What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-10 compared with 2021-11-05 · 347 added, 380 removed, 445 unchanged (62% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets (Unaudited)

September 30,

2021 (1)  

Current assets:

2 unchanged sentences

$ 16,307,000  

Accounts receivable, net of allowance for doubtful accounts of $ 64,000 as of September 30, 2021 and $ 71,000 as of December 31, 2020

Accounts receivable, net of allowance for doubtful accounts of $71,000 as of March 31, 2022 and $64,000 as of December 31, 2021

7,211,000  

3 unchanged sentences

1,383,000  

Inventories, net

23,883,000  

28 unchanged sentences

1,250,000  

Customer advance payments of orders

209,000  

Lease liabilities

13 unchanged sentences

5,269,000  

Commitments and contingincies

Shareholders' equity:

1 unchanged sentence

50,000,000 shares authorized;

13,162,341 and 13,419,847 shares outstanding as of September 30, 2021 and December 31, 2020, respectively

12,945,341 and 13,115,341 shares outstanding as of March 31, 2022 and December 31, 2021, respectively

130,000  

1 unchanged sentence

Additional paid-in capital

409,000  

Retained earnings

12 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Septermber 30,

$ 17,661,000  

$ 23,161,000  

Cost of goods sold, excluding depreciation and amortization

11,219,000  

13,982,000  

6,442,000  

9,179,000  

Operating expenses:

Selling, general and administrative

4,306,000  

4,578,000  

Depreciation and amortization

212,000  

198,000  

Total operating expenses

4,518,000  

4,776,000  

Income from operations

1,924,000  

4,403,000  

Other income:

Equity in income of unconsolidated affiliate

Gain /(Loss) on marketable securities

49,000  

322,000  

Interest income, net

Total other income

50,000  

323,000  

Income before provision for income taxes

1,974,000  

4,726,000  

Provision for income taxes

452,000  

1,007,000  

$ 1,522,000  

$ 3,719,000  

Basic earnings per common share

$ 0.12  

$ 0.28  

Diluted earnings per common share

$ 0.12  

$ 0.27  

Basic weighted average common shares outstanding

13,058,871  

13,342,398  

Diluted weighted average common shares outstanding

13,159,490  

13,717,404  

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

2 unchanged sentences

Equity (Unaudited)

For the Nine Months Ended September 30, 2021

For the Three Months Ended March 31, 2022

Balance as of December 31, 2021

13,115,341  

$ 132,000  

$ 62,488,000  

$ 62,620,000  

1,522,000  

Common stock repurchased and retired

( 170,000 )  

( 2,000 )  

( 55,000 )  

( 699,000 )  

Stock-based compensation expense

Options exercised

55,000  

Balance as of March 31, 2022

Common stock repurchased and retired

Stock-based compensation expense

Options exercised

Balance as of June 30, 2021

Common stock repurchased and retired

Stock-based compensation expense

Balance as of September 30, 2021

For the Nine Months Ended September 30, 2020

12,945,341  

$ 130,000  

$ 63,311,000  

$ 63,441,000  

For the Three Months Ended March 31, 2021

Balance as of December 31, 2020

13,419,847  

$ 135,000  

$ 409,000  

$ 59,476,000  

$ 60,020,000  

3,719,000  

Common stock repurchased and retired

( 186,000 )  

(2,000 )  

( 817,000 )  

(1,547,000 )  

( 2,366,000 )

Stock-based compensation expense

101,000  

Options exercised

89,494  

307,000  

308,000  

Balance as of March 31, 2021

Stock-based compensation expense

Options exercised

Balance as of June 30, 2020

Common stock repurchased and retired

Stock-based compensation expense

Options exercised

Balance as of September 30, 2020

13,323,341  

$ 134,000  

$ 61,648,000  

$ 61,782,000  

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30,

For the Three Months Ended

Cash Flows From Operating Activities:

Adjustments to reconcile net income to net cash provided by operating activities:

$ 1,522,000  

$ 3,719,000  

Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:

Stock-based compensation

55,000  

101,000  

Depreciation and amortization

Loss on marketable equity securities

212,000  

198,000  

Equity in income of unconsolidated affiliate

( 49,000 )  

Operating lease expense, net of accretion

228,000  

220,000  

Changes in operating assets and liabilities:

Accounts receivable, net

( 3,814,000 )  

1,384,000  

Accounts receivable, related party

( 214,000 )  

1,086,000  

( 2,029,000 )

Prepaid expenses

736,000  

( 4,011,000 )

Accounts payable and accrued liabilities

( 714,000 )  

( 1,795,000 )

Customer advance payments of orders

Lease liabilities

Net cash provided by operating activities

( 227,000 )  

Net cash used in operating activities

( 1,179,000 )  

( 3,220,000 )

Cash Flows From Investing Activities:

Purchases of property and equipment

Proceeds from sales of marketable securities

( 133,000 )  

Net cash used in investing activities

( 133,000 )  

Cash Flows From Financing Activities:

Proceeds from exercise of stock options

308,000  

Repurchase of common stock

Net cash provided by (used in) financing activities

Increase (decrease) in cash

Cash, beginning of the period

Cash, end of the period

( 756,000 )  

( 2,366,000 )

Net cash used in financing activities

( 756,000 )  

( 2,058,000 )

Decrease in cash and cash equivalents

( 2,068,000 )  

( 5,408,000 )

Cash and cash equivalents, beginning of the period

16,307,000  

23,292,000  

Cash and cash equivalents, end of the period

$ 14,239,000  

$ 17,884,000  

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

7 unchanged sentences

The Company accomplishes this by developing, manufacturing and marketing a line of building supply products for the new home and re-roofing markets and a line of disposable protective apparel for the cleanroom, industrial, pharmaceutical, medical and dental markets.

The Building Supply segment consists of construction weatherization products, such as housewrap and synthetic roof underlayment, as well as other woven material.

The Disposable Protective Apparel segment consists of a complete line of disposable protective clothing (shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields.

The Building Supply segment consists of construction weatherization products, such as housewrap, housewrap accessories, namely tape and flashing, and synthetic roof underlayment, as well as other woven material.

The Disposable Protective Apparel segment consists of a complete line of disposable protective garments (shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields.

All of our disposable protective apparel products, including face masks and face shields, are sold through similar distribution channels, are single-use and disposable, have the purpose of protecting people, products and environments, and have to be produced in Food and Drug Administration (“FDA”) approved facilities, regardless of the market served.

1 unchanged sentence

The ongoing novel coronavirus (COVID- 19 ) pandemic has adversely affected global economies, financial markets and the overall environment in which we do business.

Overall, the increase in sales of our Disposable Protective Apparel segment products resulting from the pandemic has had a positive impact on our year-to-date results, but the positive impact in 2021 is less than in 2020, as the effects of COVID- 19 are normalizing.

Overall, the increase in sales of our Disposable Protective Apparel segment products resulting from the pandemic has had a positive impact on our year-to-date results, but the positive impact in 2022 is less than in 2021 and 2020, as the effects of COVID- 19 are normalizing.

The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time.

Future developments include the duration, scope and severity of the pandemic and new variants, including the Delta variant, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the efficacy of mass vaccinations, and the resumption of widespread economic activity in certain sectors.

Future developments include the duration, scope and severity of the pandemic and new variants, including the Omicron variant, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the efficacy of mass vaccinations, and the resumption of widespread economic activity in certain sectors.

Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any certainty the likely impact of the COVID- 19 pandemic on our future operations.

6 unchanged sentences

The interim condensed consolidated financial statements should be read in conjunction with the Company’s current year SEC filings, as well as the Company’s consolidated financial statements for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10 -K for the fiscal year ended December 31, 2021 ( the “2021 Form 10 -K”), filed with the SEC on March 11, 2022.

The results of operations for the three and nine months ended September 30, 2021 in this Quarterly Report on Form 10 -Q are not necessarily indicative of the results to be expected for the full year.

The results of operations for the three months ended March 31, 2022 in this Quarterly Report on Form 10 -Q are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated balance sheet as of December 31, 2021 was prepared using information from the audited consolidated balance sheet contained in the 2021 Form 10 -K;

16 unchanged sentences

The Company manufactures certain private label goods for customers and has determined that control does not pass to the customer at the time of manufacture, based upon the nature of the private labelling.

The Company has determined as of September 30, 2021 that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables.

The Company has determined as of March 31, 2022 that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables.

See Note 10 and Note 11 of these Notes to Condensed Consolidated Financial Statements (Unaudited) for information on revenue disaggregated by type and by geographic region.

6 unchanged sentences

The 2020 Incentive Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, awards of restricted stock and restricted stock units, performance share awards, cash awards and other equity-based awards to employees (including officers), consultants and non-employee directors of the Company and its affiliates.

