What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-09 · 229 added, 184 removed, 417 unchanged (50% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets (Unaudited)

September 30,

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 35,000 as of June 30, 2023 and $ 45,000 as of December 31, 2022

Accounts receivable, net of allowance for doubtful accounts of $ 35,000 as of September 30, 2023 and $ 45,000 as of December 31, 2022

Accounts receivable, related party

14 unchanged sentences

Total liabilities

Commitments and contingencies

Commitments and contingincies

Shareholders' equity:

1 unchanged sentence

50,000,000 shares authorized;

11,875,556 and 12,226,306 shares outstanding as of June 30, 2023 and December 31, 2022, respectively

11,636,446 and 12,226,306 shares outstanding as of September 30, 2023 and December 31, 2022, respectively

Retained earnings

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

Total other income

Total other income (loss)

Income before provision for income taxes

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Other comprehensive income (loss)- foreign currency translation gain (loss)

4 unchanged sentences

Equity (Unaudited)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Comprehensive

12 unchanged sentences

Balance as of June 30, 2023

For the Six Months Ended June 30, 2022

Common stock repurchased and retired

Treasury stock excise tax

Stock-based compensation expense

Options exercised

Total comprehensive loss

Balance as of September 30, 2023

For the Nine Months Ended September 30, 2022

Comprehensive

9 unchanged sentences

Balance as of June 30, 2022

Common stock repurchased and retired

Stock-based compensation expense

Options exercised

Total comprehensive loss

Balance as of September 30, 2022

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 used in operating activities:

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

Stock-based compensation

17 unchanged sentences

Net cash used in financing activities

Decrease in cash

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of the period

20 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, 2022, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), filed with the SEC on March 16, 2023.

The results of operations for the three and six months ended June 30, 2023 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, 2023 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, 2022 was prepared using information from the audited consolidated balance sheet contained in the 2022 Form 10-K;

1 unchanged sentence

GAAP for annual consolidated financial statements.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

11 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 labeling.

The Company has determined as of June 30, 2023 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, 2023 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.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Stock-Based Compensation

11 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, 2023 and 2022, no stock options or restricted stock awards were granted under the 2020 Incentive Plan.

The Company recognized $ 7,000 and $ 87,000 in stock-based compensation expense for the six months ended June 30, 2023 and 2022, respectively, related to outstanding options previously granted under the 2004 Option Plan.

The Company recognized $ 37,000 and $ 54,000 in compensation expense associated with outstanding restricted stock awards for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, $ 26,000 of total unrecognized compensation cost related to outstanding restricted stock awards was expected to be recognized over a weighted-average remainder period of 0.38 years.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the nine months ended September 30, 2023 and 2022, 46,400 and 19,600 stock options were granted under the 2020 Incentive Plan, respectively.

The Company recognized $ 10,000 and $ 39,000 in stock-based compensation expense for the nine months ended September 30, 2023 and 2022, respectively, related to outstanding options previously granted under the 2004 Option Plan.

For the nine months ended September 30, 2023 and 2022, 227,600 and 13,600 restricted stock awards were granted under the 2020 Incentive Plan, respectively.

The Company recognized $ 58,000 and $ 80,000 in compensation expense associated with outstanding restricted stock awards for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, $ 966,000 of total unrecognized compensation cost related to outstanding restricted stock awards was expected to be recognized over a weighted-average remainder period of 2.86 years.

The Company uses the Black-Scholes option-pricing model to value the options.

4 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, 2023:

The following table summarizes stock option activity for the nine months ended September 30, 2023:

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Weighted Average

3 unchanged sentences

Canceled/expired/forfeited

Options outstanding, June 30, 2023

Options exercisable, June 30, 2023

As of June 30, 2023, $ 30,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 4.23 years.

Options outstanding, September 30, 2023

Options exercisable, September 30, 2023

As of September 30, 2023, $ 161,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 2.75 years.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06 Debt -- Debt with Conversion and Other Options (Subtopic 470 and Derivatives and Hedging --Contracts in Entity's Own Equity (Subtopic 815:

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , which is intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity.

The guidance allows for either full retrospective adoption or modified retrospective adoption.

The guidance is effective for the Company January 1, 2024 and early adoption is permitted.

The Company is evaluating the impact the adoption of this guidance will have on its condensed consolidated financial statements.

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

Measurement of Credit Losses on Financial Instruments , which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected.

Public business entities classified as smaller reporting companies are required to apply the provision of ASU 2016-13 with annual reporting periods after December 15, 2022.

The Company adopted Topic 326 effective January 1, 2023, which did not have a material impact on the Company’s condensed consolidated financial statements.

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, 2023 and December 31, 2022, inventories net of reserves consisted of the following:

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

As of September 30, 2023 and December 31, 2022, inventories net of reserves consisted of the following:

September 30,

Raw materials

9 unchanged sentences

In addition, the joint venture now supplies products for the Company’s Disposable Protective Apparel segment.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The capital from the initial funding and a bank loan, which 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.

5 unchanged sentences

All additions have been financed by Harmony with no guarantees from the Company.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

In accordance with ASC 810, Consolidation, the Company assesses whether or not related entities are variable interest entities (“VIEs”).

6 unchanged sentences

The Company periodically reviews its investment in Harmony for impairment.

Management has determined that no impairment was required as of June 30, 2023, or December 31, 2022.

Management has determined that no impairment was required as of September 30, 2023, or December 31, 2022.

Under the equity method, since the Company’s reporting currency is different from of Harmony’s reporting currency, the Company is required to translate our proportionate share of equity for effects of translations in foreign currency and adjust the investment accordingly and accrue the adjustment as a component of Accumulated other comprehensive loss (“AOCL”).

