCA Commercial Electronics), an Indiana limited liability company (“Direct Tech”), PMI Group, LLC, an Indiana limited liability company (“PMI”), Continu.Us, LLC, an Indiana limited liability company (“Continu.Us”), Solas Ray, LLC, an Indiana limited liability company (“Solas”), Kirby Goedde, an individual (“Goedde”), and Andrew Spence, an individual (“Spence” and with Goedde, each a “Seller” and collectively, the “Sellers”). DTI, Direct Tech, PMI, Continu.Us, and Solas were referred to in the MIPA collectively as “RCA.” Pursuant to the MIPA, A4 Technologies acquired all of the outstanding membership interests of RCA from the Sellers, which is referred to herein as the “RCA Transaction.”
Prior to the RCA Transaction, the Sellers owned all of the issued and outstanding membership interests in the entities that collectively constituted RCA (collectively, the “Acquired Interests”). Pursuant to the RCA Transaction, A4 Technologies acquired all of the Acquired Interests and became the sole owner of RCA. The parties to the RCA Transaction met all of the required conditions to closing on December 13, 2021, and the RCA Transaction closed on that day. Additional information about the Transaction can be found in the Current Report on Form 8-K filed by the Company on December 15, 2021.
RCA Batteries
On January 26, 2022, the Company issued a press release to announce the formation of RCA Batteries Corporation (“RCA Batteries”), a joint venture between RCA Commercial and Elecjet Corp. As of the date of this Report, the Company had opted to use RCA Batteries as a brand and not a corporate entity. As noted in the press release, RCA Batteries will reside under Alpine 4’s subsidiary RCA Commercial and will operate as the manufacturer and distributor of the ElecJet family of graphene batteries. Elecjet will continue as a manufacturer of electronic components, a research and development company, and the legal entity holding the company’s intellectual property, including patents and software copyrights. The Company further announced that Samuel Gong will be the President of RCA Batteries while remaining as President of Elecjet.
In March 2022, ElecJet engaged the Battery Innovation Center (BIC) in Newberry, Indiana, to conduct a third-party verification of the specifications of certain of ElecJet’s Class of solid-state batteries previously confirmed by ElecJet in its laboratory. The testing included puncture testing, folding/crumpling tests, and thermal heat tests. The AX Battery Class is a Ceramic Oxide solid-state battery and comes in the form of a 31Ah Solid-State Battery and a 10Ah Solid-State Battery. All of the AX and G-AX Classes are true solid-state batteries and are not semi solid-state batteries. ElecJet engaged the BIC to perform several types of testing, ranging from verification of its charge capabilities, to energy density / power density, to induced failure point testing. The BIC tested two versions of the AX 31Ah the AX-01 and the AX-02. These two subclasses are designed for different market segments.
The AX-01 is an ultra-safe version that can withstand a variety of survivability use cases. The AX-01 has a slightly different material composition that enables its amazing survivability characteristics. The BIC confirmed that the AX-01 withstood being punctured, then folded, and finally crumpled while still holding a charge. The cell was then put through a temperature destruction test where the cell survived to a temperature of 410 degrees Fahrenheit (210 degrees Celsius). Details of the tests are described below:
–Nail Puncture Test: The AX-01 was punctured by a 3mm diameter nail. The nail was left inside the battery, purposely causing the battery to short, of which it did for over an hour while being suspended in the air. The battery's temperature fluctuated but would hover at around 98.6°F (37°C) near the end of the hour with a maximum measured temperature of 101.76°F (38.76°C). Subsequently, the battery was lowered back on to the metal surface for the nail to be removed and the battery quickly returned to room temperature. One amazing feature of the battery was that during the entirety of the test, the AX-01 was holding voltage and remained functional. Note: Traditional lithium batteries typically would instantly catch on fire and go into thermal runaway the moment the battery was punctured.
–Fold/Crumple Test: After the puncture test, the AX-01 was folded over its long side (AX-01 is a long rectangular shape) by a mechanical actuator. After it was folded to the point that both ends were touching each other, the battery was attempted to be folded over again by its short side. After being folded with as much force as the mechanical actuator could press out, the battery remained functional throughout the entire process and remained at room temperature. Note: Standard lithium batteries would normally catch on fire after being folded at even a small angle.
–Thermal Heat Test: The battery was placed in an oven and the oven would slowly and constantly increase in temperature to test the battery's heat exposure breaking point. The temperature of the battery was brought up to 428°F (220°C) before thermal runaway occurred creating a new BIC record. Once the battery eventually caught fire, the fire was unlike other thermal runaways where a battery spews a stream of fire from a concentrated point, but rather was much more contained to the surface area across the battery. Note: Typical lithium batteries would have a thermal runaway at 266°F (130°C) and the previous highest recorded temperature before thermal runaway on cells of similar capacity, with fielded chemistries, at the BIC was 302°F (150°C).
The BIC confirmed that the AX-01 measured a discharge energy of 111.41Wh at a C/2 rate (measured 31.70 Ah)). At a nominal volume of 0.17571 Liters for each cell and a nominal mass of 0.395 kg, this translates to 634Wh/L and 282Wh/kg of energy densities which are both dramatic improvements over current battery technology.
The AX-01 has a designed commercial cycle life of over 1,200 charge cycles. (Please note: this life cycle range was tested only in the Company’s laboratories, and we have not yet received results from the BIC, which generally takes several months to complete.)
The AX-02 is an energy dense cell that also has a high degree of survivability but trades some of the safety material features of the AX-01 for much higher power densities and higher life cycles.
The BIC confirmed that the AX-02 has the capability to charge at 4C. This means that the battery can fully charge in just 15 minutes. The AX-02 is also capable of 7C discharging and over 2,400 life cycles, both of which are currently in the process of being confirmed by the BIC.