A total of 1,800,000 shares of the Company’s common stock are reserved for issuance under the 2020 Incentive Plan, plus the number of shares underlying any award granted under the 2004 Option Plan that expires, terminates or is cancelled or forfeited under the terms of the 2004 Option Plan.

A total of 1,800,000 shares of the Company’s common stock were reserved for issuance under the 2020 Incentive Plan, plus the number of shares underlying any award granted under the 2004 Option Plan that expires, terminates or is cancelled or forfeited under the terms of the 2004 Option Plan.

As a result of the approval of the 2020 Incentive Plan, no future equity awards will be made pursuant to the 2004 Option Plan.

Although no new awards may be granted under the 2004 Option Plan, all previously granted awards under the 2004 Option Plan will continue to be governed by the terms of the 2004 Option Plan.

As of September 30, 2021, 24,052 restricted stock equity awards had been granted under the 2020 Incentive Plan.

The Company records compensation expense for the fair value of stock-based awards determined as of the grant date, including employee stock options and restricted stock awards over the determined requisite service period, which is generally ratably over the vesting term.

For the nine months ended September 30, 2021 and 2020, no stock options were granted under the Company’s 2004 Option Plan or the 2020 Incentive Plan.

The Company recognized $ 155,000 and $ 274,000 in stock-based compensation expense for the nine months ended September 30, 2021 and 2020, respectively, related to outstanding options previously granted under the 2004 Option Plan.

For the nine months ended September 30, 2021 and 2020 15,140 and 0 restricted stock awards were granted respectively under the 2020 Incentive Plan.

The Company recognized $ 83,000 and $ 0 in compensation expense associated with outstanding restricted stock awards for the nine months ended September 30, 2021 and 2020, respectively.

For the 

three  months ended 

March 31, 2022 and 2021,  

no  stock options were granted under the 2004  Option Plan or the 

2020  Incentive Plan.

The Company recognized $ 28,000  and $ 74,000  in stock-based compensation expense for the 

three  months ended 

March 31, 2022 and 2021,  respectively, related to outstanding options previously granted under the 

2004  Option Plan.

For the 

three  months ended 

March 31, 2022 and 2021,  

no  restricted stock awards were granted under the 

2020  Incentive Plan.

The Company recognized $ 27,000  and $ 27,000  in compensation expense associated with outstanding restricted stock awards for the 

three  months ended 

March 31, 2022 and 2021,  respectively.

As of March 31, 2021, $ 52,000 of total unrecognized compensation cost related to outstanding restricted stock awards was expected to be recognized over a weighted-average remainder period of 0.49 years.

Alpha Pro Tech, Ltd.

6 unchanged sentences

The Company accounts for option forfeitures as they occur.

The following table summarizes stock option activity for the nine months ended September 30, 2021:

The following table summarizes stock option activity for the three months ended March 31, 2022:

Weighted Average

4 unchanged sentences

Granted to employees and non-employee directors

( 124,494 )  

Canceled/expired/forfeited

( 6,666 )  

Options outstanding, September 30, 2021

Options outstanding, March 31, 2022

427,580  

Options exercisable, September 30, 2021

Options exercisable, March 31, 2022

322,580  

As of September 30, 2021, $ 71,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 0.61 years.

As of September 30, 2021, we had no investments.

No marketable securities were sold during the three or nine months ended September 30, 2021.

Certain marketable securities were sold during the three months ended September 30, 2020, The total loss on marketable securities during the three months ended September 30, 2020 was $ 24,000 , consisting of an unrealized loss of $ 42,000 and a realized gain of $ 18,000 .

Certain marketable securities were sold during the nine months ended September 30, 2020.

The total loss on marketable securities during the nine months ended September 30, 2020 was $ 42,000 , due to an unrealized loss of $ 77,000 and a realized gain of $ 35,000 .

As of March 31, 2022, $ 9,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 0.47 years.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 - 13 Financial Instruments - Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments.

ASU 2016 - 13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts.

ASU 2016 - 13 is effective for public companies for the annual periods, including interim periods within those annual periods, beginning after December 15, 2019.

This guidance was applicable to the Company’s fiscal year beginning January 1, 2020.

Adoption of the new standard did not have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU No.

3 unchanged sentences

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

Adoption of the new standard did not have a material impact on our consolidated financial statements.

Adoption of the new standard in January 2021 did not have a material impact on our consolidated financial statements.

Management periodically reviews new accounting standards that are issued.

Management has not identified any other new standards that it believes merit further discussion at this time.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of September 30, 2021 and December 31, 2020, inventories net of reserves consisted of the following:

September 30,

As of March 31, 2022 and December 31, 2021, inventories net of reserves consisted of the following:

Raw materials

$ 12,625,000  

$ 13,545,000  

Work in process

4,765,000  

3,890,000  

Finished goods

6,493,000  

7,534,000  

$ 23,883,000  

$ 24,969,000  

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Equity Investment in Unconsolidated Affiliate

21 unchanged sentences

The Company periodically reviews its investment in Harmony for impairment.

Management has determined that no impairment was required as of September 30, 2021 or December 31, 2020.

For the three months ended September 30, 2021 and 2020, the Company purchased $ 6,190,000 and $ 4,156,000 of inventories, respectively, from Harmony.

For the nine months ended September 30, 2021 and 2020, the Company purchased $ 19,979,000 and $ 12,636,000 of inventories, respectively, from Harmony.

For the three months ended September 30, 2021 and 2020, the Company sold $ 399,000 and $ 180,000 of inventories, respectively, to Harmony.

For the nine months ended September 30, 2021 and 2020, the Company sold $ 1,291,000 and $ 833,000 of inventories, respectively, to Harmony.

Management has determined that no impairment was required as of March 31, 2022 or December 31, 2021.

For the three months ended March 31, 2022 and 2021, the Company purchased $ 6,183,000 and $ 6,354,000 of inventories, respectively, from Harmony.

For the three months ended March 31, 2022 and 2021, the Company sold $ 258,000 and $ 370,000 of inventories, respectively, to Harmony.

For the three months ended March 31, 2022 and 2021, the Company recorded equity in income of unconsolidated affiliate of $ 49,000 and $ 322,000 , respectively, related to Harmony.

As of March 31, 2022, the Company’s investment in Harmony was $ 6,169,000 , which consisted of its original $ 1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $ 5,738,000 , less $ 942,000 in repayments of the advance and $ 77,000 in dividends.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the three months ended September 30, 2021 and 2020, the Company recorded equity in income of unconsolidated affiliate of $ 112,000 and $ 250,000 , respectively, related to Harmony.

For the nine months ended September 30, 2021 and 2020, the Company recorded equity in income of unconsolidated affiliate of $ 623,000 and $ 456,000 , respectively, related to Harmony.

As of September 30, 2021, the Company’s investment in Harmony was $ 6,172,000 , which consisted of its original $ 1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $ 5,741,000 , less $ 942,000 in repayments of the advance and $ 77,000 in dividends.

Accrued Liabiliti e s

As of September 30, 2021 and December 31, 2020, accrued liabilities consisted of the following:

September 30,

Accrued Liabilities

As of March 31, 2022 and December 31, 2021, accrued liabilities consisted of the following:

Payroll expenses and taxes payable

$ 276,000  

$ 187,000  

Commissions and bonuses payable and general accrued liabilities

266,000  

1,063,000  

Total accrued liabilities

$ 542,000  

$ 1,250,000  

Basic and Diluted Earnings Per Common Share

1 unchanged sentence

earnings per common share (“EPS”), which utilizes the weighted average number of common shares outstanding without regard to dilutive shares, and “diluted”

EPS, which includes all such dilutive shares, for the three and nine months ended September 30, 2021 and 2020:

EPS, which includes all such dilutive shares, for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

For the Nine Months Ended

Septermber 30,

Net income (numerator)

1 unchanged sentence

$ 3,719,000  

$ 6,156,000  

$ 19,668,000  

Shares (denominator):

2 unchanged sentences

13,342,398  

13,255,125  

13,431,210  

dilutive effect of common stock options

1 unchanged sentence

375,006  

300,800  

546,354  

Diluted weighted average common shares outstanding

1 unchanged sentence

13,717,404  

13,555,925  

13,977,564  

Earnings per common share:

3 unchanged sentences

$ 0.27  

$ 0.06  

$ 0.58  

$ 0.45  

$ 1.41  

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Activity of Business Segments

5 unchanged sentences

( 2 ) Disposable Protective Apparel:

consisting of a complete line of disposable protective clothing, including shoecovers (including the Aqua Trak®

consisting of a complete line of disposable protective garments, including shoecovers (including the Aqua Trak®

and spunbond shoecovers), bouffant caps, coveralls, frocks, lab coats, gowns and hoods, as well as face masks and face shields for the pharmaceutical, cleanroom, industrial, medical and dental markets.