For the three months ended June 30, 2023 and 2022, the Company purchased $ 4,834,000 and $ 5,676,000 of inventories, respectively, from Harmony.

For the six months ended June 30, 2023 and 2022, the Company purchased $ 9,870,000 and $ 11,859,000 of inventories, respectively, from Harmony.

For the three months ended June 30, 2023 and 2022, the Company sold $ 200,000 and $ 0 of inventories, respectively, to Harmony.

For the six months ended June 30, 2023 and 2022, the Company sold $ 200,000 and $ 258,000 of inventories, respectively, to Harmony.

For the three months ended June 30, 2023 and 2022, the Company recorded equity in income of unconsolidated affiliate of $ 103,000 and $ 50,000 , respectively, related to Harmony.

For the six months ended June 30, 2023 and 2022, the Company recorded equity in income of unconsolidated affiliate of $212,000 and $ 99,000 , respectively, related to Harmony.

As of June 30, 2023, the Company’s investment in Harmony was $ 5,089,000 , which consisted of its original $ 1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $ 5,987,000 , less $ 942,000 in repayments of an advance, $ 77,000 in payments of dividends, and $ 1,331,000 in AOCL on foreign currency translations.

For the three months ended September 30, 2023 and 2022, the Company purchased $ 5,001,000 and $ 7,786,000 of inventories, respectively, from Harmony.

For the nine months ended September 30, 2023 and 2022, the Company purchased $ 14,871,000 and $ 19,645,000 of inventories, respectively, from Harmony.

The Company sold $ 66,000 of inventories to Harmony for each of the three months ended September 30, 2023 and 2022.

For the nine months ended September 30, 2023 and 2022, the Company sold $ 266,000 and $ 280,000 of inventories, respectively, to Harmony.

For the three months ended September 30, 2023 and 2022, the Company recorded equity in income of unconsolidated affiliate of $ 180,000 and loss in income from unconsolidated affiliate of $ 13,000 , respectively, related to Harmony.

For the nine months ended September 30, 2023 and 2022, the Company recorded equity in income of unconsolidated affiliate of $ 392,000 and $ 87,000 , respectively, related to Harmony.

As of September 30, 2023, the Company’s investment in Harmony was $ 5,116,000 , which consisted of its original $ 1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $ 6,168,000 , less $ 942,000 in repayments of an advance, $ 77,000 in payments of dividends, and $ 1,483,000 in AOCL on foreign currency translations.

Accrued Liabilities

As of June 30, 2023 and December 31, 2022, accrued liabilities consisted of the following:

As of September 30, 2023 and December 31, 2022, 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, 2023 and 2022:

EPS, which includes all such dilutive shares, for the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net income (numerator)

7 unchanged sentences

The resulting foreign currency translation gains or losses are deferred as AOCL and reclassified to earnings only upon sale or liquidation of that business.

The accumulated other comprehensive loss on equity in unconsolidated affiliate was $ 1,331,000 and $ 1,489,000 as of June 30, 2023 and December 31, 2022, respectively.

The accumulated other comprehensive loss on equity in unconsolidated affiliate was $ 1,483,000 and $ 1,489,000 as of September 30, 2023 and December 31, 2022, respectively.

Activity of Business Segments

13 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents consolidated net sales for each segment for the three and six months ended June 30, 2023 and 2022:

The following table presents consolidated net sales for each segment for the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Building Supply

1 unchanged sentence

Consolidated net sales

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three and six months ended June 30, 2023 and 2022:

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three and nine months ended September 30, 2023 and 2022:

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, 2023 and December 31, 2022:

The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of September 30, 2023 and December 31, 2022:

September 30,

Building Supply

6 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, 2023 and 2022:

The following table summarizes the Company’s net sales by geographic region for the three and nine months ended September 30, 2023 and 2022:

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, 2023 and 2022, the Company generated approximately $ 53,000 and $ 542,000 , respectively, in sales from Canada.

For the six months ended June 30, 2023 and 2022, the Company generated approximately $ 98,000 and $ 1,016,000 , respectively, in sales from Canada.

For the three months ended September 30, 2023 and 2022, the Company generated approximately $ 42,000 and $ 103,000 , respectively, in sales from Canada.

For the nine months ended September 30, 2023 and 2022, the Company generated approximately $ 140,000 and $ 1,119,000 , 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 June 30, 2023 and December 31, 2022:

The following table summarizes the locations of the Company’s long-lived assets by geographic region as of September 30, 2023 and December 31, 2022:

September 30,

Long-lived assets by geographic region

3 unchanged sentences

Related Party Transactions

As of June 30, 2023, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony.

As of September 30, 2023, 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 2026.

The Company’s primary operating lease commitments as of June 30, 2023 related to the Company’s manufacturing facilities in Valdosta, Georgia;

The Company’s primary operating lease commitments as of September 30, 2023 related to the Company’s corporate office in Aurora, Canada and its manufacturing facilities in Valdosta, Georgia;

Nogales, Arizona;

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2023, the Company had operating lease right-of-use assets of $ 1,264,000 and operating lease liabilities of $ 1,309,000 .

As of June 30, 2023, the Company did not have any finance leases recorded on the Company’s condensed consolidated balance sheet.

Operating lease expense was approximately $ 548,000 , during the six months ended June 30, 2023.

The aggregate future minimum lease payments and reconciliation to lease liabilities as of June 30, 2023 were as follows:

Remaining six months of 2023

As of September 30, 2023, the Company had operating lease right-of-use assets of $ 1,210,000 and operating lease liabilities of $ 1,251,000 .

As of September 30, 2023, the Company did not have any finance leases recorded on the Company’s condensed consolidated balance sheet.