The BIC also confirmed that the AX-02 measured a discharge energy of 113.213Wh at a C/2 rate (measured 31.4 Ah). At a nominal volume of 0.17571 Liters for each cell and a nominal mass of 0.395 kg, this translates to 644Wh/L and 287Wh/kg of energy densities which are both dramatic improvements over current battery technology.
Additionally, the Company has been exploring and has had discussions with different battery engineering firms, capital partners and consultants, in anticipation of bringing production of the ElecJet AX Class of batteries to the United States. ElecJet has current plans to begin with a ½ GW battery factory to support non EV customers with products for ESS systems, aerospace platforms and defense systems that need safe reliable power cells. However, the Company anticipates that factory layout and space accommodation will be made for the factory to expand to 5 GW or greater, if demand from potential EV customers increases. The company has narrowed its search to build this factory to Phoenix and Tucson, Arizona; Houston, Texas; and Indianapolis, Indiana, and plans on making a decision on which location to build this factory in the third quarter of 2022. The Company has also taken an equity position in a battery design firm, and is exploring other strategic opportunities relating to production and design of the batteries in the United States.
Annual Shareholder Meeting; Mike Loyd Resignation
On March 25, 2022, the Company held its 2021 Annual Shareholder meeting. At the meeting, the Company’s shareholders elected eight directors: Kent B. Wilson, Charles Winters, Ian Kantrowitz, Gerry Garcia, Edmond Lew, Christophe Jeunot, Jonathan Withem, and Mike Loyd; ratified the appointment of MaloneBailey, LLP as the Company’s independent registered public accountant for 2021; approved an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of Class A Common Stock to 295,000,000 shares; and approved the adoption of the Company’s new 2021 Equity Incentive Plan.
Prior to the annual meeting, Mike Loyd communicated to the Board his plan to resign, effective immediately, due to added responsibilities with his employer and to spend more time with family.
On April 13, 2022, the Company filed the Certificate of Amendment with the Delaware Secretary of State, increasing the number of authorized shares of Class A Common Stock to 295,000,000 shares.
Appointment of New Director; Implementation of Rotating Board Chair Position
On April 6, 2022, the Company announced that the Board of Directors had appointed Andy Call to join the Board of Directors and to become Chair of the Audit Committee of the Board.
Additionally, on April 6, 2022, the Company’s Board of Directors adopted a resolution to implement a rotation in the position of Chair of the Board of Directors. The resolution had been recommended by the Board’s Nominating and Corporate Governance Committee. Per the resolution of the Board, the chair position will rotate on an annual basis.
Acting upon a recommendation from the Nominating and Corporate Governance Committee, the Board then appointed Gerry Garcia as the new Chair of the Board of Directors.
Additional information about Mr. Call and about the rotating chair position can be found in the Current Report on Form 8-K filed with the SEC on April 11, 2022.
Employees
As of the date of this Report, we had 480 full-time employees. We believe that our relationship with our employees is good. Other than as disclosed in this Report or previously filed with the SEC, 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.
Summary of our Risk Factors
We face numerous risks that could materially affect our business, results of operations or financial condition. The most significant of these risks include the following:
–The global supply chain is an issue for many companies in the global business environment as well as it is for Alpine 4. These constraints affected the company in 2021 and may affect our ability to deliver our products on time in 2022.
–Alpine 4 is an "emerging growth company," and the reduced disclosure requirements applicable to "emerging growth companies" could make our Class A common stock less attractive to investors
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–Growth and development of operations will depend on the acceptance of Alpine 4's proposed businesses. If Alpine 4's products are not deemed desirable and suitable for purchase and it cannot establish a customer base, it may not be able to generate future revenues, which would result in a failure of the business and a loss of the value of your investment.
–If demand for the products Alpine 4 plans to offer slows, then its business would be materially affected, which could result in the loss of your entire investment.
–Our revenue growth rate depends primarily on our ability to satisfy relevant channels and end-customer demands, identify suppliers of our necessary ingredients and to coordinate those suppliers, all subject to many unpredictable factors.
–If securities or industry analysts do not publish or cease publishing research or reports or publish misleading, inaccurate or unfavorable research about us, our business or our market, our stock price and trading volume could decline.
–Alpine 4 stockholders may have difficulty in reselling their shares due to the limited public market or state Blue Sky laws.
–The ongoing COVID-19 pandemic has caused severe disruptions in the U.S. and global economies, which has impacted the business, activities, and operations of our customers, as well as our business and operations. Additionally, through 2021, the U.S. and other economies have been impacted by supply chain disruptions, labor shortages and high inflation, all of which may have a negative impact on our business and operations.
–Our existing debt levels may adversely affect our financial condition or operational flexibility and prevent us from fulfilling our obligations under our outstanding indebtedness.
–Growth and development of operations will depend on the growth in our acquisition model and from organic growth from our subsidiaries’ businesses. If we cannot find desirable acquisition candidates, we may not be able to generate growth with future revenues.
–We face risks related to COVID-19 which have significantly disrupted our manufacturing, research and development, operations, sales and financial results, and could continue to do so for the foreseeable future.
–Should we fail to comply with the minimum listing standards applicable to issuers listed on The Nasdaq Capital Market, our common stock may be delisted from The Nasdaq Capital Market.
Risks Associated with Our Business and Operations
We are an "emerging growth company," and the reduced disclosure requirements applicable to "emerging growth companies" could make our common stock less attractive to investors.
We are 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 $1,070,000,000 (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.
Significant time and management resources are required to ensure compliance with public company reporting and other obligations. Taking steps to comply with these requirements will increase our costs and require additional management resources, and does not ensure that we will be able to satisfy them.
We are a publicly reporting company. As a public company, we are required to comply with applicable provisions of the Sarbanes-Oxley Act of 2002, as well as other federal securities laws, and rules and regulations promulgated by the SEC and the various exchanges and trading facilities where our Class A common stock may trade, which result in significant legal, accounting, administrative and other costs and expenses. These rules and requirements impose certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest, and codes of conduct, depending on where our shares trade. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all applicable requirements.