2 unchanged sentences

The Company evaluates the performance of its segments and allocates resources to them based primarily on net sales.

The following table presents consolidated net sales for each segment for the three and nine months ended September 30, 2021 and 2020:

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The accounting policies of the segments are the same as those described previously under Summary of Significant Accounting Policies (see Note 2 ).

Segment data excludes charges allocated to the principal executive office and other corporate unallocated expenses and income taxes.

The Company evaluates the performance of its segments and allocates resources to them based primarily on net sales.

The following table presents consolidated net sales for each segment for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

For the Nine Months Ended

September 30,

Building Supply

1 unchanged sentence

$ 8,340,000  

$ 28,210,000  

$ 22,677,000  

Disposable Protective Apparel

1 unchanged sentence

14,821,000  

27,232,000  

51,004,000  

Consolidated net sales

1 unchanged sentence

$ 23,161,000  

$ 55,442,000  

$ 73,681,000  

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three and nine months ended September 30, 2021 and 2020:

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

For the Nine Months Ended

September 30,

Building Supply

1 unchanged sentence

$ 1,551,000  

$ 5,629,000  

$ 4,023,000  

Disposable Protective Apparel

1 unchanged sentence

4,750,000  

6,351,000  

23,733,000  

Total segment income

1 unchanged sentence

6,301,000  

11,980,000  

27,756,000  

Unallocated corporate overhead expenses

1 unchanged sentence

1,575,000  

4,274,000  

4,804,000  

Provision for income taxes

1 unchanged sentence

1,007,000  

1,550,000  

3,284,000  

Consolidated net income

1 unchanged sentence

$ 3,719,000  

$ 6,156,000  

$ 19,668,000  

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of September 30, 2021 and December 31, 2020:

September 30,

The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of March 31, 2022 and December 31, 2021:

Building Supply

13 unchanged sentences

$ 6,122,000  

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Financial Information about Geographic Areas

The following table summarizes the Company’s net sales by geographic region for the three and nine months ended September 30, 2021 and 2020:

The following table summarizes the Company’s net sales by geographic region for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

For the Nine Months Ended

September 30,

Net sales by geographic region

United States

$ 17,076,000  

$ 20,898,000  

International

585,000  

2,263,000  

Consolidated net sales

Net sales by geographic region are based on the countries in which our customers are located.

For the three and nine months ended September 30, 2021 and 2020, the Company did not generate sales from any single country, other than the United States, that were significant to the Company’s consolidated net sales.

The following table summarizes the locations of the Company’s long-lived assets by geographic region as of September 30, 2021 and December 31, 2020:

September 30,

$ 17,661,000  

$ 23,161,000  

Net sales by geographic region are based on the countries in which our customers are located. 

For the three months ended March 31, 2022 and 2021, the Company generated approximately $ 474,000 and $ 2,115,000 respectively, in sales from Canada.

No country other than the United States was significant to the Company’s consolidated net sales.

The following table summarizes the locations of the Company’s long-lived assets by geographic region as of March 31, 2022 and December 31, 2021:

Long-lived assets by geographic region

United States

$ 4,668,000  

$ 4,623,000  

International

1,418,000  

1,441,000  

Consolidated total long-lived assets

$ 5,985,000  

$ 6,064,000  

Related Party Transactions

As of September 30, 2021, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony.

As of March 31, 2022, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony.

See Note 6 of these Notes to Condensed Consolidated Financial Statements (Unaudited).

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company has operating leases for the Company’s corporate office and manufacturing facilities, which expire at various dates through 

The Company’s primary operating lease commitments at 

September 30, 2021 related to the Company’s manufacturing facilities in Valdosta, Georgia;

March 31, 2022 related to the Company’s manufacturing facilities in Valdosta, Georgia;

Nogales, Arizona;

and Salt Lake City, Utah, as well as the Company’s corporate headquarters in Markham, Ontario, Canada.

As of September 30, 2021, the Company had operating lease right-of-use assets of $ 2,872,000  and operating lease liabilities of $ 2,926,000 .

As of September 30, 2021, we did not have any finance leases recorded on the Company’s condensed consolidated balance sheet. Operating lease expense was approximately $ 265,000 and $ 769,000 , respectively during the 

three and nine months ended September 30, 2021.

The aggregate future minimum lease payments and reconciliation to lease liabilities as of September 30, 2021 were as follows:

September 30,

Remaining three months of 2021

As of March 31, 2022, the Company had operating lease right-of-use assets of $ 2,420,000  and operating lease liabilities of $ 2,473,000 .

As of March 31, 2022, we did not have any finance leases recorded on the Company’s condensed consolidated balance sheet. Operating lease expense was approximately $ 279,000 during the 

three months ended March 31, 2022.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The aggregate future minimum lease payments and reconciliation to lease liabilities as of March 31, 2022 were as follows:

Remaining nine months of 2022

$ 757,000  

1,017,000  

484,000  

365,000  

Total future minimum lease payments

2,623,000  

Less imputed interest

Total Lease liabilities

As of September 30, 2021, the weighted average remaining lease term of the Company’s operating leases was 

During the nine months ended September 30, 2021, the weighted average discount rate with respect to these leases was 

$ 2,473,000  

As of March 31, 2022, the weighted average remaining lease term of the Company’s operating leases was 

During the three months ended March 31, 2022, the weighted average discount rate with respect to these leases was 

The Company accounts for income taxes using the asset and liability method.

7 unchanged sentences

With non-qualified stock options (“NQSOs”), on the other hand, the employer is typically eligible to claim a deduction upon its employee's exercise of the NQSOs.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

On March 27, 2020, President Trump signed into U.S.

federal law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which is aimed at providing emergency assistance and health care for individuals, families and businesses affected by the COVID- 19 pandemic and generally supporting the U.S.

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act currently has minimal impact on the Company.

Subsequent Events

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of September 30, 2021 through the filing date of this Quarterly Report on Form 10 -Q that would require accounting or disclosure and has concluded that there are no such subsequent events.

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of March 31, 2022 through the filing date of this Quarterly Report on Form 10 -Q that would require accounting or disclosure and has concluded that there are no such subsequent events.

Alpha Pro Tech, Ltd.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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within the meaning of federal securities laws.

Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions, including, without limitation, our expected orders, production levels and sales in 2021 and 2022, and other information that is not historical information.

Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions, including, without limitation, our expected orders, production levels and sales in 2022 and other information that is not historical information.

When used in this report, the words “estimates,”

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Global economic conditions could adversely affect the Company’s business and financial results.

The effects of the COVID-19 pandemic, including effects on the business and operations of those within our supply chain and on global economic conditions generally, have had, and could continue to have, a material adverse effect on our business, financial results and results of operations.

The effects of the COVID-19 pandemic, including effects on the business and operations of those within our supply chain and on global economic conditions generally, which have had, and could continue to have, a material adverse effect on our business, financial results and results of operations.

The loss of any large customer or a reduction in orders from any large customer could reduce our net sales and harm our operating results.

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The application of these accounting policies on a consistent basis enables us to provide timely and reliable financial information.

Our significant accounting policies and estimates are more fully described in Note 2, “Summary of Significant Accounting Policies”

in the notes to our consolidated financial statements in Item 8 of the 2020 Form 10-K.

Our critical accounting policies and estimates include the following:

Accounts Receivable :

Accounts receivable are recorded at the invoice amount and do not bear interest.

The general terms for receivables is net 30 days. 

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable;

however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. 

The Company determines the allowance based upon historical write-off experience and known conditions about customers’

current ability to pay. 

Account balances are charged against the allowance when the potential for recovery is considered remote.

For new customers with no order history with the Company we may require advance payments to reduce our credit risk.

Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost or net realizable value.

Allowances are recorded for slow-moving, obsolete or unusable inventory.

We assess our inventory for estimated obsolescence or unmarketable inventory and write down the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future sales and supply on-hand, if necessary.

If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

We determine if an arrangement is a lease at inception.

Operating leases are included as right-of-use (“ROU”) assets and lease liabilities on our consolidated balance sheet.

ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

Our leases do not provide an implicit rate, and, therefore, we estimate our collateralized borrowing rate under similar terms based on the information available at the commencement date in determining the present value of future minimum lease payments.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

We do not record leases on our consolidated balance sheet with a term of one year or less.

We elected a package of transition practical expedients, which included not reassessing whether any expired or existing contracts are or contain leases, not reassessing the lease classification of expired or existing leases, and not reassessing initial direct costs for existing leases.

We also elected a practical expedient to not separate lease and non-lease components.

We did not elect the practical expedient to use hindsight in determining our lease terms or assessing impairment of our ROU assets.

Alpha Pro Tech, Ltd.