Operating lease expense was approximately $ 922,000 during the nine months ended September 30, 2023.

The aggregate future minimum lease payments and reconciliation to lease liabilities as of September 30, 2023 were as follows:

September 30,

Remaining three months of 2023

Total future minimum lease payments

1 unchanged sentence

Total Lease liabilities

As of June 30, 2023, the weighted average remaining lease term of the Company’s operating leases was 1.6 years.

During the six months ended June 30, 2023, the weighted average discount rate with respect to these leases was 4.07 %.

As of September 30, 2023, the weighted average remaining lease term of the Company’s operating leases was 2.2 years.

During the nine months ended September 30, 2023, the weighted average discount rate with respect to these leases was 4.55 %.

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

12 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, 2023, 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, 2023, 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.

The Company believes there would not be any meritorious claims against the Company in the Lawsuit.

The Company believes there would not be any meritorious claims against the Company related to the Lawsuit.

The Lawsuit has not been resolved 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, 2023.

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, 2023.

Any recovery will be recorded when received.

4 unchanged sentences

Subsequent Events

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of June 30, 2023 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, 2023 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.

66 unchanged sentences

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.

Alpha Pro Tech, Ltd.

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.

RESULTS OF OPERATIONS

1 unchanged sentence

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

Selling, general and administrative expenses

1 unchanged sentence

Income before provision for income taxes

Three and Six months ended June 30, 2023 compared to Three and Six months ended June 30, 2022

Consolidated sales for the quarter ended June 30, 2023 decreased to $16,115,000, from $17,373,000 for the quarter ended June 30, 2022, representing a decrease of $1,258,000, or 7.2%.

This decrease consisted of decreased sales in both the Building Supply segment of $280,000 and the Disposable Protective Apparel segment of $978,000.

Building Supply segment sales for the quarter ended June 30, 2023 decreased by $280,000, or 2.6%, to $10,537,000, compared to $10,817,000 for the quarter ended June 30, 2022.

The Building Supply segment had a record sales quarter in our core building products (house wrap and synthetic roof underlayment, excluding other woven material), including an increase in sales of housewrap of 17.6% and an increase in sales of synthetic roof underlayment of 0.9%, for an overall increase of 8.6%.

Sales of other woven material decreased by 45.5% compared to the same period of 2022.

The sales mix of the Building Supply segment for the quarter ended June 30, 2023 was approximately 40% for synthetic roof underlayment, 50% for housewrap and 10% for other woven material.

That is compared to approximately 40% for synthetic roof underlayment, 42% for housewrap and 18% for other woven material for the quarter ended June 30, 2022.

Three and Nine months ended September 30, 2023 compared to Three and Nine months ended September 30, 2022

Consolidated sales for the quarter ended September 30, 2023 increased to $16,053,000, from $14,722,000 for the quarter ended September 30, 2022, representing an increase of $1,331,000, or 9.0%.

This increase consisted of increased sales in the Building Supply segment of $1,845,000, partially offset by decreased sales in the Disposable Protective Apparel segment of $514,000.

Building Supply segment sales for the quarter ended September 30, 2023 increased by $1,845,000, or 19.2%, to a record sales quarter of $11,449,000, compared to $9,604,000 for the quarter ended September 30, 2022.

The 19.2% increase is comprised of a 25.7% increase in housewrap sales and a 164.5% increase in other woven material sales, partially offset by a 4.5% decrease in synthetic roof underlayment sales.

The sales mix of the Building Supply segment for the quarter ended September 30, 2023 was approximately 43% for synthetic roof underlayment, 43% for housewrap and 14% for other woven material.

That is compared to approximately 53% for synthetic roof underlayment, 41% for housewrap and 6% for other woven material for the quarter ended September 30, 2022.

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

3 unchanged sentences

Premium Seam Tape.

The housewrap market continues to be soft, due to a continued decrease in demand for new home starts as a result of interest rate hikes and economic uncertainty.

In the second quarter of 2023, single family housing starts in the United States decreased by 14.5% compared to the same period a year ago.

Our sales of housewrap and accessories, which increased by 17.6% in the second quarter of 2023 over the prior-year quarter, continue to significantly outperform the market through market diversification, product development and sales team expansion.

The housewrap market continues to be soft, as housing starts in the third quarter of 2023 in the United States decreased by 6.0% compared to the same period a year ago.

Our sales of housewrap and accessories, which increased by 25.7% in the third quarter of 2023 over the prior-year quarter, continue to significantly outperform the market through market diversification, product development and sales team expansion.

Sales of our REX Wrap®

1 unchanged sentence

Management is encouraged by our growth opportunities with REX™

Wrap Fortis, our premium housewrap line, as we continue to make inroads into the multi-family and commercial construction sector, evidenced by an increase of 18.9% in sales in the second quarter of 2023.

Wrap Fortis, our premium housewrap line, as we continue to make inroads into the multi-family and commercial construction sector, evidenced by an increase of 24.8% in sales for this product in the third quarter of 2023.

We also experienced a 256% increase in sales of housewrap accessories, REXTREME Window and Door Flashing and REX™

Premium Seam Tape, in the second quarter of 2023 over the prior-year quarter.

Based on the number of jobs we are specified on and the potential for additional bids taking place, management expects that we will continue to see positive trends relative to the industry for both our entry level and premium housewrap product lines.

The synthetic roof underlayment market has also been significantly affected by the continued decrease in new home starts, as well as a push in the market to reduce product selling prices.

Despite these pressures, synthetic roof underlayment sales also outperformed the market and were up 0.9% in the second quarter of 2023 compared to the second quarter of 2022.

Management is encouraged by the trend in synthetic roof underlayment of it outperforming the market, especially as we should see an increase in sales as inventory is alleviated at the dealer and distribution level.

