What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-08 compared with 2022-08-05 · 246 added, 225 removed, 411 unchanged (53% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets (Unaudited)

September 30,

2021 (1)

1 unchanged sentence

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 64,000 as of June 30, 2022 and as of December 31, 2021

Accounts receivable, net of allowance for doubtful accounts of $ 58,000 and $ 64,000 as of September 30, 2022 and as of December 31, 2021, respectively

Accounts receivable, related party

9 unchanged sentences

Accrued liabilities

Lease liabilities

Current portion of lease liabilities

Total current liabilities

6 unchanged sentences

50,000,000 shares authorized;

12,728,173 and 13,115,341 shares outstanding as of June 30, 2022 and December 31, 2021, respectively

12,477,306 and 13,115,341 shares outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

7 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of goods sold, excluding depreciation and amortization

4 unchanged sentences

Income from operations

Other income:

Other income (loss):

Loss on fixed assets

Equity in income of unconsolidated affiliate

Equity in income (loss) of unconsolidated affiliate

Interest income, net

6 unchanged sentences

Diluted weighted average common shares outstanding

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

Alpha Pro Tech, Ltd.

1 unchanged sentence

Equity (Unaudited)

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Balance as of December 31, 2021

6 unchanged sentences

Balance as of June 30, 2022

For the Six Months Ended June 30, 2021

Common stock repurchased and retired

Stock-based compensation expense

Options exercised

Balance as of September 30, 2022

For the Nine Months Ended September 30, 2021

Balance as of December 31, 2020

7 unchanged sentences

Balance as of June 30, 2021

Common stock repurchased and retired

Stock-based compensation expense

Balance as of September 30, 2021

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash Flows From Operating Activities:

Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:

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

Stock-based compensation

9 unchanged sentences

Lease liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash Flows From Investing Activities:

5 unchanged sentences

Net cash used in financing activities

Decrease in cash and cash equivalents

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, end of the period

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

Decrease in cash

Cash, beginning of the period

Cash, end of the period

See accompanying

Alpha Pro Tech, Ltd.

10 unchanged sentences

The Company’s products are sold under the "Alpha Pro Tech" brand name as well as under private label and are predominantly sold in the United States of America (“US”).

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

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 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 Omicron 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.

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

Due to the inherent uncertainty of this 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.

In addition, the war in Ukraine has further increased existing global supply chain, logistics, and inflationary challenges

Basis of Presentation and Revenue Recognition Policy

5 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 six months ended June 30, 2022 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 and nine months ended September 30, 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;

15 unchanged sentences

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 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 June 30, 2022 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 September 30, 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 9 and Note 10 of these Notes to Condensed Consolidated Financial Statements (Unaudited) for information on revenue disaggregated by type and by geographic region.

10 unchanged sentences

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 six months ended June 30, 2022 and 2021, 

no  stock options were granted under the 2004 Option Plan or the 2020 Incentive Plan.

The Company recognized $ 87,000  and $ 169,000  in stock-based compensation expense for the six months ended June 30, 2022 and 2021, respectively, related to outstanding options previously granted under the 2004 Option Plan.

For the six months ended June 30, 2022 and 2021, no restricted stock awards were granted under the 2020 Incentive Plan.

The Company recognized $ 54,000  in compensation expense associated with outstanding restricted stock awards for both six-month periods ended June 30, 2022 and 2021.

As of June 30, 2022, $ 25,000 of total unrecognized compensation cost related to outstanding restricted stock awards was expected to be recognized over a weighted-average remainder period of 0.24 years.

For the nine months ended September 30, 2022 and 2021, 19,600 and zero stock options were granted under the 2020 Incentive Plan, respectively.

The Company recognized $ 39,000  and $ 155,000  in stock-based compensation expense for the nine months ended September 30, 2022 and 2021, respectively, related to outstanding options previously granted under the 2004 Option Plan.

For the nine months ended September 30, 2022 and 2021, 

13,600 and zero restricted stock awards were granted under the 2020 Incentive Plan, respectively.

The Company recognized $ 80,000  and $ 83,000 in compensation expense associated with outstanding restricted stock awards for the nine month periods ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, $ 53,000 of total unrecognized compensation cost related to outstanding restricted stock awards was expected to be recognized over a weighted-average remainder period of 0.98 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 six months ended June 30, 2022:

The following table summarizes stock option activity for the nine months ended September 30, 2022:

Weighted Average

3 unchanged sentences

Canceled/expired/forfeited

Options outstanding, June 30, 2022

Options exercisable, June 30, 2022

As of June 30, 2022, $ 4,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 0.22 years.

Options outstanding, September 30, 2022

Options exercisable, September 30, 2022

As of September 30, 2022, $ 37,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 4.98 years.

Recent Accounting Pronouncements

Management periodically reviews new accounting standards that are issued.

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

As of June 30, 2022 and December 31, 2021, inventories net of reserves consisted of the following:

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

As of September 30, 2022 and December 31, 2021, inventories net of reserves consisted of the following:

September 30,

Raw materials

12 unchanged sentences

The capital from the initial funding and a bank loan, which loan is guaranteed exclusively by the individual shareholders of Maple Industries and associates and collateralized by the assets of Harmony, were utilized to purchase the original manufacturing facility in India.

Harmony currently has four facilities in India (three owned and one rented), consisting of:

(1) a 113,000 square foot building for manufacturing building products;

Harmony currently has four facilities in India (three owned and one rented) consisting of (1) a 113,000 square foot building for manufacturing building products;

(2) a 73,000 square foot building for manufacturing coated material and sewing proprietary disposable protective apparel;

10 unchanged sentences

The Company periodically reviews its investment in Harmony for impairment.

Management has determined that no impairment was required as of June 30, 2022 or December 31, 2021.

For the three months ended June 30, 2022 and 2021, the Company purchased $ 5,676,000 and $ 7,435,000 of inventories, respectively, from Harmony.

For the six months ended June 30, 2022 and 2021, the Company purchased $ 11,859,000 and $ 13,789,000 of inventories, respectively, from Harmony.

For the three months ended June 30, 2022 and 2021, the Company sold $ 0 and $ 451,000 of inventories, respectively, to Harmony.

For the six months ended June 30, 2022 and 2021, the Company sold $ 258,000 and $ 821,000 of inventories, respectively, to Harmony.

For the three months ended June 30, 2022 and 2021, the Company recorded equity in income of unconsolidated affiliate of $ 50,000 and $ 188,000 , respectively, related to Harmony.

For the six months ended June 30, 2022 and 2021, the Company recorded equity in income of unconsolidated affiliate of $ 99,000 and $ 510,000 , respectively, related to Harmony.

