FINANCIAL
HIGHLIGHTS

TO OUR SHAREHOLDERS

Lloyd Hoffman President and Chief Executive Officer

30 YEARS OF
NAVIGATING
THE FUTURE

Net income of $3.0 million for 2019 was negatively impacted compared to 2018 by lower gross profit margin, as certain products that were previously tariff free under the U.S. Customs and Borders Protection Generalized System of Preferences (“GSP”) stopped being tariff free when the GSP program was terminated during 2019. Change in product mix and increased rebates also decreased our gross profit margin. Management expects gross profit margin to be in the mid-to-high thirty percent range for 2020, excluding any improvement that may result from sales in connection with the coronavirus (“COVID-19”) pandemic.

In our history, excluding the 2009 global H1N1 Influenza A pandemic, earnings per diluted share have only been above twenty cents in the two most recent years. Earnings per diluted share were $0.23 in 2019 and $0.26 in 2018.

Confronting the Coronavirus Pandemic

As I write this letter, our company is playing a critical role in the response to the COVID-19 pandemic through the production and sale of our personal protective equipment (“PPE”) products, particularly our NIOSH-approved N-95 Particulate Respirator face masks and our face shields. As a result of the COVID-19 pandemic, demand for our PPE, including our N-95 face masks and face shields and our disposable protective garments, is exceptionally strong. Our initial response to the tremendous spike in demand for our N-95 face masks, which are 100% sourced and manufactured in the United States, was quick and demonstrates our continued commitment to navigating an ever-changing landscape. We have already increased production capacity and are currently in the process of ramping up additional production capacity for our N-95 face masks and face shields to support the demand of critical PPE products.

While the performance of our Building Supply segment will likely be dampened in 2020 by the halt to the global economy due to COVID-19, we are encouraged by the long-term revenue growth prospects for our Disposable Protective Apparel segment. We predict that sales of our N-95 face masks and face shields and our disposable protective garments will be a strong driver of our top-line growth in the coming year and into the future.

Looking Ahead – Investing in our Future

We maintained our solid balance sheet in 2019 with cash on hand at year-end of more than $6.5 million, a current ratio of 12:1, zero debt and an undrawn credit facility that provides us with additional liquidity and flexibility to weather macro-economic cycles, like the current COVID-19 pandemic that is significantly impacting many businesses. With positive cash from operations of more than $3.0 million for the year, we were able to invest nearly $1.3 million in property and equipment while also repurchasing more than 680,000 shares of our common stock at a cost of approximately $2.5 million. Throughout our 30-year history, we have proactively managed the allocation of capital in a manner that balances investment in operations for the continued development and growth of the company with returning capital to our shareholders in the form of share buybacks. As a result, our capital structure and financial health were key assets as we ramped up production of PPE in response to a significant increase in customer demand resulting from the outbreak of COVID-19 in early 2020, resulting in record shareholder liquidity and share price during the first quarter of 2020. We are highly optimistic and anticipate much success for our company in 2020 and beyond based on the dynamic environment in which we are operating. We believe that we are well positioned to continue to develop and produce innovative, high-value products for our customers, grow our revenues and provide favorable returns for our shareholders. On behalf of our management team and the Board of Directors, I want to thank you for your continued support.

Sincerely,

Lloyd Hoffman
President and Chief Executive Officer

REX SynFelt^® is our
flagship product
that is still a
market leader in
the industry today.

30 YEARS OF
INNOVATION

• AlphaProTech entered the synthetic roof underlayment with one product that was produced to our specification. Today we have 5 synthetic roof underlayment’s for the steep slope roofing market and its own manufacturing assets. Our specialty is in the manufacturing process, having full control over every aspect of the production. As the market has evolved over the last 15 years, AlphaProTech has evolved with it becoming one of the market leaders in an extremely crowded space. But our strength lies in the fact that we have multiple products to fit any steep slope roof as well as any budget. Even this past year we were once again adjusting to the market quickly and launching a new synthetic underlayment that has been well received by our customers. Our products are used in new home
• construction as well as re‐roof/remodel jobs. With our nationwide distribution outlets, we are able to touch every aspect of the entire roof build and/or replacement process. The product offerings have not been the only thing to change, the retail distribution of these specialty products has changed as well. Many of our customers have gone through consolidation and AlphaProTech has adjusted to this as well by becoming a bigger part of their product offerings. We have adjusted the product offerings into two distinct types of underlayment, coated walking surface and non-woven walking surface. Within these two categories we have the flagship product, REX SynFelt^® and our TECHNOply^® product in the coated walking surface products. In the non-woven walking surface, we now have 3 distinct products starting with
• the TECHNO SB^® Ultra along with TECHNO SB^® 50 and our newest product, TECHNO SB^® 25. Regardless of the size of the roof or budget, AlphaProTech has a product to offer. But AlphaProTech has not only expanded its reach in the underlayment market, we have also expanded our reach in the housewrap market as well. Again, our ability to manufacture quality products as well as our ability to deliver finished products to the market have made us the leader in the side wall envelope market. By expanding our lineup of products, AlphaProTech now has a complete wall weatherization system. The new lineup consists not only of the wrap, we have now launched a window and door flashing, REXTREME, to the product mix. Our strength now lies in the warranty systems we offer by purchasing and installing our wrap, flashing and tape during the construction process. This now
• makes AlphaProTech even more valuable to the building trade as we give the assurance of protection should they ever need us during the life of the structure. With our industry leading “Lifetime Warranty” by installing our premium REX Wrap^® Fortis along with the new flashing and our REX^TM Premium Seam Tape we give piece of mind to the builder as well as the structure owner. Also, another one of our most sought after strengths in the distribution market is our ability to custom print all of our products to meet the demands of the dealer and the builder. We pride ourselves in our service levels as well as our quality of product and delivery. Today, AlphaProTech offers a solution for every type of build and budget along with piece of mind with our industry leading warranties on all of our product offerings. Anyone can import products, but it takes a great company and great people to manufacture quality products. AlphaProTech has you covered in every direction!