Revenue Recognition:

Net sales includes revenue from products and shipping and handling charges, net of estimates for product returns and any related sales incentives.

Our customer contracts have a single performance obligation:

transfer control of products to customers.

Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring control of products.

All revenue is recognized when we satisfy our performance obligations under the applicable contract.

We recognize revenue in connection with transferring control of the promised products to the customer, with revenue being recognized at the point in time when the customer obtains control of the products, which is generally when title passes to the customer upon delivery to a third party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements, at which time a receivable is created for the invoice sent to the customer.

Shipping and handling activities are performed prior to the customer obtaining control of the goods, and are accounted for as fulfillment activities and are not a promised good or service.

Shipping and handling charges billed to customers are included in revenue.

Shipping and handling costs, associated with the distribution of the Company’s product to the customers, are recorded in cost of goods sold and are recognized when control of the product is transferred to the customer, which is at the time products are delivered to the third party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements.

We estimate product returns based on historical return rates and estimate rebates based on contractual agreements.

Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract.

Sales taxes and value added taxes in foreign and domestic jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from net sales.

The Company has determined that, as of September 30, 2021, it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables.

Sales Returns, Rebates and Allowances:

Sales are reduced for any anticipated sales returns, rebates and allowances based on historical experience.

Since our return policy is only 90 days and our products are not generally susceptible to external factors such as technological obsolescence or significant changes in demand, we are able to make a reasonable estimate for returns.

We offer end-user product specific and sales volume rebates to select distributors.

Our rebates are based on actual sales and are accrued monthly.

Stock-Based Compensation:

The Company accounts for stock-based awards using Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Stock Compensation.

ASC 718 requires companies to record compensation expense for the value of all outstanding and unvested share-based payments, including employee stock options and similar awards.

The fair values of stock option grants are determined using the Black-Scholes option-pricing model and are based on the following assumptions:

expected stock price volatility based on historical data and management’s expectations of future volatility, risk-free interest rates from published sources, expected term based on historical data, and no dividend yield, as the Board of Directors currently has no plans to pay dividends in the foreseeable future.

The Company accounts for option forfeitures as they occur.

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and that are fully transferable.

In addition, the option-pricing model requires the input of highly subjective assumptions, including expected stock price volatility.

Our stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value of such options.

Alpha Pro Tech, Ltd.

Our significant accounting policies and estimates are more fully described in Note 2 –

“Summary of Significant Accounting Policies”

in the notes to our consolidated financial statements in Item 8.

of the 2021 Form 10-K.

Since December 31, 2021, there have been no material changes to our critical accounting policies and estimates as described in the 2021 Form 10-K.

Alpha Pro Tech is in the business of protecting people, products and environments.

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We also manufacture a line of building supply construction weatherization products.

Our products are sold under the "Alpha Pro Tech" brand name, as well as under private label.

Our products are sold under the “Alpha Pro Tech”

brand name, as well as under private label.

Our products are grouped into two business segments:

the Building Supply segment, consisting of construction weatherization products, such as housewrap and synthetic roof underlayment as well as other woven material;

and the Disposable Protective Apparel segment, consisting of disposable protective garments (including shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields.

All financial information presented in this report reflects the current segmentation.

Our target markets include pharmaceutical manufacturing, bio-pharmaceutical manufacturing, medical device manufacturing, lab animal research, high technology electronics manufacturing (which includes the semi-conductor market), medical and dental distributors, and construction, building supply and roofing distributors.

(i) the Building Supply segment, consisting of construction weatherization products, such as housewrap and synthetic roof underlayment as well as other woven material;

and (ii) the Disposable Protective Apparel segment, consisting of disposable protective garments (including shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields.

Our target markets include pharmaceutical manufacturing, bio-pharmaceutical manufacturing and medical device manufacturing, lab animal research, high technology electronics manufacturing (which includes the semi-conductor market), medical and dental distributors, and construction, building supply and roofing distributors.

Our products are used primarily in cleanrooms, industrial safety manufacturing environments, health care facilities, such as hospitals, laboratories and dental offices, and building and re-roofing sites.

Our products are distributed principally in the United States through a network consisting of purchasing groups, national distributors, local distributors, independent sales representatives and our own sales and marketing force.

Alpha Pro Tech, Ltd.

Impact of the Novel Coronavirus (COVID-19)

After the start of the COVID-19 pandemic in early 2020, we experienced a significant surge in customer demand for our proprietary N-95 Particulate Respirator face mask product and other personal protective equipment (“PPE”) products as a result of COVID-19.

We experienced a dramatic increase in revenue from sales of PPE products throughout 2020, especially with respect to face masks, face shields and disposable protective garments, including shoecovers, coveralls, gowns, lab coats and bouffant caps.

We experienced a dramatic increase in revenue from sales of PPE products during 2020 and to a lesser extent during 2021, especially with respect to face masks and disposable protective garments, including shoecovers, coveralls, gowns, lab coats and bouffant caps.

In an effort to meet the unprecedented demand, and to aid communities around the world in responding to the ongoing healthcare crisis, the Company ramped up production during the first quarter of 2020 of our PPE products, in particular our N-95 face mask, which is manufactured by the Company in the United States.

We addressed the growing customer demand for PPE products by increasing and improving the human, mechanical, and supply chain components behind production.

During 2020, we encountered a number of constraints within our supply chain due to government-mandated shutdowns, raw materials shortages and shipping delays.

Although we worked to alleviate these supply chain issues by securing additional supply sources, in the event of subsequent shutdowns, shortages or delays, our production and sales could be further impacted.

Further, prices of raw materials have increased and we expect they may continue to rise more rapidly in the current environment than our sales prices, which could decrease our profits.

We are continuing to serve our customers while taking every precaution to provide a safe work environment for our employees.

We have enacted enhanced operating protocols to assure the safety and well-being of our employees, placed restrictions on non-essential travel, and otherwise adjusted work schedules to maximize our capacity while adhering to recommended precautions such as social distancing.

We addressed the growing customer demand for PPE products by increasing and improving the human, mechanical, and supply chain components behind production, but even with these increases and improvements, customer demand for PPE products exceeded industry supply from time to time.

Since 2020, we have encountered a number of constraints within our supply chain due to government-mandated shutdowns, raw materials shortages and shipping delays.

Although we continue to work to alleviate these supply chain issues by securing additional supply sources, in the event of subsequent shutdowns, shortages or delays, our production and sales could be further impacted.

Further, we have experienced increases in the costs of raw materials, and if the prices of raw materials continue to rise more rapidly than our sales prices, our profits may be impacted negatively.

Global shortages in important components and logistics challenges have resulted in, and will continue to cause, inflationary cost pressure in the Company’s supply chain.

To date, the inflationary cost pressure has been more pronounced in the Company’s logistics costs, but these supply chain challenges have had a [limited] impact on the Company’s results of operations and ability to deliver products and services to its customers.

However, if shortages in important supply chain materials or logistics challenges continue, the Company could fail to meet product demand.

Additionally, if inflationary pressures in logistics or component costs persist, we may not be able to quickly or easily adjust pricing, reduce costs, or implement countermeasures, all of which would adversely impact our business, financial condition, results of operations, or cash flows.

We are continuing to serve our customers while taking every precaution to provide a safe work environment for our employees, and we have enacted enhanced operating protocols to assure their safety and well-being.

We believe that we may have to take further actions that we determine are in the best interests of our employees or as required by federal, state, or local authorities.

Although we will continue to adhere to restrictions imposed by local governments in the jurisdictions in which we operate, government regulations have impacted workforce availability and expense in certain of the Company’s manufacturing facilities, and we expect this to continue for some time.

Alpha Pro Tech, Ltd.

As detailed below under “Results of Operations,”

we witnessed a softening in the demand for face masks, and face shields during the first nine months of 2021 and we expect sales will continue to decline to be more in-line with pre-pandemic levels in future periods.

We expect growth in pre-pandemic demand for our disposable protective garments and continued growth in Building Supply segment products although the Building Supply segment could be negatively impacted if there is a decrease in housing starts and increased uncertainty in the housing market and the economy in general.

Additionally, as supply chain issues for certain housing components not supplied by the Company, which could lead to a slowdown in new home construction.

The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments.

While this remains a fluid situation, all of our U.S.

manufacturing sites are currently operating at or above normal production rates. 

COVID-19 has resulted in a downturn in the global financial markets and a slowdown in the global economy.

This economic environment may impact some of our customers’

ability to pay or lead them to request extended payment terms, and we have experienced cost increases from some of our suppliers.

Additionally, we expect that demand for our Building Supply segment products could be negatively impacted if we experience a decrease in housing starts and increased uncertainty in the housing market and the economy in general, although to date we have not experienced any material negative impact in our Building Supply segment.