As of June 30, 2022, the Company’s investment in Harmony was $ 6,219,000 , which consisted of its original $ 1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $ 5,788,000 , less $ 942,000 in repayments of the advance and $ 77,000 in dividends.

Management has determined that no impairment was required as of September 30, 2022 or December 31, 2021.

For the three months ended September 30, 2022 and 2021, the Company purchased $ 7,786,000 and $ 6,190,000 of inventories, respectively, from Harmony.

For the nine months ended September 30, 2022 and 2021, the Company purchased $ 19,645,000 and $ 19,979,000 of inventories, respectively, from Harmony.

For the three months ended September 30, 2022 and 2021, the Company sold $ 66,000 and $ 399,000 of inventories, respectively, to Harmony.

For the nine months ended September 30, 2022 and 2021, the Company sold $ 280,000 and $ 1,219,000 of inventories, respectively, to Harmony.

For the three months ended September 30, 2022 and 2021, the Company recorded loss in income from unconsolidated affiliate of $ 13,000 and equity in income of unconsolidated affiliate of $ 112,000 , respectively, related to Harmony.

For the nine months ended September 30, 2022 and 2021, the Company recorded equity in income of unconsolidated affiliate of $ 87,000 and $ 623,000 , respectively, related to Harmony.

As of September 30, 2022, the Company’s investment in Harmony was $ 6,207,000 , which consisted of its original $ 1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $ 5,776,000 , less $ 942,000 in repayments of the advance and $ 77,000 in dividends.

Accrued Liabilities

As of June 30, 2022 and December 31, 2021, accrued liabilities consisted of the following:

As of September 30, 2022 and December 31, 2021, accrued liabilities consisted of the following:

September 30,

Payroll expenses and taxes payable

6 unchanged sentences

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 six months ended June 30, 2022 and 2021:

EPS, which includes all such dilutive shares, for the three and nine months ended September 30, 2022 and 2021:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net income (numerator)

19 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 six months ended June 30, 2022 and 2021:

The following table presents consolidated net sales for each segment for the three and nine months ended September 30, 2022 and 2021:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Building Supply

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three and six months ended June 30, 2022 and 2021:

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three and nine months ended September 30, 2022 and 2021:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Building Supply

4 unchanged sentences

Consolidated net income

The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of June 30, 2022 and December 31, 2021:

The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of September 30, 2022 and December 31, 2021:

September 30,

Building Supply

4 unchanged sentences

Financial Information about Geographic Areas

The following table summarizes the Company’s net sales by geographic region for the three and six months ended June 30, 2022 and 2021:

The following table summarizes the Company’s net sales by geographic region for the three and nine months ended September 30, 2022 and 2021:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net sales by geographic region

3 unchanged sentences

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

For the three months ended June 30, 2022 and 2021, the Company generated approximately $ 542,000 and $ 103,000 , respectively, in sales from Canada.

For the six months ended June 30, 2022 and 2021, the Company generated approximately $ 1,016,000 and $ 2,258,000 , respectively, in sales from Canada.

For the three months ended September 30, 2022 and 2021, the Company generated approximately $ 103,000 and $ 74,000 , respectively, in sales from Canada.

For the nine months ended September 30, 2022 and 2021, the Company generated approximately $ 1,119,000 and $ 2,333,000 , respectively, in sales from Canada.

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

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the locations of the Company’s long-lived assets by geographic region as of June 30, 2022 and December 31, 2021:

The following table summarizes the locations of the Company’s long-lived assets by geographic region as of September 30, 2022 and December 31, 2021:

September 30,

Long-lived assets by geographic region

3 unchanged sentences

Related Party Transactions

As of June 30, 2022, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony.

As of September 30, 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).

The Company has operating leases for the Company’s corporate office and manufacturing facilities, which expire at various dates through 2025.

The Company’s primary operating lease commitments at June 30, 2022 related to the Company’s manufacturing facilities in Valdosta, Georgia;

The Company has operating leases for the Company’s corporate office and manufacturing facilities, which expire at various dates through 2025.

The Company’s primary operating lease commitments at September 30, 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 June 30, 2022, the Company had operating lease right-of-use assets of $ 2,191,000 and operating lease liabilities of $ 2,243,000 .

As of June 30, 2022, we did not have any finance leases recorded on the Company’s condensed consolidated balance sheet.

Operating lease expense was approximately $ 308,000 and $ 626,000 , respectively, during the three and six months ended June 30, 2022.

The aggregate future minimum lease payments and reconciliation to lease liabilities as of June 30, 2022 were as follows:

Remaining six months of 2022

and Salt Lake City, Utah.

As of September 30, 2022, the Company had operating lease right-of-use assets of $ 1,959,000  and operating lease liabilities of $ 2,010,000 .

As of September 30, 2022, the Company did not have any finance leases recorded on the Company’s condensed consolidated balance sheet. Operating lease expense was approximately $ 309,000 and $ 936,000 , respectively, during the three and nine months ended September 30, 2022.

The aggregate future minimum lease payments and reconciliation to lease liabilities as of September 30, 2022 were as follows:

September 30,

Remaining three months of 2022

Total future minimum lease payments

1 unchanged sentence

Total Lease liabilities

As of June 30, 2022, the weighted average remaining lease term of the Company’s operating leases was 2.89 years.

During the three months ended June 30, 2022, the weighted average discount rate with respect to these leases was 4.07 %

As of September 30, 2022, the weighted average remaining lease term of the Company’s operating leases was 

During the nine months ended September 30, 2022, the weighted average discount rate with respect to these leases was 

Alpha Pro Tech, Ltd.

3 unchanged sentences

The Company’s policy is to record any interest and penalties assessed by the Internal Revenue Service as a component of the provision for income taxes.

The Company provides allowances for uncertain income tax positions when it is more likely than not that the position will not be sustained upon examination by the tax authority.

Alpha Pro Tech, Ltd.

8 unchanged sentences

compensatory damages in the amount $ 490,000 , representing the money the Company paid for the machines it never received, lost profits in the form of mask sales it could have made if Defendants had delivered the machines on the promised date, and other monetary and equitable relief.

As of June 30, 2022, the Company has written off the $ 490,000 balance of the deposit paid for the equipment, pending any recovery in the Lawsuit.

As of September 30, 2022, the Company has written off the $ 490,000 balance of the deposit paid for the equipment, pending any recovery in the Lawsuit.

As of the date hereof, no counterclaims have been asserted against the Company.

1 unchanged sentence

The Lawsuit is in its early stages and the final outcome, including the potential amount of any recovery for the Company’s claims, is uncertain.