As we review our internal controls and procedures, we may determine that they are ineffective or have material weaknesses, which could impact the market's acceptance of our filings and financial statements.
In connection with the preparation of this Annual Report, we conducted a review of our internal control over financial reporting for the purpose of providing the management report required by these rules. During the course of our review and testing, we have identified deficiencies and have been unable to remediate them before we were required to provide the required reports. Furthermore, because we have material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. Even if we are able to remediate the material weaknesses, we may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, as a public company we are required to file in a timely manner accurate quarterly and annual reports with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"), as amended. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from the market or trading facility where our shares may trade, or other adverse consequences that would materially harm our business.
Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time consuming, difficult and costly.
Alpine 4's executive officers have limited experience being officers of a public company. It may be time consuming, difficult and costly for us to continue to develop, implement, and update the internal controls and reporting procedures required by Sarbanes-Oxley. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with Sarbanes-Oxley's internal controls requirements, we may not be able to obtain the independent accountant certifications that Sarbanes-Oxley Act requires publicly traded companies to obtain.
Alpine 4 is a growth-based company and has shown a net loss since inception. Ownership of Alpine 4 shares is highly risky and could result in a complete loss of the value of your investment if we are unsuccessful in its business plans.
As the Alpine 4’s “Driver” classified subsidiaries mature from a start-up phase to an operating phase, the Company expects to stop incurring operating losses at some point in the future. However new additional subsidiaries may incur significant expenses associated with the growth of those businesses. Further, there is no guarantee that the Company will be successful in realizing future revenues or in achieving or sustaining positive cash flow at any time in the future. Any such failure could result in the possible closure of one of its subsidiaries or force Alpine 4 to seek additional capital through loans or additional sales of its equity securities to continue business operations which would dilute the value of any shares you purchase in connection with this offering.
Growth and development of operations will depend on the growth in the Alpine 4 acquisition model and from organic growth from its subsidiaries’ businesses. If we cannot find desirable acquisition candidates, it may not be able to generate growth with future revenues.
We expect to continue our strategy of acquiring businesses, which management believes will result in significant growth in projected annualized revenue by the end of 2022. However, there is no guarantee that we will be successful in realizing future revenue growth from its acquisition model. As such, we are highly dependent on suitable candidates to acquire, which supply of such candidates cannot be guaranteed and is driven from the market for M&A. If we are unable to locate or identify suitable acquisition candidates, or to enter into transactions with such candidates, or if we are unable to integrate the acquired businesses, we may not be able to grow our revenues to the extent anticipated, or at all.
We may make acquisitions which could divert the attention of management and which may not be integrated successfully into our existing business.
We may pursue acquisitions to increase our market penetration, enter new geographic markets and expand the scope of services we provide. We cannot guarantee that we will identify suitable acquisition candidates, that acquisitions will be completed on acceptable terms or that we will be able to integrate successfully the operations of any acquired business into our existing business. The acquisitions could be of significant size and involve operations in multiple jurisdictions. The acquisition and integration of another business would divert management attention from other business activities. This diversion, together with other difficulties we may incur in integrating an acquired business, could have a material adverse effect on our business, financial condition and results of operations. In addition, we may borrow money or issue capital stock to finance acquisitions. Such borrowings might not be available on terms as favorable to us as our current borrowing terms and may increase our leverage, and the issuance of capital stock could dilute the interests of our stockholders.
As we acquire companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the value of your investment.
As part of our business strategy, we regularly evaluate investments in, or acquisitions of, complementary businesses, joint ventures, services and technologies, and we expect that periodically we will continue to make such investments and acquisitions in the future. Acquisitions and investments involve numerous risks, including:
–the potential failure to achieve the expected benefits of the combination or acquisition;
–difficulties in and the cost of integrating operations, technologies, services and personnel;
–diversion of financial and managerial resources from existing operations;
–risk of entering new markets in which we have little or no experience;
–potential write-offs of acquired assets or investments;
–potential loss of key employees;
–inability to generate sufficient revenue to offset acquisition or investment costs;
–the inability to maintain relationships with customers and partners of the acquired business;
–the difficulty of incorporating acquired technology and rights into our products and services and of maintaining quality standards consistent with our established brand;
–potential unknown liabilities associated with the acquired businesses;
–unanticipated expenses related to acquired technology and its integration into existing technology;
–negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation, and the loss of acquired deferred revenue;
–the need to implement controls, procedures and policies appropriate for a public company at companies that prior to the acquisition lacked such controls, procedures and policies; and
–challenges caused by distance, language and cultural differences.
In addition, if we finance acquisitions by issuing additional convertible debt or equity securities, our existing stockholders may be diluted which could affect the market price of our stock. Further, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be seriously harmed, and the value of your investment may decline.
Alpine 4 has limited management resources and will be dependent on key executives. The loss of the services of the current officers and directors could severely impact Alpine 4’s business operations and future development, which could result in a loss of revenues and adversely impact the business.
Alpine 4 is relying on a small number of key individuals, which the Company has increased during 2021, to implement its business and operations and, in particular, the professional expertise and services of Kent B. Wilson, our President, Chief Executive Officer, and Secretary, Jeff Hail, our Chief Operating Officer, Larry Zic, our Chief Financial Officer, and SaVonnah Osmanski, our VP/Corporate Controller. Mr. Wilson serves full time in his capacities with Alpine 4 to work to develop and grow the Company. Nevertheless, Alpine 4 may not have sufficient managerial resources to successfully manage the increased business activity envisioned by its business strategy. In addition, Alpine 4's future success depends in large part on the continued service of Mr. Wilson and the executive team. If Mr. Wilson or any member of the executive team chooses not to serve as an officer or if Mr. Wilson or any member of the executive team is unable to perform his or her duties, this could have an adverse effect on Company business operations, financial condition and operating results, especially if we are unable to replace Mr. Wilson or Mr. Hail with other individuals qualified to develop and market our business. The loss of their services could result in a loss of revenues, which could result in a reduction of the value of any ownership of Alpine 4.