The impact of the COVID-19 pandemic continues to unfold.

Overall, the increase in sales of our PPE products resulting from the pandemic had a positive impact on our 2021 and 2022 financial results.

The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments, including the duration, scope and severity of the pandemic and new variants, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the efficacy of mass vaccinations, and the resumption of widespread economic activity in certain sectors.

Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any certainty the likely impact of the COVID-19 pandemic on our future operations.

Alpha Pro Tech, Ltd.

Management will continue to carefully monitor the current dynamic market conditions and work to respond to them swiftly and effectively.

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The following table sets forth certain operational data as a percentage of net sales for the periods indicated:

For the Three Months

Ended Septermber 30,

For the Nine Months

Ended Septermber 30,

For the Three Months Ended

Selling, general and administrative expenses

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Income before provision for income taxes

Three months ended September 30, 2021 compared to three months ended September 30, 2020

Consolidated sales for the three months ended September 30, 2021 decreased to $14,475,000, from $30,027,000 for the three months ended September 30, 2020, representing a decrease of $15,552,000, or 51.8%.

Three months ended March 31, 2022 compared to three months ended March 31, 2021

Consolidated sales for the three months ended March 31, 2022 decreased to $17,661,000, from $23,161,000 for the three months ended March 31, 2021, representing a decrease of $5,500,000, or 23.7%.

This decrease consisted of decreased sales in the Disposable Protective Apparel segment of $7,397,000, partially offset by increased sales in the Building Supply segment of $1,897,000.

Disposable Protective Apparel Segment

Sales for the Disposable Protective Apparel segment for the three months ended September 30, 2021 decreased by $17,956,000, or 80.3%, to $4,403,000, compared to $22,359,000 for the same period of 2020.

This segment decrease was due to a 92.3% decrease in sales of face masks, a 91.9% decrease in face shields and a 33.1% decrease in sales of disposable protective garments.

The decreases for face masks, face shields and disposable protective garments were primarily due to increased demand resulting from the COVID-19 pandemic in the third quarter of 2020.

Future sales of face mask and face shields are expected to be in line with pre-pandemic levels.

Sales for the disposable protective garments in the third quarter of 2021 were down as inventory levels in the supply chain, primarily with our major international channel partner, were higher than historical levels, as a result of record sales in the first and second quarter of 2021.

This partner’s sales to its end users for the three and nine months ended September 30, 2021 were significantly higher than pre-pandemic levels due to strong open orders, generated largely in 2020.

Open orders for the disposable protective garments are now more in line with pre-pandemic levels and sales in the coming quarters could be negatively affected as current inventory levels are higher than historical levels.

We are working closely with all of our channel partners to uncover new end-customer sales opportunities.

Sales for the Disposable Protective Apparel segment for the three months ended March 31, 2022 decreased by $7,397,000, or 49.9%, to $7,424,000, compared to $14,821,000 for the same period of 2021.

This segment decrease was due to a 59.4% decrease in sales of face masks, a 52.2% decrease in face shields and a 41.2% decrease in sales of disposable protective garments, all primarily due to reduced customer demand in the first quarter of 2022 compared to demand in the first quarter of 2021 associated with the COVID-19 pandemic.

The sales mix of the Disposable Protective Apparel segment for the three months ended March 31, 2022 was approximately 53% for disposable protective garments, 31% for face masks and 16% for face shields.

This sales mix is compared to approximately 45% for disposable protective garments, 38% for face masks and 17% for face shields for the three months ended March 31, 2021.

The decrease in face mask sales in the first quarter of 2022, primarily our proprietary N-95 Particulate Respirator face mask, resulted from very significant customer demand associated with the COVID-19 pandemic in the same period of 2021.

Face mask sales in the first quarter of 2022, which were aided by the Omicron variant of COVID-19, were significantly higher than all quarterly sales since the first quarter of 2021.

Excluding the first quarter of 2021, face mask sales in the first quarter of 2022 were higher than any other quarter on record with the exception of quarters of past pandemics in 2020 (COVID-19) and 2009 (H1N1) and the outbreak in 2003 (SARS).

The decrease in face shield sales in the first quarter of 2022 was also due to the decline in demand compared to the same period in 2021 associated with the COVID-19 pandemic.

As with face mask sales, face shield sales in the first quarter of 2022 were significantly higher than all quarterly sales since the first quarter of 2021 and higher than all other quarters on record except for quarters in 2020 (COVID-19) and a quarter in the early nineties.

Alpha Pro Tech, Ltd.

The sales mix of the Disposable Protective Apparel segment for the three months ended September 30, 2021 was approximately 69% for disposable protective garments, 23% for face masks and 8% for face shields.

This sales mix is compared to approximately 20% for disposable protective garments, 60% for face masks and 20% for face shields for the three months ended September 30, 2020.

Due to COVID-19 variants and other challenges related to efforts to reduce the duration, scope and severity of the pandemic, sales of face masks and face shields are expected to remain higher than pre-pandemic levels in the short term, but it is uncertain how long this will continue.

Sales for the disposable protective garments decreased in the first quarter of 2022, primarily due to record sales in the first and second quarters of 2021 resulting from strong orders received from our major international channel partner in 2020 in response to COVID-19.

Sales in the first quarter of 2022, as with sales in the second half of 2021, were negatively affected as inventory levels in the supply chain, primarily with our partner mentioned above, were higher than historical.

Open orders from this partner have recently improved, indicating that their inventory levels have likely normalized.

Although our sales were down during the first quarter of 2022 and more in line with pre-pandemic levels, this partner’s sales to its end users for the same period were significantly higher than pre-pandemic levels.

We are working closely with all of our channel partners to uncover new end-customer sales opportunities.

Building Supply Segment

Building Supply segment sales for the three months ended September 30, 2021 increased by $2,404,000, or 31.4%, to a quarterly record of $10,072,000, compared to $7,668,000 for the three months ended September 30, 2020.

We have had back to back quarterly record sales as the second quarter of 2021 was the previous highest quarter on record.

Also, the first quarter of 2021 was a record first quarter in the Building Segment.

In addition, sales increased by over 30% in each of the second and third quarters of 2021 compared to the prior year comparative quarter.

The Building Supply segment increase during the three months ended September 30, 2021 was primarily due to a 35.9% increase in sales of synthetic roof underlayment, a 25.7% increase in sales of housewrap and a 26.7% increase in sales of other woven material compared to the same period of 2020.

The sales mix of the Building Supply segment for the three months ended September 30, 2021 was approximately 50% for synthetic roof underlayment, 43% for housewrap and 7% for other woven material.

This compared to approximately 49% for synthetic roof underlayment, 44% for housewrap and 7% for other woven material for the three months ended September 30, 2020.

Building Supply segment sales for the three months ended March 31, 2022 increased by $1,897,000, or 22.7%, to the highest quarter on record of $10,237,000, compared to $8,340,000 for the three months ended March 31, 2021.

The Building Supply segment increase during the three months ended March 31, 2022 was primarily due to a 13.9% increase in sales of synthetic roof underlayment, an 18.4% increase in sales of housewrap and a 116.2% increase in sales of other woven material compared to the same period of 2021.

The sales mix of the Building Supply segment for the three months ended March 31, 2022 was approximately 48% for synthetic roof underlayment, 40% for housewrap and 12% for other woven material.

This compared to approximately 52% for synthetic roof underlayment, 41% for housewrap and 7% for other woven material for the three months ended March 31, 2021.

Our synthetic roof underlayment product line includes REX SynFelt®, REX TECHNOply®

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Plus and REX Wrap Fortis®.

Building Supply segment sales in the third quarter of 2021 showed continued significant growth due to strong demand for both our synthetic roof underlayment and housewrap products.

Synthetic roof underlayment sales increased by 35.9% compared to the third quarter of 2020 due to the increase in inventory requirements at the dealer level, as well as the expansion of new home construction.

The housewrap family of products continued grow with a 25.7% year-over-year increase due to growth in new market share as well as high demand for new home construction.

Our system of selling housewrap with associated accessories is becoming increasingly accepted in the market.

Management is optimistic about continued growth for the future as the demand for Building Supply products looks to remain strong.

Management has committed to increasing production capacity for this segment by investing approximately $4.0 million in new equipment, a part of which became operational in the latter part of the third quarter of 2021, which contributed to the record sales quarter.

As a result of a delay in the supply chain, the most expensive piece of equipment is now anticipated to arrive in the latter part of the fourth quarter of 2021 and is expected to be operational in the first quarter of 2022.

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020

Consolidated sales for the nine months ended September 30, 2021 decreased to $55,442,000 from $73,681,000 for the nine months ended September 30, 2020, representing a decrease of $18,239,000, or 24.8%.