Our core garment material,
ComforTech^®, is available
in Coveralls, Lab Coats, Frocks
and Sleeves. ComforTech^® is
suitable in both Cleanroom and
General Industrial Environments.

30 YEARS OF
ENSURING
QUALITY
CONTROL

• The Disposable Protective Apparel Segment of AlphaProTech has two distinct and clear objectives: disposable protective apparel, or garments, and disposable face masks and shields – whereas the latter will be discussed later in this report. In the apparel, or garment segment, our objective is to provide end-customers with consistently high quality garments that protect both the wearer and the environment in which they work. In the pharmaceutical, life sciences manufacturing space, it is just as critical to protect the person from the product as well as protect the product from the
• person. It is a delicate balance of comfort vs. performance - so that the chain-of-custody in manufacturing is achieved and at the same time, our garments deliver a high level of safety for the worker. To meet this challenge, the AlphaProTech Critical Cover^® portfolio of products includes a comprehensive selection of garment materials and designs to meet a wide range of applications and environments.
  
  We endeavor the aforementioned objective by enabling a Channel Partner Strategy with select regional, national and global
• distributors. In an effort to protect the AlphaProTech Critical Cover^® brand and deliver a high level of service and support, we are very selective in choosing our channel partners. Once vetted, we work together to build a lasting rapport and strong sales and marketing collaboration in an effort to achieve mutual goals. By working in concert, we are able to understand their business model and exceed all of their logistical requirements.               
  
  Similarly, AlphaProTech’s field-based selling organization and marketing team engages directly
• at all points in the customer’s supply-chain. Many of the products in the AlphaProTech Critical Cover^® portfolio today are a result of interacting with end-customers and providing a garment solution for their specific manufacturing need. We take great pride in our manufacturing flexibility to meet a specific garment need and this competitive advantage is accretive to end-customer retention and loyalty.

Our line of specialty CoolOne^®
Face Masks includes both design
features for breathability and
comfort as well as technology
for wearers with sensitive skin.

30 YEARS OF
PROTECTING
HEALTH

• The other sub-segment of AlphaProTech’s Disposable Protective Apparel division, mentioned earlier, comprises a product portfolio of single-use protective Face Masks and Face Shields – and other ancillary, related products. These products are manufactured and used for the express purpose of protecting the Healthcare Worker and the people they treat and/or come in contact. We work closely with Medical & Dental Distributors worldwide, along with other Healthcare Consortiums, to demonstrate the unique protective properties of
• our products. To that end, many of our Face Masks made in the USA feature an innovative and patented design called the Positive Facial Lock or PFL^®. The PFL^® advantage utilizes our exclusive Twist-Seal technology that allows the wearer to create a custom fit to their own facial features. The seal that the PFL^® technology creates to the individual’s facial features can prevent many airborne contaminants from entering the wearers breathing zone and ultimately inflicting them with a contagious disease. Additionally, to facilitate comfort and
• breathability, many of our Face Masks also contain a second patented and integrated feature called the Magic Arch^®. The Magic Arch^® upholds the structure and design of the Face Mask and prevents the Face Mask from coming in contact with the wearer’s nose and mouth.
  
  The PFL^® and Magic Arch^® features work in concert to provide the Healthcare Worker with a comfortable and effective device and an intangible sense of confidence in their work.
  
  
• Other products in this category that AlphaProTech manufactures and markets are protective Face Shields, Combination Face Mask & Shield (combo devices protect against both airborne and splash hazards), Isolation Gowns, and disposable apparel and shoe covers. These additional products are designed for use in a variety of Healthcare environments to add to the protection of the Healthcare Worker and the people they treat.