Competition that we face is varied and strong.
Our subsidiaries’ products and industries as a whole are subject to competition. There is no guarantee that we can sustain our market position or expand our business.
We compete with a number of entities in providing products to our customers. Such competitor entities include a variety of large nationwide corporations, including but not limited to public entities and companies that have established loyal customer bases over several decades.
Many of our current and potential competitors are well established and have significantly greater financial and operational resources, and name recognition than we have. As a result, these competitors may have greater credibility with both existing and potential customers. They also may be able to offer more competitive products and services and more aggressively promote and sell their products. Our competitors may also be able to support more aggressive pricing than we will be able to, which could adversely affect sales, cause us to decrease our prices to remain competitive, or otherwise reduce the overall gross profit earned on our products.
Our success in business and operations will depend on general economic conditions.
The success of Alpine 4 and its subsidiaries depends, to a large extent, on certain economic factors that are beyond its control. Factors such as general economic conditions, levels of unemployment, interest rates, tax rates at all levels of government, competition and other factors beyond Alpine 4's control may have an adverse effect on the ability of our subsidiaries to sell its products, to operate, and to collect sums due and owing to them.
Alpine 4 may not be able to successfully implement its business strategy, which could adversely affect its business, financial condition, results of operations and cash flows. If Alpine 4 cannot successfully implement its business strategy, it could result in the loss of the value of your investment.
Successful implementation of our business strategy depends on our being able to acquire additional businesses and grow our existing subsidiaries, as well as on factors specific to the industries in which our subsidiaries operate, and the state of the financial industry and numerous other factors that may be beyond our control. Adverse changes in the following factors could undermine our business strategy and have a material adverse effect on our business, our financial condition, and results of operations and cash flow:
•The competitive environment in the industries in which our subsidiaries operate 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 these competitive environments.
Our revenue growth rate depends primarily on our ability to satisfy relevant channels and end-customer demands, identify suppliers of our necessary ingredients and to coordinate those suppliers, all subject to many unpredictable factors.
We may not be able to identify and maintain the necessary relationships with suppliers of product and services as planned. Delays or failures in deliveries could materially and adversely affect our growth strategy and expected results. As we supply more customers, our rate of expansion relative to the size of such customer base will decline. In addition, one of our biggest challenges is securing an adequate supply of suitable product. Competition for product is intense, and commodities costs subject to price volatility.
Our ability to execute our business plan also depends on other factors, including:
•ability to keep satisfied vendor relationships
•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.
Our financial condition and results of operations for fiscal 2022 may continue to be adversely affected by the COVID-19 pandemic.
The impact of the worldwide COVID-19 pandemic has been and will likely continue to be extensive in many geographies and aspects of society. The pandemic has resulted in and will likely continue to result in disruptions to the global economy, as well as businesses, supply chains and capital markets around the world.
Impacts to our business have included temporary closures of many of our government and university customers and our suppliers, disruptions or restrictions on our employees’ and customers’ ability to travel, and delays in product installations or shipments to and from affected countries. In an effort to halt the outbreak of COVID-19, a number of countries, including the United States, implemented and some continue to implement significant restrictions on travel, shelter in place or stay at home orders, and business closures. While some of these restrictions were loosened in certain jurisdictions, some markets have returned to restrictions in the face of increases in new COVID-19 cases, particularly as more contagious strains of the virus emerge. Many of our employees in jurisdictions in which we have significant operations continue to work remotely. Much of the commercial activity in sales and marketing, and customer demonstrations and applications training, is still either being conducted remotely or postponed. Even where customers have re-opened their sites, some still operate at productivity levels that are below pre-pandemic levels in an effort to accommodate safety protocols and as a
result of pandemic-related supply chain disruptions. Any resurgence of the virus or the emergence of new strains of the virus, particularly any new strains which are more easily transmitted or which are resistant to existing vaccines, may require us or our customers to close or partially close operations once again. These travel restrictions, business closures and operating reductions at Alpine 4, our customers, our distributors, and/or our suppliers have in the past adversely impacted and may continue to adversely impact our operations, including our ability to manufacture, sell or distribute our products, as well as cause temporary closures of our distributors, or the facilities of suppliers or customers. Further, global supply chains continue to be disrupted, causing shortages, which has impacted our ability to manufacture and supply our products. We could also experience increased compensation expenses associated with employee recruiting and employee retention to the extent employment opportunities continue to multiply post-pandemic, causing the search for and retention of talent to become more competitive. This disruption of our employees, distributors, suppliers and customers has historically impacted and may continue to impact our global sales and future operating results.
We are continuing to monitor and assess the ongoing effects of the COVID-19 pandemic on our commercial operations in 2022 and going forward. However, we cannot at this time accurately predict what effects these conditions will ultimately have on our operations due to uncertainties relating to the severity of the disease, including the impact of any resurgence of the virus, the continued emergence of new strains of the virus, the effectiveness and availability of vaccines, the willingness of individuals to receive vaccines, (including to protect against any new strains of the virus), and the length or severity of travel restrictions, business closures, and other safety and precautionary measures imposed by the governments of impacted countries. The pandemic has also adversely affected the economies and financial markets of many countries, which has affected and may continue to affect demand for our products and our operating results.
In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive such difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business. Furthermore, our stock price may decline due in part to the volatility of the stock market and any general economic downturn.