In addition, we will be launching a new line of self-adhered roofing products in late 2023, which we expect will bring additional revenue to our synthetic roof underlayment line of products.

Premium Seam Tape, in the third quarter of 2023 over the prior-year quarter.

Management expects that we will continue to see positive trends relative to the industry for both our entry level and premium housewrap and housewrap accessories product lines.

Alpha Pro Tech, Ltd.

Other woven material sales decreased in the second quarter of 2023 compared to the same period of 2022 by 45.5% due to decreased sales to our major customer, product overstocks and the aforementioned economic slowdown.

We do not expect other woven material to be a growth driver in 2023, but these products only represent approximately 10% of the Building Supply segment sales.

Recent capital investments in our Building Supply segment are expected to increase production capacity, allowing us to react to spikes in new construction and multi-family housing starts more quickly than some competitors with multiple month lead-times due to overseas production and shipping.

Continued growth in the Building Supply segment is expected through the market’s reception of our best-in-class warranties.

 These include the highest and strongest coverages available in synthetic roof underlayment and full system warranties that apply to single-family, commercial and multi-family properties on our weather resistive barriers.

Sales for the Disposable Protective Apparel segment for the quarter ended June 30, 2023 decreased by $978,000, or 14.9%, to $5,578,000, compared to $6,556,000 for the same period of 2022.

This segment experienced an increase of 7.6% in sales of disposable protective garments, offset by a 71.6% decrease in sales of face masks and an 84.4% decrease in sales of face shields.

The sales mix of the Disposable Protective Apparel segment for the quarter ended June 30, 2023 was approximately 93% for disposable protective garments, 5% for face masks and 2% for face shields.

This sales mix is compared to approximately 74% for disposable protective garments, 14% for face masks and 12% for face shields for the quarter ended June 30, 2022.

Sales of disposable protective garments in the second quarter of 2023 were up 7.6% as our channel partners and our end customers are working through their inventory and their ordering patterns return to normal.

The synthetic roof underlayment market has also been significantly affected by the continued decrease in new home starts, economic uncertainty, and a push in the market to reduce product selling prices.

Despite these pressures, synthetic roof underlayment sales also outperformed the market despite being down 4.5% in the third quarter of 2023 compared to the third quarter of 2022.

Management is encouraged by the trend in synthetic roof underlayment of it outperforming the market, especially as we should see an increase in sales as excess inventory is alleviated at the dealer and distribution level.

Management is excited about our launch of a new line of self-adhered roofing products in late 2023 or early 2024, which should result in revenue growth within our current customer base and allow for expansion into new markets and business segments.

We continue to work closely with our customers to develop new products that increase safety and productivity.

Other woven material sales increased in the third quarter of 2023 compared to the same period of 2022 by 164.5%, primarily due to increased sales to our major customer.

We do not expect other woven material to be a growth driver in the remainder of 2023, as these products only represent approximately 12% of the Building Supply segment sales.

Management expects additional growth in the building supply segment.

While housing starts may be trending down nationally, we have continually grown market share.

We will build on our success within the multi-family and commercial segment and the single-family segment.

Disposable Protective Apparel segment sales for the quarter ended September 30, 2023 decreased by $514,000, or 10.0%, to $4,604,000, compared to $5,118,000 for the same period of 2022.

This segment experienced an increase of 5.1% in sales of disposable protective garments, offset by a 60.6% decrease in sales of face masks and a 73.8% decrease in sales of face shields.

The sales mix of the Disposable Protective Apparel segment for the quarter ended September 30, 2023 was approximately 91% for disposable protective garments, 7% for face masks and 2% for face shields.

This sales mix is compared to approximately 78% for disposable protective garments, 15% for face masks and 7% for face shields for the quarter ended September 30, 2022.

Sales of disposable protective garments in the third quarter of 2023 were up 5.1% as our channel partners and our end customers are continuing to work through their inventory.

In addition, our sales have been positively affected as we can now meet face-to-face with our distribution partners and end-customers, something we have not been able to do since 2020.

Face mask and face shield sales are still suffering from the COVID-19 residual excess inventories at the distributor level.

Comparatively, sales of face masks and face shields were higher than normal during the second quarter of 2022 due to the ongoing demand for COVID-19 products.

Consolidated sales for the six months ended June 30, 2023 decreased to $29,914,000 from $35,034,000 for the six months ended June 30, 2022, representing a decrease of $5,120,000, or 14.6%.

Consolidated sales for the nine months ended September 30, 2023 decreased to $45,967,000 from $49,756,000 for the nine months ended September 30, 2022, representing a decrease of $3,789,000, or 7.6%.

This decrease consisted of decreased sales in the Building Supply segment of $41,000 and decreased sales in the Disposable Protective Apparel Segment of $3,748,000.

Building Supply segment sales for the nine months ended September 30, 2023 decreased by $41,000, or 0.1%, to $30,616,000, compared to $30,657,000 for the same period of 2022.

Sales of housewrap increased by 12.2%, sales of other woven material increased by 1.4% and sales of synthetic roof underlayment decreased by 11.2% compared to the same period of 2022.

Management is encouraged by the 12.2% increase in housewrap sales, especially since housing starts are down 12.6% year to date.

The sales mix of the Building Supply segment for the nine months ended September 30, 2023 was 42% for synthetic roof underlayment, 46% for housewrap and 12% for other woven material.

This compared to 47% for synthetic roof underlayment, 41% for housewrap and 12% for other woven material for the nine months ended September 30, 2022.

Alpha Pro Tech, Ltd.

Building Supply segment sales for the six months ended June 30, 2023 decreased by $1,887,000, or 9.0%, to $19,167,000, compared to $21,054,000 for the same period of 2022.