Any potential recovery represents a gain contingency in accordance with ASC 450, Contingencies , that has not been recorded as the matter was not resolved as of June 30, 2022.

Any recovery will be recorded when received.

The Company is subject to certain claims and legal actions arising in the ordinary course of business.

The ultimate outcome of any pending or potential litigation against the Company cannot be predicted.

Management accrues contingent liabilities only when management concludes that it is both probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated.

Any potential recovery represents a gain contingency in accordance with ASC 450, Contingencies , that has not been recorded as the matter was not resolved as of September 30, 2022.

Any recovery will be recorded when received. 

The Company is subject to certain claims and legal actions arising in the ordinary course of business.  

The ultimate outcome of any pending or potential litigation against the Company cannot be predicted.  Management accrues contingent liabilities only when management concludes that it is both probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. 

Subsequent Events

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of June 30, 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.

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of September 30, 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.

27 unchanged sentences

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

 Our joint venture may present risks that are only present when third parties are involved.

Security breaches and other disruptions to the Company’s information technology infrastructure could interfere with the Company’s operations, compromise information belonging to the Company and our customers and suppliers and expose the Company to liability, which could adversely impact the Company’s business and reputation.

23 unchanged sentences

“Summary of Significant Accounting Policies”

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

of the 2021 Form 10-K.

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.

21 unchanged sentences

To date, the inflationary cost pressure has been more pronounced in the Company’s logistics costs, but these supply chain challenges have had an 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.

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.

In addition, the war in Ukraine has further increased existing global supply chain, logistics, and inflationary challenges.

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.

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

COVID-19 and other factors have 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 as the overall market for  housing starts has decreased 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.

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 as the overall market for housing starts has decreased and there is increased uncertainty in the housing market and the economy in general, although to date the negative impact on our Building Supply segment has been limited.

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

5 unchanged sentences

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

For the Three Months Ended

For the Six Months Ended

For the Three Months

For the Nine Months

Ended September 30,

Selling, general and administrative expenses

1 unchanged sentence

Income before provision for income taxes

Three months ended June 30, 2022 compared to three months ended June 30, 2021

Consolidated sales for the three months ended June 30, 2022 decreased to $17,373,000, from $17,806,000 for the three months ended June 30, 2021, representing a decrease of $433,000, or 2.4%.

This decrease consisted of decreased sales in the Disposable Protective Apparel segment of $1,452,000, partially offset by increased sales in the Building Supply segment of $1,019,000.

Three months ended September 30, 2022 compared to three months ended September 30, 2021

Consolidated sales for the three months ended September 30, 2022 increased to $14,722,000, from $14,475,000 for the three months ended September 30, 2021, representing an increase of $247,000, or 1.7%.

This increase consisted of increased sales in the Disposable Protective Apparel segment of $715,000, partially offset by decreased sales in the Building Supply segment of $468,000.

Building Supply Segment

Building Supply segment sales for the three months ended June 30, 2022 increased by $1,019,000, or 10.4%, to the highest quarter on record of $10,817,000, compared to $9,798,000 for the three months ended June 30, 2021.

The Building Supply segment increase during the three months ended June 30, 2022 was primarily due to a 7.7% increase in sales of housewrap and a 116.4% increase in sales of other woven material, partially offset by a decrease in sales of synthetic roof underlayment of 7.7% compared to the same period of 2021.

The sales mix of the Building Supply segment for the three months ended June 30, 2022 was approximately 40% for synthetic roof underlayment, 42% for housewrap and 18% for other woven material.

This compared to approximately 48% for synthetic roof underlayment, 43% for housewrap and 9% for other woven material for the three months ended June 30, 2021.

Building Supply segment sales for the three months ended September 30, 2022 decreased by $468,000, or 4.6%, to $9,604,000, compared to $10,072,000 for the three months ended September 30, 2021.

The Building Supply segment decrease during the three months ended September 30, 2022 was primarily due to a 6.0% decrease in sales of housewrap and a 12.3% decrease in sales of other woven material, partially offset by an increase in sales of synthetic roof underlayment of 3.4% compared to the same period of 2021.

The sales mix of the Building Supply segment for the three months ended September 30, 2022 was approximately 53% for synthetic roof underlayment, 41% for housewrap and 6% for other woven material.

This compared to approximately 50% for synthetic roof underlayment, 43% for housewrap and 7% for other woven material for the three months ended September 30, 2021.

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

1 unchanged sentence

Plus and REX Wrap Fortis®.

Building Supply segment sales for the second quarter of 2022 resulted in the all-time highest quarter on record.

In addition, we have experienced record quarters in each of the past seven quarters, as compared to each respective prior year comparative quarter.

Also, we have experienced the four highest quarters on record over the past five quarters:

the second and third quarters of 2021 and the first and second quarters of 2022.

Core Building Supply product sales (house wrap and synthetic roof underlayment sales, excluding other woven material) in the third quarter of 2022 were the second highest quarter on record, next only to the third quarter of 2021.

In addition, we have experienced the five highest quarters on record for the Building Supply segment over the past six quarters:

the second and third quarters of 2021 and the first, second and third quarters of 2022.

We have also experienced record quarters for the Building Supply segment in seven of the past eight quarters, as compared to each respective prior year comparative quarter.

In the third quarter of 2022, synthetic roof underlayment sales were the second highest quarter on record, primarily due to healthy sales of our economy TECHNO family of products that increased 7.8%, partially offset by an industry-wide decline in premium synthetic roof underlayment sales.

There has been an overall increase in inventory levels at the retail level on economy roof underlayment products.

The higher inventories, as well as a general retraction in the building and re-roofing markets are expected to continue, which could affect our sales in the near future.

Housewrap sales in the third quarter of 2022, also declined as a result of a slowdown in new home construction starts and inventory stockpiles at the dealer side.

One of our housewrap growth strategies is to pursue additional market share of the multi-family building market, through the education of architects and introducing new products, which are currently in development, to meet the needs of ever changing building code requirements and customers’

Other woven material sales decreased in the third quarter of 2022 compared to the same period of 2021 by 12.3% due to decreased sales to our major customer, product overstocks and the economic slowdown.

As a result, we now expect negative growth in the near term with this product line.

Alpha Pro Tech, Ltd.

In the second quarter of 2022, the Building Supply segment experienced growth over the same period last year, which was led by a quarterly record in sales of housewrap.

Premium housewrap was up, as we enjoyed entry into more multi-family and light commercial markets.

We also experienced additional growth with our entry level line of housewrap with additional market penetration on the retail side, as well as increased sales of our accessory items, which includes window and door flashing and seam tapes.