This decrease consisted of decreased sales in the Disposable Protective Apparel Segment of $23,772,000 and increased sales in the Building Supply segment of $5,533,000.

Building Supply segment sales have had record quarters in each of the past six quarters, with the highest quarters on record in the second and then third quarters of 2021 and now in the first quarter of 2022.

In addition, the fourth quarter of 2020 and the first and fourth quarters of 2021 were quarterly records, at that time, compared to any prior year comparative quarter.

Building Supply segment sales during the first quarter of 2022 experienced continued significant growth due to strong demand for both our synthetic roof underlayment and housewrap products.

Synthetic roof underlayment sales increased by 13.9% compared to the first quarter of 2021, which was primarily due to robust sales of our TECHNO SB®25 product line.

The housewrap family of products continued to grow with an 18.4% first quarter increase over the prior-year quarter due to growth in new market share as well as high demand for new home construction.

Other woven material sales increased in the first quarter of 2022 compared to the same period of 2021 by a significant 116.2% due to increased sales to our major customer.

The Company has committed to increasing production capacity in our Building Supply segment by investing approximately $4.0 million in new equipment, a part of which became operational in the latter part of the third quarter of 2021.

This equipment, which is expected to increase our production capacity, has been delayed as a result of supply chain issues, and is now expected in the latter part of the second quarter of 2022 and is expected to be operational in the following quarter.

Management is encouraged by the current demand for the Company’s Building Supply products and anticipates continued growth in 2022.

The Company has continued to enjoy increased sales, and being vertically integrated and having control of our manufacturing, unlike most of our competitors, aides in minimizing the effects of worldwide supply chain issues.

The synthetic roofing market was strong in 2021 and into early 2022, although the Company has recently seen some retraction in new home starts and re-roofing expenditures.

By adding dealers, distribution channels and products in the roofing sector, we remain optimistic with respect to achieving sales growth in 2022.

Assuming new home construction remains high, we expect our housewrap sales will continue to grow despite the aforementioned retraction, as our distribution channels continue to expand and we introduce new products for this market.

Alpha Pro Tech, Ltd.

Disposable Protective Apparel Segment

Sales for the Disposable Protective Apparel segment for the nine months ended September 30, 2021 decreased by $23,772,000, or 46.6%, to $27,232,000, compared to $51,004,000 for the same period of 2020.

This segment decrease was due to a 71.4% decrease in sales of face masks, a 69.6% decrease in sales of face shields and a 15.9% increase in sales of disposable protective garments, all primarily due to customer demand associated with the pandemic.

The sales mix of the Disposable Protective Apparel segment for the nine months ended September 30, 2021 was 61% for disposable protective garments, 28% for masks and 11% for shields.

This sales mix is compared to 28% for disposable protective garments, 52% for masks and 20% for shields for the nine months ended September 30, 2020.

Building Supply Segment

Building Supply segment sales for the nine months ended September 30, 2021 increased by $5,533,000, or 24.4%, to $28,210,000, compared to $22,677,000 for the same period of 2020.

The Building Supply segment increase was primarily due to an increase in sales of synthetic roof underlayment of 34.4%, an increase in sales of housewrap of 19.6%, and an increase in sales of other woven material of 4.3% compared to the same period of 2020.

Synthetic roof underlayment sales increased as a result of increased sales of the Company’s TECHNO family of products.

Synthetic roof underlayment and housewrap sales were positively affected during the nine months ended September 30, 2021 by improved U.S.

housing starts.

As a result of supply chain issues for certain housing components not supplied by the Company, there could be a slowdown in new home construction, which could negatively affect our sales.

The sales mix of the Building Supply segment for the nine months ended September 30, 2021 was 50% for synthetic roof underlayment, 42% for housewrap and 8% for other woven material.

This compared to 46% for synthetic roof underlayment, 45% for housewrap and 9% for other woven material for the nine months ended September 30, 2020.

Gross Profit.

Gross profit decreased by $10,194,000, or 67.3%, to $4,942,000 for the three months ended September 30, 2021, from $15,136,000 for the three months ended September 30, 2020.

The gross profit margin was 34.1% for the three months ended September 30, 2021, compared to 50.4% for the three months ended September 30, 2020.

Gross profit decreased by $15,950,000, or 43.9%, to $20,353,000 for the nine months ended September 30, 2021, from $36,303,000 for the same period of 2020.

The gross profit margin was 36.7% for the nine months ended September 30, 2021, compared to 49.3% for the same period of 2020.

Management believes that gross profit margin will continue to be negatively affected in 2021 as a result of changes in product mix as the need for face masks and face shields, which have a higher gross profit margin than our other products, declines from the surge in customer demand in 2020 as a result of the COVID-19 pandemic.

In addition, gross profit is being negatively affected by significant increases in ocean freight and other transportation costs.

Additionally, our portfolio of products has been affected by much higher than normal raw material costs.

In the current environment, cost increases may rise more rapidly than our sales prices, which could decrease gross profit.

Gross profit decreased by $2,737,000, or 29.8%, to $6,442,000 for the three months ended March 31, 2022, from $9,179,000 for the three months ended March 31, 2021.

The gross profit margin was 36.5% for the three months ended March 31, 2022, compared to 39.6% for the three months ended March 31, 2021.

Management believes that gross profit margin likely will continue to be negatively affected by significant increases in ocean freight and other transportation costs.

Additionally, our portfolio of products has been affected by much higher than normal raw material costs and increased labor costs.

In the current environment, cost increases may rise more rapidly than our sales prices, which could continue to decrease gross profit.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $696,000, or 15.2%, to $3,884,000 for the three months ended September 30, 2021, from $4,580,000 for the three months ended September 30, 2020.

However, as a percentage of net sales, selling, general and administrative expenses increased to 26.8% for the three months ended September 30, 2021, up from 15.3% for the same period of 2020, primarily as a result of lower net sales.

Alpha Pro Tech, Ltd.

The change in expenses by segment for the three months ended September 30, 2021 was as follows:

Disposable Protective Apparel was down $484,000, or 28.8%;

Building Supply was up $187,000, or 13.8%;

and corporate unallocated expenses were down $399,000, or 25.8%.

The decrease in the Disposable Protective Apparel segment expenses was primarily related to decreased employee compensation, commission and general factory expenses.

The increase in the Building Supply segment expenses was primarily related to increased employee compensation, marketing, commission and travel expenses, partially offset by decreased insurance costs.

The decrease in corporate unallocated expenses was primarily due to lower accrued bonuses.

Selling, general and administrative expenses decreased by $575,000, or 4.3%, to $12,661,000 for the nine months ended September 30, 2021, from $13,236,000 for the nine months ended September 30, 2020.

As a percentage of net sales, selling, general and administrative expenses increased to 22.8% for the nine months ended September 30, 2021, up from 18.0% for the same period of 2020, primarily as a result of lower net sales.

The change in expenses by segment for the nine months ended September 30, 2021 was as follows:

Selling, general and administrative expenses decreased by $272,000, or 5.9%, to $4,306,000 for the three months ended March 31, 2022, from $4,578,000 for the three months ended March 31, 2021.

However, as a percentage of net sales, selling, general and administrative expenses increased to 24.4% for the three months ended March 31, 2022, up from 19.8% for the same period of 2021, primarily as a result of lower net sales.

The change in expenses by segment for the three months ended March 31, 2022 was as follows:

Disposable Protective Apparel was down $453,000, or 27.0%;

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and corporate unallocated expenses were down $182,000, or 11.8%.

The decrease in the Disposable Protective Apparel segment expenses was primarily related to decreased commission and general factory expenses, partially offset by increased employee compensation.

The increase in the Building Supply segment expenses was related to increased employee compensation.

The decrease in corporate unallocated expenses was primarily due to decreased accrued bonuses and professional fees, partially offset by increased public company expenses, insurance expenses and general office expenses.

The decrease in the Disposable Protective Apparel segment expenses was primarily related to decreased employee compensation, marketing and commission expenses.

The increase in the Building Supply segment expenses was primarily related to increased employee compensation, marketing and travel expenses.

The decrease in corporate unallocated expenses was primarily due to lower accrued bonuses and lower public company expenses.

In accordance with the terms of his employment agreement, the Company’s current President and Chief Executive Officer is entitled to an annual bonus equal to 5% of the pre-tax profits of the Company, excluding bonus expense, up to a maximum of $1.0 million.

A bonus amount of $51,000 was accrued for the three months ended September 30, 2021, compared to $350,000 for the three months ended September 30, 2020.

A bonus amount of $406,000 was accrued for the nine months ended September 30, 2021, as compared to $1,000,000 for the same period of 2020.

A bonus amount of $104,000 was accrued for the three months ended March 31, 2022, compared to $249,000 for the three months ended March 31, 2021.

Depreciation and Amortization.