Sales of our core building products were down 4.5% since December 31, 2022, as an increase in sales of housewrap of 6.0% over the prior-year period was more than offset by a decrease in sales of synthetic roof underlayment of 15.0%.

This increase in sales of housewrap was despite a 21.1% decrease in single family housing starts compared to the same period a year ago.

Sales of other woven material decreased by 29.8% compared to the same period of 2022.

The sales mix of the Building Supply segment for the six months ended June 30, 2023 was 41% for synthetic roof underlayment, 48% for housewrap and 11% for other woven material.

This compared to 44% for synthetic roof underlayment, 41% for housewrap and 15% for other woven material for the six months ended June 30, 2022.

Sales for the Disposable Protective Apparel segment for the six months ended June 30, 2023 decreased by $3,233,000, or 23.1%, to $10,747,000, compared to $13,980,000 for the same period of 2022.

This segment decrease was due to an 8.9% increase in sales of disposable protective garments, that was more than offset by a 74.2% decrease in sales of face masks, and an 82.4% decrease in sales of face shields.

Sales of disposable protective garments for the six months ended June 30, 2023 were up 8.9% for the reasons as discussed above in the three months ended June 30, 2023 section.

Disposable Protective Apparel segment sales for the nine months ended September 30, 2023 decreased by $3,748,000, or 19.6%, to $15,351,000, compared to $19,099,000 for the same period of 2022.

This segment decrease was due to a 71.5% decrease in sales of face masks, and an 81.2% decrease in sales of face shields, partially offset by a 7.7% increase in sales of disposable protective garments.

Sales of disposable protective garments for the nine months ended September 30, 2023 were up 7.7%, for the reasons as discussed above in the three months ended September 30, 2023 section.

Face mask and face shield sales continue to be affected by excess inventories at the distributor level and in the marketplace.

The sales mix of the Disposable Protective Apparel segment for the six months ended June 30, 2023 was 89% for disposable protective garments, 8% for face masks and 3% for face shields.

This sales mix is compared to 63% for disposable protective garments, 23% for face masks and 14% for face shields for the six months ended June 30, 2022.

The sales mix of the Disposable Protective Apparel segment for the nine months ended September 30, 2023 was 90% for disposable protective garments, 7% for face masks and 3% for face shields.

This sales mix is compared to 67% for disposable protective garments, 21% for face masks and 12% for face shields for the nine months ended September 30, 2022.

Gross Profit .

Gross profit increased by $494,000, or 8.8%, to $6,106,000 for the quarter ended June 30, 2023, from $5,612,000 for the quarter ended June 30, 2022.

The gross profit margin was 37.9% for the quarter ended June 30, 2023, compared to 32.3% for the quarter ended June 30, 2022.

Gross profit decreased by $966,000, or 8.0%, to $11,088,000 for the six months ended June 30, 2023, from $12,054,000 for the same period of 2022.

The gross profit margin was 37.1% for the six months ended June 30, 2023, compared to 34.4% for the same period of 2022.

Gross profit increased by $1,217,000, or 25.3%, to $6,035,000 for the quarter ended September 30, 2023, from $4,818,000 for the quarter ended September 30, 2022.

The gross profit margin was 37.6% for the quarter ended September 30, 2023, compared to 32.7% for the quarter ended September 30, 2022.

Gross profit increased by $251,000, or 1.5%, to $17,123,000 for the nine months ended September 30, 2023, from $16,872,000 for the same period of 2022.

The gross profit margin was 37.3% for the nine months ended September 30, 2023, compared to 33.9% for the same period of 2022.

The gross profit margin in 2023 has been positively affected by ocean freight rates which have come down since the latter part of 2022.

1 unchanged sentence

Selling, General and Administrative Expenses .

Selling, general and administrative expenses increased by $510,000, or 12.5%, to $4,575,000 for the quarter ended June 30, 2023, from $4,065,000 for the quarter ended June 30, 2022.

As a percentage of net sales, selling, general and administrative expenses increased to 28.4% for the quarter ended June 30, 2023, from 23.4% for the same period of 2022.

The change in expenses by segment for the quarter ended June 30, 2023 was as follows:

Selling, general and administrative expenses increased by $417,000, or 10.5%, to $4,387,000 for the quarter ended September 30, 2023, from $3,970,000 for the quarter ended September 30, 2022.

As a percentage of net sales, selling, general and administrative expenses increased to 27.3% for the quarter ended September 30, 2023, from 27.0% for the same period of 2022.

The change in expenses by segment for the quarter ended September 30, 2023 was as follows:

Disposable Protective Apparel expenses were down $24,000, or 2.1%;

1 unchanged sentence

and corporate unallocated expenses were up $117,000, or 9.6%.

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

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

The increase in corporate unallocated expenses was primarily due to employee compensation and professional fees.

Selling, general and administrative expenses increased by $517,000, or 6.2%, to $8,888,000 for the six months ended June 30, 2023, from $8,371,000 for the six months ended June 30, 2022.

As a percentage of net sales, selling, general and administrative expenses increased to 29.7% for the six months ended June 30, 2023, up from 23.9% for the same period of 2022.

The change in expenses by segment for the six months ended June 30, 2023 was as follows:

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

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

The increase in corporate unallocated expenses was primarily due to employee compensation.

Selling, general and administrative expenses increased by $934,000, or 7.6%, to $13,275,000 for the nine months ended September 30, 2023, from $12,341,000 for the nine months ended September 30, 2022.

As a percentage of net sales, selling, general and administrative expenses increased to 28.9% for the nine months ended September 30, 2023, up from 24.8% for the same period of 2022.