One of our growth strategies is to pursue additional market share of the multi-family building market, through the education of architects and introducing new products, which are currently in development, to meet the needs of ever changing building code requirements and customers’

Our synthetic roof underlayment sales in the second quarter of 2022 were negatively affected due a decline of sales in our premium REX SynFelt®

brand, which reflects an industry trend, and flat sales of our economy TECHNO SB®

brand as there has been an overall increase in inventory levels at the retail level on economy underlayment products.

The higher inventories as well as a general retraction in the building market are expected to continue into the third quarter but we do expect growth in the near future.

Other woven material sales increased in the second quarter of 2022 compared to the same period of 2021 by a significant 116.4% due to increased sales to our major customer and sales to a new other woven material customer.

We expect continued substantial growth in the remainder of 2022 with this product line.

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 further delayed as a result of supply chain issues, and is now expected in the latter part of the third 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 segment products and anticipates continued growth in the remainder of 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, as well as excess inventory in the market.

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

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.

However, there is uncertainty in the economy in relation to interest rates and a possible recession that could impact the Building Supply segment.

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

The Building Supply segment has seen some softening during the third quarter of 2022 as a result of a slowdown in new home construction starts, re-roofing expenditures and inventory stockpiles at the dealer side.

Even with the slowdown, synthetic roof underlayment sales in the third quarter of 2022 reached the second highest on record, which is due to additional distribution channels becoming operational.

To counter balance the slowdown in the single family construction segment, we continue to focus on expanding distribution into the multi-family and commercial construction segments.

We expect to see a general slowdown in sales during the fourth quarter as new home construction starts continue to decrease but we do not expect it to be as severe as the deterioration in the broader construction market, since we are also expanding our distribution reach and market share to offset the reduction in construction spending.

We are also working to expand our product offerings focused on the wall and roof weatherization side of the construction process.

As these new products are introduced, we expect to see an increase in revenue based on completing the overall systems used in construction. Management is encouraged about our growth potential in the coming year.

However, there is uncertainty in the economy in relation to interest rates and a possible recession and the continued slowdown in building that could impact the Building Supply segment.

Disposable Protective Apparel Segment

Sales for the Disposable Protective Apparel segment for the three months ended June 30, 2022 decreased by $1,452,000, or 18.1%, to $6,556,000, compared to $8,008,000 for the same period of 2021.

This segment decrease was due to a 28.9% decrease in sales of disposable protective garments, and a 0.7% decrease in sales of face masks, partially offset by a 172.1% increase in face shields.

Sales of disposable garments and face masks were affected due to reduced customer demand in the second quarter of 2022 compared to demand in the second quarter of 2021 associated with the COVID-19 pandemic.

Face shield demand was positively affected primarily by sales to one distributor.

The sales mix of the Disposable Protective Apparel segment for the three months ended June 30, 2022 was approximately 74% for disposable protective garments, 14% for face masks and 12% for face shields.

This sales mix is compared to approximately 85% for disposable protective garments, 11% for face masks and 4% for face shields for the three months ended June 30, 2021.

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

Although our sales were down during the second quarter of 2022, our disposable protective garment sales were significantly higher than pre-pandemic levels.

We are continuing to work closely with our channel partners to uncover new end-customer sales opportunities.

Sales for the Disposable Protective Apparel segment for the three months ended September 30, 2022 increased by $715,000, or 16.2%, to $5,118,000, compared to $4,403,000 for the same period of 2021.

This segment increase was due to a 33.0% increase in sales of disposable protective garments, partially offset by a 25.1% decrease in sales of face masks and a 5.6% decrease in sales of face shields.

The sales mix of the Disposable Protective Apparel segment for the three months ended September 30, 2022 was approximately 78% for disposable protective garments, 15% for face masks and 7% for face shields.

This sales mix is compared to approximately 69% for disposable protective garments, 23% for face masks and 8% for face shields for the three months ended September 30, 2021.

Sales of disposable garments were significantly higher due to increased customer demand in the third quarter of 2022 compared to demand in the third quarter of 2021.

Our customers’

supply chains were overstocked in the third quarter of 2021, due to record sales in the first six months of 2021, which led to lower sales in 

that quarter.

Sales for the disposable protective garments also increased significantly in the third quarter of 2022, primarily due to improved sales to our major international channel partner.

Sales of face masks in the third quarter of 2022 were down compared to the same quarter of 2021, which was still aided by increased COVID-19-related demand.

Sales of face masks this quarter were in line with pre-pandemic levels but are expected to be lower in the coming months as the market is saturated with face masks.

Sales of face shields in the third quarter of 2022 were down compared to the same quarter of 2021 but more in line with pre-pandemic levels.

Face shield sales are expected to be lower in the near term.

We are continuing to work closely with our channel partners to uncover new end-customer sales opportunities, but expect sales of face masks and face shields to continue to decrease to pre-pandemic levels due to the saturated market.

Alpha Pro Tech, Ltd.

Sales of face mask sales in the second quarter of 2022 were basically flat compared to the same quarter of 2021.

Sales of face masks continue to be somewhat aided by the Omicron variants of COVID-19 and are still higher than pre-pandemic levels but, are expected to be low in the coming months as the market is saturated with face masks.

The increase in face shield sales in the second quarter of 2022 was also due to demand associated with the COVID-19 pandemic, primarily from one distributor.

Face shield sales in the second quarter of 2022 were significantly higher than pre-pandemic levels but are expected to be lower in the near term.

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 now expected to be at pre-pandemic levels or lower. 

In particular, face mask sales are expected to continue to decrease due to the saturated market. 

Six months ended June 30, 2022 compared to six months ended June 30, 2021

Consolidated sales for the six months ended June 30, 2022 decreased to $35,034,000 from $40,967,000 for the six months ended June 30, 2021, representing a decrease of $5,933,000, or 14.5%.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021

Consolidated sales for the nine months ended September 30, 2022 decreased to $49,756,000 from $55,442,000 for the nine months ended September 30, 2021, representing a decrease of $5,686,000, or 10.3%.

This decrease consisted of decreased sales in the Disposable Protective Apparel Segment of $8,133,000, partially offset by increased sales in the Building Supply segment of $2,447,000.

Building Supply Segment

Building Supply segment sales for the six months ended June 30, 2022 increased by $2,916,000, or 16.1%, to $21,054,000, compared to $18,138,000 for the same period of 2021.

Building Supply segment sales for the nine months ended September 30, 2022 increased by $2,447,000, or 8.7%, to $30,657,000, compared to $28,210,000 for the same period of 2021.

The Building Supply segment increase was primarily due to an increase in sales of housewrap of 5.9%, an increase in sales of synthetic roof underlayment of 3.0%, and an increase in sales of other woven material of 75.1% compared to the same period of 2021.