Depreciation and amortization expense increased by $23,000, or 12.4%, to $209,000 for the three months ended September 30, 2021, from $186,000 for the three months ended September 30, 2020.

Depreciation and amortization expense increased by $65,000, or 11.9%, to $611,000 for the nine months ended September 30, 2021, from $546,000 for the same period of 2020.

The increase was primarily attributable to increased depreciation for machinery and equipment in the Building Supply segment and increased corporate depreciation related to computer technology.

Depreciation and amortization expense increased by $14,000, or 7.1%, to $212,000 for the three months ended March 31, 2022, from $198,000 for the three months ended March 31, 2021.

The increase was primarily attributable to increased depreciation for machinery and equipment in the Building Supply segment.

Income from Operations.

Income from operations decreased by $9,521,000, or 91.8%, to $849,000 for the three months ended September 30, 2021, compared to $10,370,000 for the three months ended September 30, 2020.

The decreased income from operations was primarily due to a decrease in gross profit of $10,194,000 and an increase in depreciation and amortization expense of $23,000, partially offset by a decrease in selling, general and administrative expenses of $696,000.

Income from operations as a percentage of net sales for the three months ended September 30, 2021 was 5.9%, compared to 34.5% for the same period of 2020.

Income from operations decreased by $15,440,000, or 68.6%, to $7,081,000 for the nine months ended September 30, 2021, compared to $22,521,000 for the nine months ended September 30, 2020.

Income from operations decreased by $2,479,000, or 56.3%, to $1,924,000 for the three months ended March 31, 2022, compared to $4,403,000 for the three months ended March 31, 2021.

The decreased income from operations was primarily due to a decrease in gross profit of $2,737,000 and an increase in depreciation and amortization expense of $14,000, partially offset by a decrease in selling, general and administrative expenses of $272,000.

Income from operations as a percentage of net sales for the nine months ended September 30, 2021 was 12.8%, compared to 30.6% for the same period of 2020.

Income from operations as a percentage of net sales for the three months ended March 31, 2022 was 10.9%, compared to 19.0% for the same period of 2021.

Other Income.

Other income decreased by $114,000, or 50.2%, to $113,000 for the three months ended September 30, 2021, from $227,000 for the three months ended September 30, 2020.

The decrease was primarily due to a decrease in equity in income of unconsolidated affiliate of $138,000, partially offset by an increase of $24,000 on loss on marketable securities.

Other income increased by $194,000 to $625,000 for the nine months ended September 30, 2021, from $431,000 for the same period of 2020.

The increase was primarily due an increase in equity in income of unconsolidated affiliate of $167,000 and a loss on marketable securities in 2020 compared to no gain or loss on marketable securities during the same period of 2021, for a net increase of $42,000, partially offset by a decrease in interest income of $15,000.

Alpha Pro Tech, Ltd.

Other income decreased by $273,000, or 84.5%, to $50,000 for the three months ended March 31, 2022, from $323,000 for the three months ended March 31, 2021.

The decrease was due to a decrease in equity in income of unconsolidated affiliate of $273,000.

Income before Provision for Income Taxes.

Income before provision for income taxes for the three months ended September 30, 2021 was $962,000, compared to income before provision for income taxes of $10,597,000 for the same period of 2020, representing a decrease of $9,635,000, or 90.9%.

Income before provision for income taxes for the three months ended March 31, 2022 was $1,974,000, compared to income before provision for income taxes of $4,726,000 for the same period of 2021, representing a decrease of $2,752,000, or 58.2%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $2,479,000 and a decrease in other income of $273,000.

Income before provision for income taxes for the nine months ended September 30, 2021 was $7,706,000, compared to income before provision for income taxes of $22,952,000 for the nine months ended September 30, 2020, representing a decrease of $15,246,000, or 66.4%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $15,440,000, partially offset by an increase in other income of $194,000.

Alpha Pro Tech, Ltd.

Provision for Income Taxes .

The provision for income taxes for the three months ended September 30, 2021 was $196,000, compared to $2,490,000 for the same period of 2020.

The estimated effective tax rate was 20.4% for the three months ended September 30, 2021, compared to 23.5% for the three months ended September 30, 2020.

The Company does not record a tax provision on equity in income of unconsolidated affiliate, which reduces the effective tax rate.

The provision for income taxes for the nine months ended September 30, 2021 was $1,550,000, compared to $3,284,000 for the same period of 2020.

The provision for income taxes consisted of an estimated nonrecurring tax benefit of $2.0 million in the first quarter of 2020 as a result of the exercise of disqualified incentive stock options and non-qualified stock options.

The estimated effective tax rate was 20.1% for the nine months ended September 30, 2021, compared to 14.3% for the nine months ended September 30, 2020.

Excluding the estimated nonrecurring tax benefit of $2.0 million, the estimated effective tax rate was 23.0% for the nine months ended September 30, 2020.

The provision for income taxes for the three months ended March 31, 2022 was $452,000, compared to $1,007,000 for the same period of 2021.

The estimated effective tax rate was 22.9% for the three months ended March 31, 2022, compared to 21.3% for the three months ended March 31, 2021.

The Company does not record a tax provision on equity in income of unconsolidated affiliate, which reduces the effective tax rate.

Net income for the three months ended September 30, 2021 was $766,000, compared to net income of $8,107,000 for the three months ended September 30, 2020, representing a decrease of $7,341,000, or 90.6%.

Net income as a percentage of net sales for the three months ended September 30, 2021 was 5.3%, and net income as a percentage of net sales for the same period of 2020 was 27.0%.

Basic earnings per common share for the three months ended September 30, 2021, and 2020 were $0.06 and $0.60, respectively.

Diluted earnings per common share for the three months ended September 30, 2021 and 2020 were $0.06 and $0.58, respectively.

Net income for the nine months ended September 30, 2021 was $6,156,000, compared to net income of $19,668,000 for the same period of 2020, representing a decrease of $13,512,000, or 68.7%.

Net income for the three months ended March 31, 2022 was $1,522,000, compared to net income of $3,719,000 for the three months ended March 31, 2021, representing a decrease of $2,197,000, or 59.1%.

The decrease in net income was largely associated with the surge in product demand due to the COVID-19 pandemic.

The net income decrease comparing the 2022 and 2021 periods was due to a decrease in income before provision for income taxes of $2,752,000, partially offset by a decrease in provision for income taxes of $555,000.

As mentioned above, a tax benefit from stock options exercised positively impacted net income in the first quarter of 2020 by an estimated $2.0 million.

Net income as a percentage of net sales for the nine months ended September 30, 2021 was 11.1%, and net income as a percentage of net sales for the same period of 2020 was 26.7%.

Basic earnings per common share for the nine months ended September 30, 2021 and 2020 were $0.46 and $1.46, respectively.

Diluted earnings per common share for the nine months ended September 30, 2021 and 2020 were $0.45 and $1.41, respectively.

Alpha Pro Tech, Ltd.

Net income as a percentage of net sales for the three months ended March 31, 2022 was 8.6%, and net income as a percentage of net sales for the same period of 2021 was 16.1%.

Basic earnings per common share for the three months ended March 31, 2022, and 2021 were $0.12 and $0.28, respectively.

Diluted earnings per common share for the three months ended March 31, 2022 and 2021 were $0.12 and $0.27, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2021, the Company had cash of $17,636,000 and working capital of $49,746,000.

As of September 30, 2021, the Company’s current ratio (current assets/current liabilities) was 17:1, compared to a current ratio of 9:1 as of December 31, 2020.

Cash decreased by 24.3%, or $5,656,000, to $17,636,000 as of September 30, 2021, compared to $23,292,000 as of December 31, 2020, and working capital increased by $295,000 from $49,451,000 as of December 31, 2020.

The decrease in cash from December 31, 2020 was due to cash used in investing activities of $2,391,000 and cash used in financing activities of $3,686,000 partially offset by cash provided by operating activities of $421,000.

We previously had a $3,500,000 credit facility with Wells Fargo Bank, consisting of a line of credit with interest at prime plus 0.5%.

This credit line expired in May 2020, and the Company decided not to renew.

The Company has continued its relationship with Wells Fargo, with the exception of the line of credit.

The Company determined that the credit line is not necessary at this time, as it had not been used in several years, and the Company currently has sufficient funding from operations.

Net cash provided by operating activities of $421,000 for the three months ended September 30, 2021 was due to net income of $6,156,000, impacted primarily by the following:

stock-based compensation expense of $238,000, depreciation and amortization expense of $611,000, equity in income of unconsolidated affiliate of $623,000, operating lease expense net of accretion of $663,000, a decrease in accounts receivable of $3,650,000, an increase in prepaid expenses of $337,000, an increase in inventory of $6,441,000, a decrease in accounts payable and accrued liabilities of $2,627,000, a decrease in customer advance payments of $209,000 and a decrease in lease liabilities of $660,000.