The change in expenses by segment for the nine months ended September 30, 2023 was as follows:

Disposable Protective Apparel expenses were down $80,000, or 2.2%;

Building Supply expenses were up $909,000, or 18.6%;

and corporate unallocated expenses were down $12,000, or 0.5%.

and corporate unallocated expenses were up $105,000, or 2.8%.

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

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

The decrease in corporate unallocated expenses was primarily due to decreased accrued bonuses, stock option and restricted stock expenses, rent expense and insurance, partially offset by increased professional fees.

Alpha Pro Tech, Ltd.

The increase in corporate unallocated expenses was primarily due to increased professional fees and general office expenses, partially offset by decreased 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 $83,000 was accrued for the three months ended June 30, 2023, compared to $47,000 for the three months ended June 30, 2022.

A total of $120,000 has been accrued for the six months ended June 30, 2023, compared to $151,000 for the same period of 2022.

A bonus amount of $96,000 was accrued for the three months ended September 30, 2023, compared to $36,000 for the three months ended September 30, 2022.

A total of $216,000 has been accrued for the nine months ended September 30, 2023, compared to $186,000 for the same period of 2022.

Alpha Pro Tech, Ltd.

Depreciation and Amortization .

Depreciation and amortization expense decreased by $8,000, or 3.5%, to $219,000 for the quarter ended June 30, 2023, from $227,000 for the quarter ended June 30, 2022.

Depreciation and amortization expense increased by $23,000, or 5.2%, to $462,000 for the six months ended June 30, 2023, from $439,000 for the same period of 2022.

Depreciation and amortization expense increased by $24,000, or 11.9%, to $225,000 for the quarter ended September 30, 2023, from $201,000 for the quarter ended September 30, 2022.

Depreciation and amortization expense increased by $46,000, or 7.2%, to $687,000 for the nine months ended September 30, 2023, from $641,000 for the same period of 2022.

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 $8,000, or 0.6%, to $1,312,000 for the quarter ended June 30, 2023, compared to $1,320,000 for the quarter ended June 30, 2022.

The decreased income from operations was primarily due to an increase in selling, general and administrative expenses of $510,000, partially offset by an increase in gross profit of $494,000 and a decrease in depreciation and amortization expense of $8,000.

Income from operations as a percentage of net sales for the quarter ended June 30, 2023 was 8.1%, compared to 7.6% for the same period of 2022.

Income from operations decreased by $1,506,000, or 46.4%, to $1,738,000 for the six months ended June 30, 2023, compared to $3,244,000 for the same period of 2022.

The decreased income from operations was primarily due to a decrease in gross profit of $966,000, an increase in selling, general and administrative expenses of $517,000 and an increase in depreciation and amortization expense of $23,000.

Income from operations as a percentage of net sales for the six months ended June 30, 2023 was 5.8%, compared to 9.3% for the same period of 2022.

Income from operations increased by $776,000, or 119.9%, to $1,423,000 for the quarter ended September 30, 2023, compared to $647,000 for the quarter ended September 30, 2022.

The increased income from operations was primarily due to an increase in gross profit of $1,217,000, partially offset by an increase in selling, general and administrative expenses of $417,000 and an increase in depreciation and amortization expense of $24,000.

Income from operations as a percentage of net sales for the quarter ended September 30, 2023 was 8.9%, compared to 4.4% for the same period of 2022.

Income from operations decreased by $729,000, or 18.7%, to $3,161,000 for the nine months ended September 30, 2023, compared to $3,890,000 for the same period of 2022.

The decreased income from operations was primarily due to an increase in selling, general and administrative expenses of $934,000 and an increase in depreciation and amortization expense of $46,000, partially offset by an increase in gross profit of $251,000.

Income from operations as a percentage of net sales for the nine months ended September 30, 2023 was 6.9%, compared to 7.8% for the same period of 2022.

Other Income.

Other income increased by $702,000, to $272,000 for the quarter ended June 30, 2023, from a loss of $430,000 for the same period of 2022.

Other income increased by $387,000, to $402,000 for the quarter ended September 30, 2023, compared to $15,000 for the same period of 2022.

The increase was primarily due to an increase in equity in income of unconsolidated affiliate of $193,000 and an increase in interest income of $194,000.

In addition, there was a loss on fixed assets of $490,000 during the same period of 2022 due to equipment for the Disposable Protective Apparel segment that was not delivered.

Other income increased by $1,305,000, to $941,000 for the nine months ended September 30, 2023, from a loss of $364,000 for the same period of 2022.

The increase was primarily due to an increase in equity in income of unconsolidated affiliate of $305,000 and an increase in interest income of $510,000.

In addition, there was a loss on fixed assets of $490,000 in 2022 due to equipment for the Disposable Protective Apparel segment that was not delivered.

The Company has filed a lawsuit in this matter (see Part II, Item 1, “Legal Proceedings,”

for more information).

Other income increased by $919,000, to $539,000 for the six months ended June 30, 2023, from a loss of $380,000 for the same period of 2022.

The increase was primarily due to an increase in equity in income of unconsolidated affiliate of $113,000 and an increase in interest income of $316,000.

In addition, as mentioned above, there was a loss on fixed assets of $490,000 during the same period of 2022.

Income before Provision for Income Taxes.

Income before provision for income taxes for the quarter ended June 30, 2023 was $1,584,000, compared to income before provision for income taxes of $890,000 for the same period of 2022, representing an increase of $694,000, or 78.0%.

Income before provision for income taxes for the quarter ended September 30, 2023 was $1,825,000, compared to income before provision for income taxes of $662,000 for the same period of 2022, representing an increase of $1,163,000, or 175.7%.

This increase in income before provision for income taxes was due to an increase in income from operations of $776,000 and an increase in other income of $387,000.