Building Supply segment sales during the first six months of 2022 experienced continued significant growth due to strong demand for both our housewrap products, other non-woven products and to a lesser extent synthetic roof underlayment products.

The housewrap family of products continued to grow with a 12.5% year to date increase over the prior year to date due to growth in new market share as well as high demand for new home construction.

Other woven material sales increased year to date by a significant 116.4% due to increased sales to our major customer, as well as a new customer.

Synthetic roof underlayment sales increased by 2.8% compared to the first six months of 2021, which was primarily due to robust sales of our economy TECHNO family of products that have increased 11.6% year to date, partially offset by an industry-wide decline in premium synthetic roof underlayment sales.

The sales mix of the Building Supply segment for the six months ended June 30, 2022 was 44% for synthetic roof underlayment, 41% for housewrap and 15% for other woven material.

This compared to 50% for synthetic roof underlayment, 42% for housewrap and 8% for other woven material for the six months ended June 30, 2021.

Building Supply segment sales during the first nine months of 2022 experienced growth due to increased demand for our housewrap products, other non-woven products and, to a lesser extent, synthetic roof underlayment products.

The housewrap family of products continued to grow with a 5.9% year to date increase over the prior year to date due to growth in new market share as well as high demand for new home construction during the first half of 2022.

Other woven material sales increased year to date by 75.1% due to increased sales to our major customer, as well as a new customer.

Synthetic roof underlayment sales increased by 3.0% compared to the first nine months of 2021, which was primarily due to robust sales of our economy TECHNO family of products that have increased 10.2% year to date, partially offset by an industry-wide decline in premium synthetic roof underlayment sales.

The sales mix of the Building Supply segment for the nine months ended September 30, 2022 was 47% for synthetic roof underlayment, 41% for housewrap and 12% for other woven material.

This compared to 50% for synthetic roof underlayment, 42% for housewrap and 8% for other woven material for the nine months ended September 30, 2021.

Disposable Protective Apparel Segment

Sales for the Disposable Protective Apparel segment for the six months ended June 30, 2022 decreased by $8,849,000, or 38.8%, to $13,980,000, compared to $22,829,000 for the same period of 2021.

Sales for the Disposable Protective Apparel segment for the nine months ended September 30, 2022 decreased by $8,133,000, or 29.9%, to $19,099,000, compared to $27,232,000 for the same period of 2021.

This segment decrease was due to a 22.6% decrease in sales of disposable protective garments, a 47.6% decrease in sales of face masks, and a 25.1% decrease in sales of face shields, all primarily due to increased customer demand associated with the pandemic in 2021.

Although sales of disposable protective garments, face masks and face shields are down year to date, they are above pre-pandemic levels.

The sales mix of the Disposable Protective Apparel segment for the six months ended June 30, 2022 was 63% for disposable protective garments, 23% for masks and 14% for shields.

This sales mix is compared to 59% for disposable protective garments, 29% for masks and 12% for shields for the six months ended June 30, 2021.

Alpha Pro Tech, Ltd.

Although sales of disposable protective garments, face masks and face shields are down year to date compared to the same period in 2021, they are above pre-pandemic levels.

In addition, our major international channel partner’s sales to its end users of our Disposable Protective Apparel products in 2022 have been significantly higher than pre-pandemic levels.

The sales mix of the Disposable Protective Apparel segment for the nine months ended September 30, 2022 was 67% for disposable protective garments, 21% for face masks and 12% for face shields.

This sales mix is compared to 61% for disposable protective garments, 28% for face masks and 11% for face shields for the nine months ended September 30, 2021.

Gross Profit.

Gross profit decreased by $620,000, or 9.9%, to $5,612,000 for the three months ended June 30, 2022, from $6,232,000 for the three months ended June 30, 2021.

The gross profit margin was 32.3% for the three months ended June 30, 2022, compared to 35.0% for the three months ended June 30, 2021.

Gross profit decreased by $3,357,000, or 21.8%, to $12,054,000 for the six months ended June 30, 2022, from $15,411,000 for the same period of 2021.

The gross profit margin was 34.4% for the six months ended June 30, 2022, compared to 37.6% for the same period of 2021.

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

Gross profit decreased by $124,000, or 2.5%, to $4,818,000 for the three months ended September 30, 2022, from $4,942,000 for the three months ended September 30, 2021.

The gross profit margin was 32.7% for the three months ended September 30, 2022, compared to 34.1% for the three months ended September 30, 2021.

Gross profit decreased by $3,481,000, or 17.1%, to $16,872,000 for the nine months ended September 30, 2022, from $20,353,000 for the same period of 2021.

The gross profit margin was 33.9% for the nine months ended September 30, 2022, compared to 36.7% for the same period of 2021.

Alpha Pro Tech, Ltd.

Although the gross profit margin has been negatively affected in 2022 by significant increases in ocean freight and other transportation costs, ocean freight rates have started to come down.

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.

In order to mitigate cost increases the Company will likely be increasing prices during the latter part of the third quarter of 2022.

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

In order to offset cost increases, the Company increased prices on many products during the latter part of the third quarter of 2022, which should have a positive effect in the coming quarters.

Management expects the gross profit margin to improve next year, although continuing inflationary pressures could limit such improvements.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $134,000, or 3.2%, to $4,065,000 for the three months ended June 30, 2022, from $4,199,000 for the three months ended June 30, 2021.

As a percentage of net sales, selling, general and administrative expenses decreased to 23.4% for the three months ended June 30, 2022, down from 23.6% for the same period of 2021, primarily as a result of lower expenses.

The change in expenses by segment for the three months ended June 30, 2022 was as follows:

Selling, general and administrative expenses increased by $86,000, or 2.2%, to $3,970,000 for the three months ended September 30, 2022, from $3,884,000 for the three months ended September 30, 2021.

As a percentage of net sales, selling, general and administrative expenses increased slightly to 27.0% for the three months ended September 30, 2022, from 26.8% for the same period of 2021, primarily as a result of higher expenses.

The change in expenses by segment for the three months ended September 30, 2022 was as follows:

Disposable Protective Apparel was down $50,000, or 4.1%;

Building Supply was up $69,000, or 4.4%;

and corporate unallocated expenses were down $266,000, or 17.8%.

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

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

The decrease in corporate unallocated expenses was primarily due to lower employee compensation, accrued bonuses and lower stock option expenses.

Selling, general and administrative expenses decreased by $406,000, or 4.6%, to $8,371,000 for the six months ended June 30, 2022, from $8,777,000 for the six months ended June 30, 2021.