The preparation of the consolidated financial statements requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate estimates, judgments and methodologies on an ongoing basis. Changes in estimates are recorded in the period in which they become known. We base estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the COVID-19 pandemic will directly or indirectly impact future business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the continued emergence of new strains of the virus, the effectiveness and availability of vaccines, the willingness of individuals to receive vaccines (including to protect against any new strains of the virus), and the actions taken to contain or treat the virus, as well as the economic impact on local, regional, national and international customers and markets. We have made estimates of the impact of COVID-19 within the consolidated financial statements and there may be changes to those estimates in future periods. Actual results may differ from management’s estimates if these results differ from historical experience.
Our existing debt levels may adversely affect our financial condition or operational flexibility and prevent us from fulfilling our obligations under our outstanding indebtedness.
As of December 31, 2021, we had total debt of approximately $63 million. This level of debt or any increase in our debt level could have adverse consequences for our business, financial condition, operating results and operational flexibility, including the following: (i) the debt level may cause us to have difficulty borrowing money in the future for working capital, capital expenditures, acquisitions or other purposes; (ii) our debt level may limit operational flexibility and our ability to pursue business opportunities and implement certain business strategies; and (iii) we have a higher level of debt than some of our competitors or potential competitors, which may cause a competitive disadvantage and may reduce flexibility in responding to changing business and economic conditions, including increased competition and vulnerability to general adverse economic and industry conditions. If we fail to satisfy our obligations under our outstanding debt, an event of default could result that could cause some or all of our debt to become due and payable.
Cybersecurity risks and cyber incidents, including cyber-attacks, could adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and confidential information in our possession and damage to our business relationships, any of which could negatively impact our business, financial condition and operating results.
There has been an increase in the frequency and sophistication of the cyber and security threats we face, with attacks ranging from those common to businesses generally to those that are more advanced and persistent, which may target us due to our substantial reliance on information technology or otherwise. Cyber-attacks and other security threats could originate from a wide variety of sources, including cyber criminals, nation state hackers, hacktivists and other outside parties. As a result of the generally increasing frequency and sophistication of cyber-attacks, and our substantial reliance on technology, we may face a heightened risk of a security breach or disruption with respect to sensitive information resulting from an attack by computer hackers, foreign governments or cyber terrorists.
The operation of our business is dependent on computer hardware and software systems, as well as data processing systems and the secure processing, storage and transmission of information, which are vulnerable to security breaches and cyber incidents. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. In addition, we and our employees may be the target of fraudulent emails or other targeted attempts to gain unauthorized access to proprietary or other sensitive information. The result of these incidents may include disrupted operations, misstated or unreliable financial data, fraudulent transfers or requests for transfers of money, liability for stolen information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships, causing our business and results of operations to suffer. Our reliance on information technology is substantial, and accordingly the risks posed to our information systems, both internal and those provided by third-party service providers are critical. We have implemented processes, procedures and internal controls designed to mitigate cybersecurity risks and cyber intrusions and rely on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems; however, these measures, as well as our increased awareness of the nature and extent of a risk of a cyber-incident, do not guarantee that a cyber-incident will not occur and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident, especially because the cyber-incident techniques change frequently or are not recognized until launched and because cyber-incidents can originate from a wide variety of sources.
Those risks are exacerbated by the rapidly increasing volume of highly sensitive data, including our and our customers’ proprietary business information and intellectual property, and personally identifiable information of our employees and customers, that we collect and store in our data centers and on our networks. The secure processing, maintenance and transmission of this information are critical to our operations. A significant actual or potential theft, loss, corruption, exposure, fraudulent use or misuse of employee, customer or other personally identifiable or our or our customers’ proprietary business data, whether by third parties or as a result of employee malfeasance (or the negligence or malfeasance of third party service providers that have access to such confidential information) or otherwise, non-compliance with our contractual or other legal obligations regarding such data or intellectual property or a violation of our privacy and security policies with respect to such data could result in significant remediation and other costs, fines, litigation or regulatory actions against us and significant reputational harm.
Failure to maintain the security of our information and technology networks or data security breaches could harm our reputation and have a material adverse effect on our results of operations, financial condition and cash flow.
We rely on the reasonably secure processing, storage and transmission of confidential and other sensitive information in our computer systems and networks, and those of our service providers and their vendors. We are subject to various risks and costs associated with the collection, handling, storage and transmission of personally identifiable information and other sensitive information, including those related to compliance with U.S. and foreign data collection and privacy laws and other contractual obligations, as well as those associated with the compromise of our systems processing such information. In the ordinary course of our business, we collect, store a range of data, including our proprietary business information and intellectual property, and personally identifiable information of our employees, our fund investors and other third parties, in our cloud applications and on our networks, as well as our services providers’ systems. The secure processing, maintenance and transmission of this information are critical to our operations. We, our service providers and their vendors face various security threats on a regular basis, including ongoing cybersecurity threats to and attacks on our and their information technology infrastructure that are intended to gain access to our proprietary information, destroy data or disable, degrade or sabotage our systems. Cyber-incident techniques change frequently, may not immediately be recognized and can originate from a wide variety of sources. There has been an increase in the frequency, sophistication and ingenuity of the data security threats we and our service providers face, with attacks ranging from those common to businesses generally to those that are more advanced and persistent. Although we and our services providers take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to unauthorized access, theft, misuse, computer viruses or other malicious code, including malware, and other events that could have a security impact. We may be the target of more advanced and persistent attacks because, as an alternative asset manager, we hold a significant amount of confidential and sensitive information about, among other things, our fund investors, portfolio companies and potential investments. We may also be exposed to a more significant risk if these acts
are taken by state actors. Any of the above cybersecurity threats, fraudulent activities or security breaches suffered by our service providers and their vendors could also put our confidential and sensitive information at risk or cause the shutdown of a service provider on which we rely. We and our employees have been and expect to continue to be the target of fraudulent calls and emails, the subject of impersonations and fraudulent requests for money, including attempts to redirect material payment amounts in a transaction to a fraudulent bank account, and other forms of spam attacks, phishing or other social engineering, ransomware or other events. Cyber-criminals may attempt to redirect payments made at the closings of our investments to unauthorized accounts, which we or our services providers we retain, such as paying agents and escrow agents, may be unable to detect or protect against. The COVID-19 pandemic has exacerbated these risks due to heavier reliance on online communication and the remote working environment, which may be less secure, and there has been a significant increase in hacking attempts by cyber-criminals. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by others, including by our service providers. If successful, such attacks and criminal activity could harm our reputation, disrupt our business, cause liability for stolen assets or information and have a material adverse effect on our results of operations, financial condition and cash flow.