Income before provision for income taxes for the nine months ended September 30, 2023 was $4,102,000, compared to income before provision for income taxes of $3,526,000 for the same period of 2022, representing an increase of $576,000, or 16.3%.

This increase in income before provision for income taxes was due to an increase in other income of $1,305,000, partially offset by a decrease in income from operations of $729,000.

Income before provision for income taxes for the six months ended June 30, 2023 was $2,277,000, compared to income before provision for income taxes of $2,864,000 for the same period of 2022, representing a decrease of $587,000, or 20.5%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $1,506,000, partially offset by an increase in other income of $919,000.

Provision for Income Taxes.

The provision for income taxes for the quarter ended June 30, 2023 was $438,000, compared to $197,000 for the same period of 2022.

The estimated effective tax rate was 27.7% for the quarter ended June 30, 2023, compared to 22.1% for the quarter ended June 30, 2022.

The provision for income taxes for the quarter ended September 30, 2023 was $395,000, compared to $159,000 for the same period of 2022.

The estimated effective tax rate was 21.6% for the quarter ended September 30, 2023, compared to 24.0% for the quarter ended September 30, 2022.

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

Alpha Pro Tech, Ltd.

The provision for income taxes for the six months ended June 30, 2023 was $579,000, compared to $649,000 for the same period of 2022.

The estimated effective tax rate was 25.4% for the six months ended June 30, 2023, compared to 22.7% for the six months ended June 30, 2022.

The provision for income taxes for the nine months ended September 30, 2023 was $974,000, compared to $808,000 for the same period of 2022.

The estimated effective tax rate was 23.7% for the nine months ended September 30, 2023, compared to 22.9% for the nine months ended September 30, 2022.

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 quarter ended June 30, 2023 was $1,146,000, compared to net income of $693,000 for the same period of 2022, representing an increase of $453,000, or 65.4%.

The net income increase comparing the second quarter of 2023 and 2022 was due to an increase in income before provision for income taxes of $694,000, partially offset by an increase in provision for income taxes of $241,000.

Net income as a percentage of net sales for the quarter ended June 30, 2023 was 7.1%, and net income as a percentage of net sales for the same period of 2022 was 4.0%.

Basic and diluted earnings per common share for the quarter ended June 30, 2023 and 2022 were $0.10 and $0.05, respectively.

Net income for the six months ended June 30, 2023 was $1,698,000, compared to net income of $2,215,000 for the same period of 2022, representing a decrease of $517,000, or 23.3%.

The net income decrease comparing the 2023 and 2022 periods was due to a decrease in income before provision for income taxes of $587,000, partially offset by a decrease in provision for income taxes of $70,000.

Net income as a percentage of net sales for the six months ended June 30, 2023 was 5.7%, and net income as a percentage of net sales for the same period of 2022 was 6.3%.

Basic and diluted earnings per common share for the six months ended June 30, 2023 and 2022 were $0.14 and $0.17, respectively.

Alpha Pro Tech, Ltd.

Net income for the quarter ended September 30, 2023 was $1,430,000, compared to net income of $503,000 for the same period of 2022, representing an increase of $927,000, or 184.3%.

The net income increase between the third quarters of 2023 and 2022 was due to an increase in income before provision for income taxes of $1,163,000, partially offset by an increase in provision for income taxes of $236,000.

Net income as a percentage of net sales for the quarter ended September 30, 2023 was 8.9%, and net income as a percentage of net sales for the same period of 2022 was 3.4%.

Basic and diluted earnings per common share for the quarter ended September 30, 2023 and 2022 were $0.12 and $0.04, respectively.

Net income for the nine months ended September 30, 2023 was $3,128,000, compared to net income of $2,718,000 for the same period of 2022, representing an increase of $410,000, or 15.1%.

The net income increase between the 2023 and 2022 periods was due to an increase in income before provision for income taxes of $576,000, partially offset by an increase in provision for income taxes of $166,000.

Net income as a percentage of net sales for the nine months ended September 30, 2023 was 6.8%, and net income as a percentage of net sales for the same period of 2022 was 5.5%.

Basic and diluted earnings per common share for the nine months ended September 30, 2023 and 2022 were $0.26 and $0.21, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2023, the Company had cash and cash equivalents (“cash”) of $15,349,000 and working capital of $50,338,000.

As of June 30, 2023, the Company’s current ratio (current assets/current liabilities) was 27:1, compared to a current ratio of 22:1 as of December 31, 2022.

Cash decreased by 5.8%, or $941,000 to $15,349,000 as of June 30, 2023, compared to $16,290,000 as of December 31, 2022, and working capital increased by $182,000 from $50,156,000 as of December 31, 2022.

The decrease in cash from December 31, 2022, was due to cash used in investing activities of $390,000 and cash used in financing activities of $1,538,000 partially offset by cash provided by operating activities of $987,000.

Net cash provided by operating activities of $987,000 for the six months ended June 30, 2023 was due to net income of $1,698,000, as adjusted primarily by the following:

As of September 30, 2023, the Company had cash and cash equivalents (“cash”) of $18,163,000 and working capital of $50,705,000.

As of September 30, 2023, the Company’s current ratio (current assets/current liabilities) was 27:1, compared to a current ratio of 22:1 as of December 31, 2022.

Cash increased by 11.5%, or $1,873,000 to $18,163,000 as of September 30, 2023, compared to $16,290,000 as of December 31, 2022, and working capital increased by $549,000 from $50,156,000 as of December 31, 2022.

The increase in cash from December 31, 2022, was due to cash provided by operating activities of $4,929,000, partially offset by cash used in investing activities of $487,000 and cash used in financing activities of $2,569,000.