As a percentage of net sales, selling, general and administrative expenses increased to 23.9% for the six months ended June 30, 2022, up from 21.4% for the same period of 2021, primarily as a result of lower net sales.

The change in expenses by segment for the six months ended June 30, 2022 was as follows:

and corporate unallocated expenses were up $67,000, or 5.8%.

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

The increase in the Building Supply segment expenses was primarily related to increased employee compensation, sales travel, insurance and general office expenses, partially offset by a decrease in marketing and commission expenses.

The increase in corporate unallocated expenses was primarily due to higher professional fees and insurance expense.

Selling, general and administrative expenses decreased by $320,000, or 2.5%, to $12,341,000 for the nine months ended September 30, 2022, from $12,661,000 for the nine months ended September 30, 2021.

As a percentage of net sales, selling, general and administrative expenses increased to 24.8% for the nine months ended September 30, 2022, up from 22.8% for the same period of 2021, primarily as a result of lower net sales.

The change in expenses by segment for the nine months ended September 30, 2022 was as follows:

Disposable Protective Apparel was down $595,000, or 14.0%;

1 unchanged sentence

and corporate unallocated expenses were down $381,000, or 9.1%.

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

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

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

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

The decrease in corporate unallocated expenses was primarily due to decreased accrued bonuses, stock option expenses, and public company and general office expenses, partially offset by increased employee compensation and insurance 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 $46,000 was accrued for the three months ended June 30, 2022, compared to $106,000 for the three months ended June 30, 2021.

A bonus amount of $150,000 was accrued for the six months ended June 30, 2022, as compared to $355,000 for the same period of 2021.

A bonus amount of $36,000 was accrued for the three months ended September 30, 2022, compared to $51,000 for the three months ended September 30, 2021.

A bonus amount of $186,000 was accrued for the nine months ended September 30, 2022, compared to $406,000 for the same period of 2021.

Depreciation and Amortization.

Depreciation and amortization expense increased by $24,000, or 11.8%, to $227,000 for the three months ended June 30, 2022, from $203,000 for the three months ended June 30, 2021.

Depreciation and amortization expense increased by $38,000, or 9.5%, to $439,000 for the six months ended June 30, 2022, from $401,000 for the same period of 2021.

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

Alpha Pro Tech, Ltd.

Depreciation and amortization expense decreased by $8,000, or 3.8%, to $201,000 for the three months ended September 30, 2022, from $209,000 for the three months ended September 30, 2021.

Depreciation and amortization expense increased by $30,000, or 4.9%, to $641,000 for the nine months ended September 30, 2022, from $611,000 for the same period of 2021.

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

Income from Operations.

Income from operations decreased by $510,000, or 27.9%, to $1,320,000 for the three months ended June 30, 2022, compared to $1,830,000 for the three months ended June 30, 2021.

The decreased income from operations was primarily due to a decrease in gross profit of $620,000 and an increase in depreciation and amortization expense of $24,000, partially offset by a decrease in selling, general and administrative expenses of $134,000.

Income from operations as a percentage of net sales for the three months ended June 30, 2022 was 7.6%, compared to 10.3% for the same period of 2021.

Income from operations decreased by $2,989,000, or 48.0%, to $3,244,000 for the six months ended June 30, 2022, compared to $6,233,000 for the six months ended June 30, 2021.

Income from operations decreased by $202,000, or 23.8%, to $647,000 for the three months ended September 30, 2022, compared to $849,000 for the three months ended September 30, 2021.

The decreased income from operations was primarily due to a decrease in gross profit of $124,000 and an increase in selling, general and administrative expenses of $86,000, partially offset by a decrease in depreciation and amortization expense of $8,000.

Income from operations as a percentage of net sales for the three months ended September 30, 2022 was 4.4%, compared to 5.9% for the same period of 2021.

Alpha Pro Tech, Ltd.

Income from operations decreased by $3,191,000, or 45.1%, to $3,890,000 for the nine months ended September 30, 2022, compared to $7,081,000 for the nine months ended September 30, 2021.

The decreased income from operations was primarily due to a decrease in gross profit of $3,481,000 and an increase in depreciation and amortization expense of $30,000, partially offset by a decrease in selling, general and administrative expenses of $320,000.

Income from operations as a percentage of net sales for the six months ended June 30, 2022 was 9.3%, compared to 15.2% for the same period of 2021.

Income from operations as a percentage of net sales for the nine months ended September 30, 2022 was 7.8%, compared to 12.8% for the same period of 2021.

Other Income.

Other income decreased by $618,000, or 328.7%, to a loss of $430,000 for the three months ended June 30, 2022, from other income of $188,000 for the three months ended June 30, 2021.

The decrease was due to a loss on fixed assets of $490,000 and decrease in equity in income of unconsolidated affiliate of $138,000, partially offset by an increase in interest income of $10,000.

The loss on fixed assets was due to equipment for the Disposable Protective Apparel segment that was not delivered and the Company has recently filed a lawsuit in this matter.

Other income decreased by $98,000, or 86.7%, to $15,000 for the three months ended September 30, 2022, from $113,000 for the three months ended September 30, 2021.

The decrease was due to a decrease in equity in income of unconsolidated affiliate of $125,000 (equity in loss of unconsolidated affiliate of $13,000, compared to equity in income of unconsolidated affiliate of $112,000), partially offset by an increase in interest income of $27,000.

Other income decreased by $989,000 to a loss of $364,000 for the nine months ended September 30, 2022, from other income of $625,000 for the same period of 2021.

The decrease was primarily due a loss on fixed assets of $490,000, and a decrease in equity in income of unconsolidated affiliate of $536,000, partially offset by an increase in interest income of $37,000.

The loss on fixed assets was due to equipment for the Disposable Protective Apparel segment that was not delivered and the Company has recently filed a lawsuit (the “Lawsuit”) in this matter.

See Part II, Item 1, “Legal Proceedings,”

for more information on the Lawsuit.

Other income decreased by $891,000 to a loss of $380,000 for the six months ended June 30, 2022, from other income of $511,000 for the same period of 2021.

The decrease was primarily due a loss on fixed assets of $490,000 as discussed above, and a decrease in equity in income of unconsolidated affiliate of $411,000, partially offset by an increase in interest income of $10,000.

Income before Provision for Income Taxes.

Income before provision for income taxes for the three months ended June 30, 2022 was $890,000, compared to income before provision for income taxes of $2,081,000 for the same period of 2021, representing a decrease of $1,128,000, or 55.9%.

Income before provision for income taxes for the three months ended September 30, 2022 was $662,000, compared to income before provision for income taxes of $962,000 for the same period of 2021, representing a decrease of $300,000, or 31.2%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $202,000 and a decrease in other income of $98,000.