We rely heavily on our back office informational technology infrastructure, including our data processing systems, communication lines, and networks. Although we have back-up systems and business-continuation plan in place, our back-up procedures and capabilities in the event of a failure or interruption may not be adequate. Any interruption or failure of our informational technology infrastructure could result in our inability to provide services to our clients, other disruptions of our business, corruption or modifications to our data and fraudulent transfers or requests for transfers of money. Further consequences could include liability for stolen assets or information, increased cybersecurity protection and insurance costs and litigation. We expect that we will need to continue to upgrade and expand our back-up and procedures and capabilities in the future to avoid disruption of, or constraints on, our operations. We may incur significant costs to further upgrade our data processing systems and other operating technology in the future.
Our technology, data and intellectual property and the technology, data and intellectual property of our funds’ portfolio companies are also subject to a heightened risk of theft or compromise to the extent that we and our funds’ portfolio companies engage in operations outside the United States, particularly in those jurisdictions that do not have comparable levels of protection of proprietary information and assets, such as intellectual property, trademarks, trade secrets, know-how and customer information and records. In addition, we and our funds’ portfolio companies may be required to forgo protections or rights to technology, data and intellectual property in order to operate in or access markets in a foreign jurisdiction. Any such direct or indirect loss of rights in these assets could negatively impact us, our funds and their investments.
A significant actual or potential theft, loss, corruption, exposure or fraudulent, unauthorized or accidental use or misuse of investor, employee or other personally identifiable or proprietary business data could occur, as a result of third-party actions, employee malfeasance or otherwise, non-compliance with our contractual or other legal obligations regarding such data or intellectual property or a violation of our privacy and security policies with respect to such data. If such a theft, loss, corruption, use or misuse of data were to occur, it could result in significant remediation and other costs, fines, litigation and regulatory actions against us by (i) the U.S. federal and state governments, (ii) the EU or other jurisdictions, (iii) various regulatory organizations or exchanges and (iv) affected individuals, as well as significant reputational harm.
Cybersecurity has become a top priority for regulators around the world. Many jurisdictions in which we operate have laws and regulations relating to data privacy, cybersecurity and protection of personal information and other sensitive information, including, without limitation the General Data Protection Regulation (Regulation (EU) 2016/679) (the “GDPR”) in the EU and the Data Protection Act 2018 in the U.K. (the “U.K. Data Protection Act”), comprehensive privacy laws enacted in California, Colorado and Virginia, the Hong Kong Personal Data (Privacy) Ordinance, the Korean Personal Information Protection Act and related legislation, regulations and orders and the Australian Privacy Act. China and other countries have also passed cybersecurity laws that may impose data sovereignty restrictions and require the localization of certain information. We believe that additional similar laws will be adopted in these and other jurisdictions in the future, further expanding the regulation of data privacy and cybersecurity. Such laws and regulations strengthen the rights of individuals (data subjects), mandate stricter controls over the processing of personal data by both controllers and processors of personal data and impose stricter sanctions with substantial administrative fines and potential claims for damages from data subjects for breach of their rights, among other requirements. Some jurisdictions, including each of the U.S. states as well as the EU through the GDPR and the U.K. through the U.K. Data Protection Act, have also enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data, which would require heightened escalation and notification processes with associated response plans. We expect to devote resources to comply with evolving cybersecurity and data privacy regulations and to continually monitor and enhance our information security and data privacy procedures and controls as necessary. We or our fund’s portfolio companies may incur substantial costs to comply with changes in such laws and regulations and may be unable to adapt to such changes in the necessary timeframe and/or at reasonable cost. Furthermore, if we experience a cybersecurity incident and fail to comply with the applicable
laws and regulations, it could result in regulatory investigations and penalties, which could lead to negative publicity and may cause our fund investors and clients to lose confidence in the effectiveness of our security and privacy measures.
The materialization of one or more of these risks could impair the quality of our operations, harm our reputation, negatively impact our businesses and limit our ability to grow.
We rely significantly on the use of information technology, as well as those of our third-party service providers. Our failure or the failure of third-party service providers to protect our website, networks, and systems against cybersecurity incidents, or otherwise to protect our confidential information, could damage our reputation and brand and substantially harm our business, financial condition, and results of operations.
To the extent that our services are web-based, we collect, process, transmit and store large amounts of data about our customers, employees, vendors and others, including credit card information and personally identifiable information, as well as other confidential and proprietary information. We also employ third-party service providers for a variety of reasons, including storing, processing and transmitting proprietary, personal and confidential information on our behalf. While we rely on tokenization solutions licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card numbers, advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect this data from being breached or compromised. Similarly, our security measures, and those of our third-party service providers, may not detect or prevent all attempts to hack our systems or those of our third-party service providers. DDoS attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other cybersecurity incidents and similar disruptions that may jeopardize the security of information stored in or transmitted by our website, networks and systems or that we or our third-party service providers otherwise maintain, including payment card systems, may subject us to fines or higher transaction fees or limit or terminate our access to certain payment methods. We and our service providers may not anticipate or prevent all types of attacks until after they have already been launched, and techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers, and we may be unable to implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. In addition, cybersecurity incidents can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships.
Breaches of our security measures or those of our third-party service providers or any cybersecurity incident could result in unauthorized access to our website, networks and systems; unauthorized access to and misappropriation of customer and/or employee information, including personally identifiable information, or other confidential or proprietary information of ourselves or third parties; viruses, worms, spyware or other malware being served from our website, networks or systems; deletion or modification of content or the display of unauthorized content on our website; interruption, disruption or malfunction of operations; costs relating to cybersecurity incident remediation, deployment of additional personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third party experts and consultants; litigation, regulatory action and other potential liabilities. If any of these cybersecurity incidents occur, or there is a public perception that we, or our third-party service providers, have suffered such a breach, our reputation and brand could also be damaged and we could be required to expend significant capital and other resources to alleviate problems caused by such cybersecurity incidents. As a consequence, our business could be materially and adversely affected and we could also be exposed to litigation and regulatory action and possible liability. In addition, any party who is able to illicitly obtain a customer’s password could access the customer’s transaction data or personal information. Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have an material adverse effect on our business, financial condition, and results of operations. This risk is heightened as governmental authorities throughout the U.S. and around the world devote increasing attention to data privacy and security issues.
While we maintain privacy, data breach and network security liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. Additionally, even though we continue to devote resources to monitor and update our systems and implement information security measures to protect our systems, there can be No assurance that any controls and procedures we have in place will be sufficient to protect us from future cybersecurity incidents. Failure by us or our vendors to comply with data security requirements, including (if applicable) the California Consumer Privacy Act’s (“CCPA”) new “reasonable security” requirement in light of the private right of action, or rectify a security issue may result in class action litigation, fines and the imposition of restrictions on our ability to accept payment cards, which could adversely affect our operations. As cyber threats are continually evolving, our controls and procedures may become inadequate and we may be required to devote additional resources to modify or enhance our systems in the future. As a result, we may face interruptions to our systems, reputational damage, claims under privacy and data protection laws and
regulations, customer dissatisfaction, legal liability, enforcement actions or additional costs, any and all of which could adversely affect our business, financial condition, and results of operations. In addition, although we seek to detect and investigate data security incidents, security breaches and other incidents of unauthorized access to our information technology systems and data can be difficult to detect and any delay in identifying such breaches or incidents may lead to increased harm and legal exposure of the type described above.
Environmental, social and governance matters may impact our business and reputation.
Increasingly, in addition to the importance of their financial performance, companies are being judged by their performance on a variety of environmental, social and governance (“ESG”) matters, which are considered to contribute to the long-term sustainability of companies’ performance.
A variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized. In addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of ESG measures to their investment decisions. Topics taken into account in such assessments include, among others, companies’ efforts and impacts on climate change and human rights, ethics and compliance with law, diversity and the role of companies’ board of directors in supervising various sustainability issues.
ESG goals and values are embedded in our core mission and vision, and we actively take into consideration their expected impact on the sustainability of our business over time and the potential impact of our business on society and the environment, including offsetting or reducing carbon emissions and sound pollution from launches. However, in light of investors’ increased focus on ESG matters, there can be no certainty that we will manage such issues successfully, or that we will successfully meet society’s expectations as to our proper role. This could lead to risk of litigation or reputational damage relating to our ESG policies or performance.
Further, our emphasis on ESG issues may not maximize short-term financial results and may yield financial results that conflict with the market’s expectations. We have and may in the future make business decisions that may reduce our short-term financial results if we believe that the decisions are consistent with our ESG goals, which we believe will improve our financial results over the long-term. These decisions may not be consistent with the short-term expectations of our stockholders and may not produce the long-term benefits that we expect, in which case our business, financial condition, and operating results could be harmed.
Risks Related to Our Class A Common Stock
We may, in the future, issue additional securities, which would reduce our stockholders' percent of ownership and may dilute our share value.
Our Certificate of Incorporation, as amended to date, authorizes us to issue 295,000,000 shares of Class A common stock, and 10,000,000 shares of Class B common stock and 15,000,000 Class C stock. As of the date of this Report, we had 162,210,355 shares of Class A common stock outstanding; 8,548,088 shares of Class B common stock issued and outstanding; and 12,500,200 shares of Class C common stock issued and outstanding.
The future issuance of additional shares of Class A common stock will result in additional dilution in the percentage of our Class A common stock held by our then existing stockholders. We may value any Class A common stock issued in the future on an arbitrary basis including for services or acquisitions or other corporate actions that may have the effect of diluting the value of the shares held by our stockholders, and might have an adverse effect on any trading market for our Class A common stock. Additionally, our board of directors may designate the rights terms and preferences of one or more series of preferred stock at its discretion including conversion and voting preferences without prior notice to our stockholders. Any of these events could have a dilutive effect on the ownership of our shareholders, and the value of shares owned.
Raising additional capital or purchasing businesses through the issuance of common stock will cause dilution to our existing stockholders.
We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations, and strategic and licensing arrangements, as well as issuing stock to make additional business or asset acquisitions. To the extent that we raise additional capital through the sale of common stock or securities convertible or
exchangeable into common stock or through the issuance of equity for purchases of businesses or assets, your ownership interest in Alpine 4 will be diluted.
Future sales of substantial amounts of our Class A common stock into the public and the issuance of the shares upon conversion of the outstanding convertible notes will be dilutive to our existing stockholders and could result in a decrease in our stock price.
Raising additional capital may restrict our operations or require us to relinquish rights.
We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations, and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, the terms of any such securities may include liquidation or other preferences that materially adversely affect your rights as a stockholder. Debt financing, if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic partnerships and licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, future revenue streams or grant licenses on terms that are not favorable to us.
Market volatility may affect our stock price and the value of your shares.
The market price for our Class A common stock is likely to be volatile, in part because of the volume of trades of our Class A common stock. In addition, the market price of our Class A common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others:
•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;
•social and economic impacts resulting from the global COVID-19 pandemic;
•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.
If securities or industry analysts do not publish or cease publishing research or reports or publish misleading, inaccurate or unfavorable research about us, our business or our market, our stock price and trading volume could decline.
The trading market for our Class A common stock will be influenced by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. We currently have limited coverage and may never obtain increased research coverage by securities and industry analysts. If no or few securities or industry analysts cover our company, the trading price and volume of our stock would likely be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, or provides more favorable relative recommendations about our competitors, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price or trading volume to decline.
Future sales of our Class A common stock may cause our stock price to decline.
Sales of a substantial number of shares of our Class A common stock in the public market or the perception that these sales might occur could significantly reduce the market price of our Class A common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
Alpine 4 may issue Preferred Stock with voting and conversion rights that could adversely affect the voting power of the holders of Class A Common Stock.
Pursuant to our Certificate of Incorporation, our Board of Directors may issue Preferred Stock with voting and conversion rights that could adversely affect the voting power of the holders of Class A Common Stock. In the fourth quarter of 2019, we issued shares of a newly designated Series B Preferred Stock to members of our Board of Directors. The outstanding shares of Series B Preferred Stock have voting rights in the aggregate equal to 200% of the total voting power of our other outstanding securities, giving our Board of Directors control over any matters submitted to the vote of the shareholders of Alpine 4. Any such provision may be deemed to have a potential anti-takeover effect, and the issuance of Preferred Stock in accordance with such provision may delay or prevent a change of control of Alpine 4. The Board of Directors also may declare a dividend on any outstanding shares of Preferred Stock.
If we are unable to continue to meet the required listing standards of The Nasdaq Capital Market, our Class A common stock may be delisted from The Nasdaq Capital Market, which could negatively impact the price of our common stock and our ability to access the capital markets.
Our common stock is currently listed on The Nasdaq Capital Market. The listing standards of The Nasdaq Capital Market require that a company maintain stockholders’ equity of at least $2.5 million and a minimum bid price subject to specific requirements of $1.00 per share. Should we fail to comply with the minimum listing standards applicable to issuers listed on The Nasdaq Capital Market, our common stock may be delisted from The Nasdaq Capital Market. If our common stock is delisted, it could reduce the price of our common stock and the levels of liquidity available to our stockholders. In addition, the delisting of our common stock could materially adversely affect our access to the capital markets, and any limitation on liquidity or reduction in the price of our common stock could materially adversely affect our ability to raise capital on terms acceptable to us or at all. Delisting from The Nasdaq Capital Market could also result in other negative implications, including the potential loss of confidence by suppliers, customers and employees, the loss of institutional investor interest and fewer business development opportunities.
Raising additional capital or purchasing businesses through the issuance of common stock will cause dilution to our existing stockholders.
We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations, and strategic and licensing arrangements, as well as issuing stock to make additional business or asset acquisitions. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock or through the issuance of equity for purchases of businesses or assets, your ownership interest in Alpine 4 will be diluted.
Raising additional capital may restrict our operations or require us to relinquish rights.
We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations, and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of
common stock or securities convertible or exchangeable into common stock, the terms of any such securities may include liquidation or other preferences that materially adversely affect your rights as a stockholder. Debt financing, if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic partnerships and licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, future revenue streams or grant licenses on terms that are not favorable to us.
If securities or industry analysts do not publish or cease publishing research or reports or publish misleading, inaccurate or unfavorable research about us, our business or our market, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. We currently have limited coverage and may never obtain increased research coverage by securities and industry analysts. If no or few securities or industry analysts cover our company, the trading price and volume of our stock would likely be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, or provides more favorable relative recommendations about our competitors, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price or trading volume to decline.
Future sales of our common stock may cause our stock price to decline.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
We will have broad discretion in how we use the net proceeds of future capital raising transactions. We may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.
We will have considerable discretion in the application of the net proceeds of any future capital raising transactions. We intend to use the net proceeds from future capital raising transactions to fund development of our products and working capital and other general corporate purposes. As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the balance of the net proceeds of such capital raising transactions. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds from that offering in a manner that does not produce income or that loses value.
The market price for our common stock may be volatile, and an investment in our common stock could decline in value.
The stock market in general has experienced extreme price and volume fluctuations. The market prices of the securities of biotechnology and specialty pharmaceutical companies, particularly companies like ours without product revenues and earnings, have been highly volatile and may continue to be highly volatile in the future. This volatility has often been unrelated to the operating performance of particular companies. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our common stock:
–announcements of technological innovations or new products by us or our competitors;
–developments or disputes concerning patents or proprietary rights, including announcements of infringement, interference or other litigation against us or our potential licensees;
–developments involving our efforts to commercialize our products, including developments impacting the timing of commercialization;
–actual or anticipated fluctuations in our operating results;
–changes in financial estimates or recommendations by securities analysts;
–developments involving corporate collaborators, if any;
–changes in accounting principles; and
–the loss of any of our key management personnel.
In the past, securities class action litigation has often been brought against companies that experience volatility in the market price of their securities. Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business, operating results and financial condition.
We do not anticipate paying dividends on our common stock and, accordingly, stockholders must rely on stock appreciation for any return on their investment.
We have never declared or paid cash dividends on our common stock and do not expect to do so in the foreseeable future. The declaration of dividends is subject to the discretion of our board of directors and limitations under applicable law, and will depend on various factors, including our operating results, financial condition, future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment in our company if you require dividend income from your investment in our company. The success of your investment will likely depend entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no guarantee that our common stock will appreciate in value.
We expect that our quarterly results of operations will fluctuate, and this fluctuation could cause our stock price to decline.
Our quarterly operating results are likely to fluctuate in the future. These fluctuations could cause our stock price to decline. The nature of our business involves variable factors, such as the timing of the research, development and regulatory pathways of our product candidates, which could cause our operating results to fluctuate.