Net cash provided by operating activities of $4,929,000 for the nine months ended September 30, 2023 was due to net income of $3,128,000, as adjusted primarily by the following:

stock-based compensation expense of $68,000, depreciation and amortization expense of $687,000, equity in income of unconsolidated affiliate of $392,000, operating lease expense net of accretion of $515,000, an increase in accounts receivable of $2,066,000, a decrease in accounts receivable related party of $599,000, an increase in prepaid expenses of $344,000, a decrease in inventory of $2,871,000, a decrease in accounts payable and accrued liabilities of $302,000, and a decrease in lease liabilities of $523,000, all compared to December 31, 2022.

Accounts receivable increased by $2,548,000, or 36.5%, to $9,521,000 as of June 30, 2023, from $6,973,000 as of December 31, 2022.

The increase in accounts receivable was primarily related to higher sales in June 2023 compared to December 2022.

The number of days that sales remained outstanding as of June 30, 2023, calculated by using an average of accounts receivable outstanding and annual revenue, was 53 days, compared to 35 days as of December 31, 2022.

Inventory decreased by $2,426,000, or 9.9%, to $21,971,000 as of June 30, 2023, from $24,397,000 as of December 31, 2022.

Accounts receivable increased by $1,467,000, or 21.0%, to $8,440,000 as of September 30, 2023, from $6,973,000 as of December 31, 2022.

The increase in accounts receivable was primarily related to higher sales in September 2023 compared to December 2022.

The number of days that sales remained outstanding as of September 30, 2023, calculated by using an average of accounts receivable outstanding and annual revenue, was 44 days, compared to 35 days as of December 31, 2022.

Inventory decreased by $2,871,000, or 11.8%, to $21,526,000 as of September 30, 2023, from $24,397,000 as of December 31, 2022.

The decrease was due to a decrease in inventory for the Disposable Protective Apparel segment of $516,000, or 3.6%, to $13,869,000 and a decrease in inventory for the Building Supply segment of $2,355,000, or 23.5%, to $7,657,000.

Prepaid expenses decreased by $344,000, or 7.0%, to $4,558,000 as of September 30, 2023, from $4,902,000 as of December 31, 2022.

The decrease was primarily due to decreased prepaid inventory.

Right-of-use assets as of September 30, 2023, decreased by $515,000 to $1,210,000 from $1,725,000 as of December 31, 2022, as a result of amortization of the balance.

Alpha Pro Tech, Ltd.

Prepaid expenses increased by $519,000, or 10.6%, to $5,421,000 as of June 30, 2023, from $4,902,000 as of December 31, 2022.

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

Right-of-use assets as of June 30, 2023, decreased by $461,000 to $1,264,000 from $1,725,000 as of December 31, 2022, as a result of amortization of the balance.

Lease liabilities as of June 30, 2023, decreased by $465,000 to $1,309,000 from $1,774,000 as of December 31, 2022.

The decrease in lease liabilities was the result of lease payments made during the six months ended June 30, 2023.

Accounts payable and accrued liabilities as of June 30, 2023, decreased by $360,000, or 23.9%, to $1,147,000, from $1,507,000 as of December 31, 2022.

The decrease was primarily due to a decrease in accrued bonuses and commission.

Net cash used in investing activities was $390,000 for the six months ended June 30, 2023, compared to net cash used in investing activities of $222,000 for the same period of 2022.

Investing activities for the six months ended June 30, 2023 and 2022 consisted of the purchase of property and equipment.

Net cash used in financing activities was $1,538,000 for the six months ended June 30, 2023, compared to net cash used in financing activities of $1,686,000 for the same period of 2022.

Net cash used in financing activities for the six months ended June 30, 2023 resulted from the payment of $1,941,000 for the repurchase of common stock partially offset by the proceeds of $403,000 from the exercise of stock options.

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 proceeds of $30,000 from the exercise of stock options.

As of June 30, 2023, we had $2,265,000 available for additional stock purchases under our stock repurchase program.

During the six months ended June 30, 2023, we repurchased 475,000 shares of common stock at a cost of $1,930,000.

As of June 30, 2023, we had repurchased a total of 20,135,617 shares of common stock at a cost of approximately $48,288,000 through our repurchase program which commenced in 1999.

Lease liabilities as of September 30, 2023, decreased by $523,000 to $1,251,000 from $1,774,000 as of December 31, 2022.

The decrease in lease liabilities was the result of lease payments made during the nine months ended September 30, 2023.

Accounts payable and accrued liabilities as of September 30, 2023, decreased by $302,000, or 20.0%, to $1,205,000, from $1,507,000 as of December 31, 2022.

The decrease was primarily due to a decrease in trade payable.

Net cash used in investing activities was $487,000 for the nine months ended September 30, 2023, compared to net cash used in investing activities of $349,000 for the same period of 2022.

Investing activities for the nine months ended September 30, 2023 and 2022 consisted of the purchase of property and equipment.

Net cash used in financing activities was $2,569,000 for the nine months ended September 30, 2023, compared to net cash used in financing activities of $2,772,000 for the same period of 2022.

Net cash used in financing activities for the nine months ended September 30, 2023 resulted from the payment of $2,979,000 for the repurchase of common stock and $30,000 for treasury stock excise tax, partially offset by $440,000 in proceeds from the exercise of stock options.

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 $60,000 in proceeds from the exercise of stock options.

As of September 30, 2023, we had $1,217,000 available for additional stock purchases under our stock repurchase program.

During the nine months ended September 30, 2023, we repurchased 724,110 shares of common stock at a cost of $2,979,000.

As of September 30, 2023, we had repurchased a total of 20,384,727 shares of common stock at a cost of approximately $49,337,000 through our repurchase program which commenced in 1999.

We retire all stock upon repurchase.