Income before provision for income taxes for the six months ended June 30, 2022 was $2,864,000, compared to income before provision for income taxes of $6,744,000 for the six months ended June 30, 2021, representing a decrease of $3,880,000, or 57.5%.

Income before provision for income taxes for the nine months ended September 30, 2022 was $3,526,000, compared to income before provision for income taxes of $7,706,000 for the nine months ended September 30, 2021, representing a decrease of $4,180,000, or 54.2%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $3,191,000 and a decrease in other income of $989,000.

Provision for Income Taxes .

The provision for income taxes for the three months ended June 30, 2022 was $197,000, compared to $347,000 for the same period of 2021.

The estimated effective tax rate was 22.1% for the three months ended June 30, 2022, compared to 17.3% for the three months ended June 30, 2021.

The provision for income taxes for the three months ended September 30, 2022 was $159,000, compared to $196,000 for the same period of 2021.

The estimated effective tax rate was 24.0% for the three months ended September 30, 2022, compared to 20.4% for the three months ended September 30, 2021.

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 six months ended June 30, 2022 was $649,000, compared to $1,354,000 for the same period of 2021.

The estimated effective tax rate was 22.7% for the six months ended June 30, 2022, compared to 20.1% for the six months ended June 30, 2021.

The provision for income taxes for the nine months ended September 30, 2022 was $808,000, compared to $1,550,000 for the same period of 2021.

The estimated effective tax rate was 22.9% for the nine months ended September 30, 2022, compared to 20.1% for the nine months ended September 30, 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 June 30, 2022 was $693,000, compared to net income of $1,671,000 for the three months ended June 30, 2021, representing a decrease of $978,000, or 58.5%.

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

The net income decrease for the three months ended June 30, 2022 compared to the same period of 2021 was due to a decrease in income from operations of $510,000 and a decrease in other income of $618,000, for a decrease in income before provision for income taxes of $1,128,000, partially offset by a decrease in provision for income taxes of $150,000.

The loss on assets of $490,000, mentioned above, significantly decreased our net income for the three months ended June 30, 2022.

Net income as a percentage of net sales for the three months ended June 30, 2022 was 4.0%, and net income as a percentage of net sales for the same period of 2021 was 9.4%.

Basic earnings per common share for the three months ended June 30, 2022, and 2021 were $0.05 and $0.13, respectively.

Diluted earnings per common share for the three months ended June 30, 2022 and 2021 were $0.05 and $0.12, respectively.

Net income for the three months ended September 30, 2022 was $503,000, compared to net income of $766,000 for the three months ended September 30, 2021, representing a decrease of $263,000, or 34.3%.

The decrease in net income was largely associated with lower gross margin as a result of increased freight and transportation costs, increased raw material costs and selling, general and administrative costs and a decrease in equity in income of unconsolidated affiliate.

The net income decrease for the three months ended September 30, 2022 compared to the same period of 2021 was due to a decrease in income from operations of $202,000 and a decrease in other income of $98,000, resulting in a decrease in income before provision for income taxes of $300,000, partially offset by a decrease in provision for income taxes of $37,000.

Net income as a percentage of net sales for the three months ended September 30, 2022 was 3.4%, and net income as a percentage of net sales for the same period of 2021 was 5.3%.

Basic earnings per common share for the three months ended September 30, 2022, and 2021 were $0.04 and $0.06, respectively.

Diluted earnings per common share for the three months ended September 30, 2022 and 2021 were $0.04 and $0.06, respectively.

Alpha Pro Tech, Ltd.

Net income for the six months ended June 30, 2022 was $2,215,000, compared to net income of $5,390,000 for the same period of 2021, representing a decrease of $3,175,000, or 58.9%.

The net income decrease comparing the 2022 and 2021 periods was due to a decrease in income from operations of $2,989,000 and a decrease in other income of $891,000, for a decrease in income before provision for income taxes of $3,880,000, partially offset by a decrease in provision for income taxes of $705,000.

As mentioned above, the loss on assets has negatively impacted the net income for the first half of 2022.

Net income as a percentage of net sales for the six months ended June 30, 2022 was 6.3%, and net income as a percentage of net sales for the same period of 2021 was 13.2%.

Basic earnings per common share for the six months ended June 30, 2022 and 2021 were $0.17 and $0.41, respectively.

Diluted earnings per common share for the six months ended June 30, 2022 and 2021 were $0.17 and $0.40, respectively.

Net income for the nine months ended September 30, 2022 was $2,718,000, compared to net income of $6,156,000 for the same period of 2021, representing a decrease of $3,438,000, or 55.8%.

The net income decrease comparing the 2022 and 2021 periods was due to a decrease in income from operations of $3,191,000 and a decrease in other income of $989,000, resulting in a decrease in income before provision for income taxes of $4,180,000, partially offset by a decrease in provision for income taxes of $742,000.

As mentioned above, the $490,000 loss on assets has negatively impacted our net income in 2022.

Net income as a percentage of net sales for the nine months ended September 30, 2022 was 5.5%, and net income as a percentage of net sales for the same period of 2021 was 11.1%.

Basic earnings per common share for the nine months ended September 30, 2022 and 2021 were $0.21 and $0.46, respectively.

Diluted earnings per common share for the nine months ended September 30, 2022 and 2021 were $0.21 and $0.45, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2022, the Company had cash and cash equivalents (“cash”) of $15,342,000 and working capital of $51,064,000.

As of June 30, 2022, the Company’s current ratio (current assets/current liabilities) was 21:1, compared to a current ratio of 20:1 as of December 31, 2021.

Cash decreased by 5.9%, or $965,000, to $15,342,000 as of June 30, 2022, compared to $16,307,000 as of December 31, 2021, and working capital increased by $733,000 from $50,331,000 as of December 31, 2021.

As of September 30, 2022, the Company had cash and cash equivalents (“cash”) of $15,517,000 and working capital of $50,595,000.

As of September 30, 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 4.8%, or $790,000, to $15,517,000 as of September 30, 2022, compared to $16,307,000 as of December 31, 2021, and working capital increased by $257,000 from $50,338,000 as of December 31, 2021.

The decrease in cash from December 31, 2021 was due to cash used in investing activities of $349,000 and cash used in financing activities of $2,772,000, partially offset by cash provided by operating activities of $ 2,331,000.

Net cash provided by operating activities of $943,000 for the six months ended June 30, 2022  was due to net income of $2,215,000, impacted primarily by the following:

stock-based compensation expense of $87,000, depreciation and amortization expense of $439,000, equity in income of unconsolidated affiliate of $99,000, operating lease expense net of accretion of $457,000, an increase in accounts receivable of $3,269,000, an increase in prepaid expenses of $175,000, a decrease in inventory of $1,812,000, a decrease in accounts payable and accrued liabilities of $67,000, and a decrease in lease liabilities of $457,000, all compared to December 31, 2021.

Accounts receivable increased by $3,269,000, or 68.3%, to $8,049,000 as of June 30, 2022, from $4,780,000 as of December 31, 2021.

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

The number of days that sales remained outstanding as of June 30, 2022, calculated by using an average of accounts receivable outstanding and annual revenue, was 44 days, compared to 24 days as of December 31, 2021.

Inventory decreased by $1,812,000, or 7.3%, to $23,157,000 as of June 30, 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 $1,651,000, or 10.2%, to $14,584,000 and a decrease in inventory for the Building Supply segment of $161,000, or 1.8%, to $8,573,000.

Prepaid expenses increased by $175,000, or 2.5%, to $7,118,000 as of June 30, 2022, from $6,943,000 as of December 31, 2021.

The increase was primarily due to increased prepayments for insurance and prepaid inventory.

Right-of-use assets as of June 30, 2022 decreased by $457,000 to $2,191,000 from $2,648,000 as of December 31, 2021 as a result of amortization of the balance.

Lease liabilities as of June 30, 2022 decreased by $457,000 to $2,243,000 from $2,700,000 as of December 31, 2021.

Net cash provided by operating activities of $2,331,000 for the nine months ended September 30, 2022 was due to net income of $2,718,000, impacted primarily by the following:

stock-based compensation expense of $119,000, depreciation and amortization expense of $641,000, equity in income of unconsolidated affiliate of $87,000, operating lease expense net of accretion of $689,000, an increase in accounts receivable of $2,680,000, a decrease in prepaid expenses of $2,374,000, an increase in inventory of $155,000, a decrease in accounts payable and accrued liabilities of $759,000, and a decrease in lease liabilities of $690,000, all compared to December 31, 2021.

Accounts receivable increased by $2,519,000, or 52.7%, to $7,299,000 as of September 30, 2022, from $4,780,000 as of December 31, 2021.

The increase in accounts receivable was primarily related to increased sales as compared to the fourth quarter of 2021, and partially due to increased terms to our major international channel partner.

The number of days that sales remained outstanding as of September 30, 2022, calculated by using an average of accounts receivable outstanding and annual revenue, was 48 days, compared to 24 days as of December 31, 2021. 

Inventory increased by $155,000, or 0.6%, to $25,124,000 as of September 30, 2022, from $24,969,000 as of December 31, 2021.

The increase was due to an increase in inventory for the Building Supply segment of $1,504,000, or 17.2%, to $10,237,000, partially offset by a decrease in inventory for the Disposable Protective Apparel segment of $1,349,000, or 8.3%, to $14,887,000.

Prepaid expenses decreased by $2,374,000, or 37.4%, to $4,569,000 as of September 30, 2022, from $6,943,000 as of December 31, 2021.

The decrease was primarily due to decreased prepaid inventory and equipment, partially offset by increased prepayments for insurance.

Right-of-use assets as of September 30, 2022 decreased by $689,000 to $1,959,000 from $2,648,000 as of December 31, 2021 as a result of amortization of the balance.

Lease liabilities as of September 30, 2022 decreased by $690,000 to $2,010,000 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, 2022 decreased by $759,000, or 42.7%, to $1,019,000, from $1,778,000 as of December 31, 2021.

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

Alpha Pro Tech, Ltd.

Accounts payable and accrued liabilities as of June 30, 2022 decreased by $67,000, or 3.8%, to $1,720,000, from $1,778,000 as of December 31, 2021.

The decrease was primarily due to a decrease in accrued bonuses, partially offset by an increase in trade accounts payable.

Net cash used in investing activities was $222,000 for the six months ended June 30, 2022, compared to net cash used in investing activities of $1,468,000 for the same period of 2021.

Investing activities for the six months ended June 30, 2022 consisted of the purchase of property and equipment of $222,000.

Investing activities for the six months ended June 30, 2021 consisted of the purchase of property and equipment of $1,468,000.

Net cash used in financing activities was $1,686,000 for the six months ended June 30, 2022, compared to net cash used in financing activities of $3,317,000 for the same period of 2021.

Net cash used in financing activities for the six months ended June 30, 2022 resulted from the payment of $1,716,000 for the repurchase of common stock, partially offset by the proceeds of $30,000 from the exercise of stock options.

Net cash used in financing activities for the six months ended June 30, 2021 resulted from the payment of $3,708,000 for the repurchase of common stock partially offset by the proceeds of $391,000 from the exercise of stock options.

As of June 30, 2022, we had $2,362,000 available for additional stock purchases under our stock repurchase program.

During the three months ended June 30, 2022, we repurchased 225,500 shares of common stock at a cost of $960,000.

As of June 30, 2022, we had repurchased a total of 18,945,417 shares of common stock at a cost of approximately $44,158,000 through our repurchase program.

Net cash used in investing activities was $349,000 for the nine months ended September 30, 2022, compared to net cash used in investing activities of $2,391,000 for the same period of 2021.

Investing activities for the nine months ended September 30, 2022 consisted of the purchase of property and equipment of $349,000.

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

Net cash used in financing activities was $2,772,000 for the nine months ended September 30, 2022, compared to net cash used in financing activities of $3,686,000 for the same period of 2021.

Net cash used in financing activities for the nine months ended September 30, 2022 resulted from the payment of $2,832,000 for the repurchase of common stock, partially offset by the proceeds of $60,000 from the exercise of stock options.

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 the proceeds of $391,000 from the exercise of stock options.

As of September 30, 2022, we had $1,246,000 available for additional stock purchases under our stock repurchase program.

During the three months ended September 30, 2022, we repurchased 259,200 shares of common stock at a cost of $1,116,000.

As of September 30, 2022, we had repurchased a total of 19,204,617 shares of common stock at a cost of approximately $45,274,000 through our repurchase program.

We retire all stock upon repurchase.

2 unchanged sentences

As a result of delays in the supply chain the most expensive piece of equipment, for which an approximately $900,000 balance remains outstanding, has been delayed.

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 fourth quarter of 2021, and then in the second quarter of 2022, and is now expected in the latter part of the third quarter of 2022 and is expected to be operational in the fourth quarter of 2022.

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 fourth quarter of 2021, and is now expected in the latter part of the fourth quarter of 2022.

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

2 unchanged sentences

Management periodically reviews new accounting standards that are issued.

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

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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