Accounts receivable decreased by $3,650,000, or 40.4%, to $5,387,000 as of September 30, 2021, from $9,037,000 as of December 31, 2020.

The decrease in accounts receivable was related to decreased sales as compared to the fourth quarter of 2020.

The number of days that sales remained outstanding as of September 30, 2021, calculated by using an average of accounts receivable outstanding and annual revenue, was 40 days, compared to 34 days as of December 31, 2020.

Inventory increased by $6,441,000, or 38.5%, to $23,190,000 as of September 30, 2021, from $16,749,000 as of December 31, 2020.

The increase was due to an increase in inventory for the Disposable Protective Apparel segment of $4,852,000, or 42.2%, to $16,350,000 and an increase in inventory for the Building Supply segment of $1,589,000 or 30.3%, to $6,840,000.

Prepaid expenses increased by $337,000, or 5.4%, to $6,562,000 as of September 30, 2021, from $6,225,000 as of December 31, 2020.

The increase was primarily due to prepayments for tax payments and insurance.

Right-of-use assets as of September 30, 2021 decreased by $663,000 to $2,872,000 from $3,535,000 as of December 31, 2020 as a result of amortization of the balance.

Lease liabilities as of September 30, 2021 decreased by $660,000 to $2,926,000 from $3,586,000 as of December 31, 2020.

As of March 31, 2022, the Company had cash and cash equivalents (“cash”) of $14,239,000 and working capital of $51,186,000.

As of March 31, 2022, the Company’s current ratio (current assets/current liabilities) was 27:1, compared to a current ratio of 20:1 as of December 31, 2021.

Cash decreased by 12.7%, or $2,068,000, to $14,239,000 as of March 31, 2022, compared to $16,307,000 as of December 31, 2021, and working capital increased by $855,000 from $50,331,000 as of December 31, 2021.

The decrease in cash from December 31, 2021 was due to cash used in operating activities of $ 1,179,000, cash used in investing activities of $133,000 and cash used in financing activities of $756,000.

Net cash used in operating activities of $1,179,000 for the three months ended March 31, 2022 was due to net income of $1,522,000, impacted primarily by the following:

stock-based compensation expense of $55,000, depreciation and amortization expense of $212,000, equity in income of unconsolidated affiliate of $49,000, operating lease expense net of accretion of $228,000, an increase in accounts receivable of $3,814,000, a decrease in prepaid expenses of $736,000, a decrease in inventory of $1,086,000, a decrease in accounts payable and accrued liabilities of $714,000, and a decrease in lease liabilities of $227,000, all compared to December 31, 2021.

Accounts receivable increased by $4,028,000, or 84.3%, to $8,808,000 as of March 31, 2022, from $4,780,000 as of December 31, 2021.

The increase in accounts receivable was related to increased sales as compared to the fourth quarter of 2021.

The number of days that sales remained outstanding as of March 31, 2022, calculated by using an average of accounts receivable outstanding and annual revenue, was 35 days, compared to 24 days as of December 31, 2021.

Inventory decreased by $1,086,000, or 4.3%, to $23,883,000 as of March 31, 2022, from $24,969,000 as of December 31, 2021.

The decrease was due to a decrease in inventory for the Disposable Protective Apparel segment of $1,508,000, or 9.3%, to $14,728,000 offset by an increase in inventory for the Building Supply segment of $421,000 or 4.8%, to $9,155,000.

Prepaid expenses decreased by $736,000, or 10.6%, to $6,207,000 as of March 31, 2022, from $6,943,000 as of December 31, 2021.

The decrease was primarily due to decrease in prepayments for tax payments and prepaid inventory.

Right-of-use assets as of March 31, 2022 decreased by $228,000 to $2,420,000 from $2,648,000 as of December 31, 2021 as a result of amortization of the balance.

Lease liabilities as of March 31, 2022 decreased by $227,000 to $2,473,000 from $2,700,000 as of December 31, 2021.

The recording of the lease liabilities was the result of adopting ASC 842, Leases.

The decrease in the lease liabilities was the result of lease payments made during the year.

Accounts payable and accrued liabilities as of September 30, 2021 decreased by $2,627,000, or 55.0%, to $2,149,000, from $4,776,000 as of December 31, 2020.

The decrease was primarily due to a decrease in accrued bonuses and a decrease in trade accounts payable.

Customer advance payment of orders as of September 30, 2021 was $0, which was the result of no customer deposits for future dated PPE orders in response to the COVID-19 pandemic, compared to $209,000 as of December 31, 2020.

Net cash used in investing activities was $2,391,000 for the nine months ended September 30, 2021, compared to net cash used in investing activities of $567,000 for the same period of 2020.

Investing activities for the nine months ended September 30, 2021 consisted of the purchase of property and equipment of $2,391,000.

Investing activities for the nine months ended September 30, 2020 consisted of the purchase of property and equipment of $687,000 and proceeds from the sale of marketable securities of $120,000.

Net cash used in financing activities was $3,686,000 for the nine months ended September 30, 2021, compared to net cash provided by financing activities of $1,564,000 for the same period of 2020.

Net cash used in financing activities for the nine months ended September 30, 2021 resulted from the payment of $4,077,000 for the repurchase of common stock, partially offset by proceeds of $391,000 from the exercise of stock options.

Net cash provided by financing activities for the nine months ended September 30, 2020 resulted from proceeds of $1,970,000 from the exercise of stock options, partially offset by the payment of $406,000 for the repurchase of common stock.

Alpha Pro Tech, Ltd.

As of September 30, 2021, we had $409,000 available for additional stock purchases under our stock repurchase program.

During the three months ended September 30, 2021, we repurchased 46,000 shares of common stock at a cost of $369,000.

As of September 30, 2021, we had repurchased a total of 18,492,917 shares of common stock at a cost of approximately $42,111,000 through our repurchase program.

Accounts payable and accrued liabilities as of March 31, 2022 decreased by $714,000, or 40.2%, to $1,064,000, from $1,778,000 as of December 31, 2021.

The decrease was primarily due to a decrease in accrued bonuses and a decrease in trade accounts payable.

Net cash used in investing activities was $133,000 for the three months ended March 31, 2022, compared to net cash used in investing activities of $130,000 for the same period of 2021.

Investing activities for the three months ended March 31, 2022 consisted of the purchase of property and equipment of $133,000.

Investing activities for the three months ended March 31, 2021 consisted of the purchase of property and equipment of $130,000.

Net cash used in financing activities was $756,000 for the three months ended March 31, 2022, compared to net cash used in financing activities of $2,058 for the same period of 2021.

Net cash used in financing activities for the three months ended March 31, 2022 resulted from the payment of $756,000 for the repurchase of common stock.

Net cash used in financing activities for the three months ended March 31, 2021 resulted from the payment of $2,366,000 for the repurchase of common stock partially offset by the proceeds of $308,000 from the exercise of stock options.

As of March 31, 2022, we had $1,322,000 available for additional stock purchases under our stock repurchase program.

During the three months ended March 31, 2022, we repurchased 170,000 shares of common stock at a cost of $756,000.

As of March 31, 2022, we had repurchased a total of 18,719,917 shares of common stock at a cost of approximately $43,198,000 through our repurchase program.

We retire all stock upon repurchase.

Future repurchases are expected to be funded from cash on hand and cash flows from operating activities.

We believe that our current cash balance will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future.

We have made approximately $4,000,000 in commitments for capital investments to increase our production capacity in our Building supply segment, of which $2,450,000 has been paid as of September 30, 2021.

We have committed to increasing production capacity in our Building Supply segment by investing approximately $4.0 million in new equipment, a part of which became operational in the latter part of the third quarter of 2021.

As a result of delays in the supply chain the most expensive piece of equipment, for which an approximately $1,000,000 balance remains outstanding, has had a further delay.

This amount has not been prepaid and will be paid in full upon delivery of equipment.

The equipment was originally anticipated to arrive in the latter part of the fourth quarter of 2021 and is now expected in the latter part of the second quarter of 2022 and is expected to be operational in the third quarter of 2022.

The Company expects to fund the remaining balance from cash flow from operations.

We believe that our current cash balance and expected cash flow from operations will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future. 

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts.

ASU 2016-13 is effective for public entities for the annual periods, including interim periods within those annual periods, beginning after December 15, 2019.

This guidance is applicable to the Company’s fiscal year beginning January 1, 2020.

Adoption of the new standard did not have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU No.

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This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

Adoption of the new standard in January 2021 did not have a material impact on our consolidated financial statements.

Management periodically reviews new accounting standards that are issued.

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As a smaller reporting company, we are not required to provide the information otherwise required by this Item.

Alpha Pro Tech, Ltd.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements