ALPHA PRO TECH LTD 10-Q

ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets (Unaudited) March 31, December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 13,352,000 $ 18,636,000 Accounts receivable, net 6,671,000 3,692,000 Accounts receivable, related party 1,001,000 1,202,000 Inventories, net 23,565,000 22,733,000 Prepaid expenses 4,751,000 4,376,000 Total current assets 49,340,000 50,639,000 Property and equipment, net 8,412,000 8,520,000 Goodwill 55,000 55,000 Right-of-use assets 8,485,000 8,714,000 Equity investment in unconsolidated affiliate 5,890,000 5,814,000 Total assets $ 72,182,000 $ 73,742,000 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 887,000 $ 1,283,000 Accrued liabilities 502,000 947,000 Current portion of lease liabilities 917,000 893,000 Total current liabilities 2,306,000 3,123,000 Lease liabilities, net of current portion 7,645,000 7,882,000 Deferred income tax liabilities, net 503,000 503,000 Total liabilities 10,454,000 11,508,000 Commitments and contingencies Shareholders' equity: Common stock, $ .01 par value: 50,000,000 shares authorized; 10,595,465 and 10,816,878 shares outstanding as of March 31, 2025 and December 31, 2024, respectively 106,000 108,000 Additional paid-in capital 16,157,000 16,368,000 Retained earnings 47,029,000 47,257,000 Accumulated other comprehensive loss ( 1,564,000 ) ( 1,499,000 ) Total shareholders' equity 61,728,000 62,234,000 Total liabilities and shareholders' equity $ 72,182,000 $ 73,742,000 The condensed consolidated balance sheet as of December 31, 2024, has been prepared using information from the audited consolidated balance sheet as of that date. See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 1 Alpha Pro Tech, Ltd. Condensed Consolidated Statements of Income (Unaudited) For the Three Months Ended March 31, 2025 2024 Net sales $ 13,822,000 $ 13,482,000 Cost of goods sold, excluding depreciation and amortization 8,430,000 8,065,000 Gross profit 5,392,000 5,417,000 Operating expenses: Selling, general and administrative 4,694,000 4,847,000 Depreciation and amortization 243,000 244,000 Total operating expenses 4,937,000 5,091,000 Income from operations 455,000 326,000 Other income: Equity in income of unconsolidated affiliate 141,000 138,000 Interest income, net 176,000 258,000 Total other income 317,000 396,000 Income before provision for income taxes 772,000 722,000 Provision for income taxes 159,000 146,000 Net income $ 613,000 $ 576,000 Basic earnings per common share $ 0.06 $ 0.05 Diluted earnings per common share $ 0.06 $ 0.05 Basic weighted average common shares outstanding 10,724,760 11,285,296 Diluted weighted average common shares outstanding 10,836,581 11,389,394 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 2 Alpha Pro Tech, Ltd. Condensed Consolidated Statements of Comprehensive Income (Unaudited) For the Three Months Ended March 31, 2025 2024 Net income $ 613,000 $ 576,000 Other comprehensive income - foreign currency translation gain (loss) ( 65,000 ) 6,000 Comprehensive income $ 548,000 $ 582,000 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 3 Alpha Pro Tech, Ltd. Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) For the Three Months Ended March 31, 2025 Accumulated Additional Other Common Stock Paid-in Retained Comprehensive Shares Amount Capital Earnings Income (Loss) Total Balance as of December 31, 2024 10,816,878 $ 108,000 $ 16,368,000 $ 47,257,000 $ ( 1,499,000 ) $ 62,234,000 Net income - - - 613,000 - 613,000 Common stock repurchased and retired ( 221,413 ) ( 2,000 ) ( 335,000 ) ( 841,000 ) - ( 1,178,000 ) Treasury stock excise tax - - ( 12,000 ) - - ( 12,000 ) Stock-based compensation expense - - 136,000 - - 136,000 Other comprehensive loss - - - - ( 65,000 ) ( 65,000 ) Balance as of March 31, 2025 10,595,465 $ 106,000 $ 16,157,000 $ 47,029,000 $ ( 1,564,000 ) $ 61,728,000 For the Three Months Ended March 31, 2024 Accumulated Additional Other Common Stock Paid-in Retained Comprehensive Shares Amount Capital Earnings Income (Loss) Total Balance as of December 31, 2023 11,416,212 $ 114,000 $ 16,339,000 $ 46,552,000 $ ( 1,437,000 ) $ 61,568,000 Net income - - - 576,000 - 576,000 Common stock repurchased and retired ( 270,000 ) ( 2,000 ) ( 386,000 ) ( 1,029,000 ) - ( 1,417,000 ) Treasury stock excise tax - - ( 14,000 ) - - ( 14,000 ) Stock-based compensation expense - - 109,000 - - 109,000 Options exercised 226,666 2,000 813,000 - - 815,000 Other comprehensive income - - - - 6,000 6,000 Balance as of March 31, 2024 11,372,878 $ 114,000 $ 16,861,000 $ 46,099,000 $ ( 1,431,000 ) $ 61,643,000 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 4 Alpha Pro Tech, Ltd. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2025 2024 Cash Flows From Operating Activities: Net income $ 613,000 $ 576,000 Adjustments to reconcile net income to net cash and cash equivalents used in operating activities: Stock-based compensation 136,000 109,000 Depreciation and amortization 243,000 244,000 Equity in income of unconsolidated affiliate ( 141,000 ) ( 138,000 ) Non-cash lease expense 229,000 162,000 Changes in operating assets and liabilities: Accounts receivable, net ( 2,979,000 ) ( 923,000 ) Accounts receivable, related party 201,000 ( 15,000 ) Inventories, net ( 832,000 ) ( 638,000 ) Prepaid expenses ( 375,000 ) 383,000 Accounts payable and accrued liabilities ( 841,000 ) ( 743,000 ) Lease liabilities ( 213,000 ) ( 186,000 ) Net cash and cash equivalents used in operating activities ( 3,959,000 ) ( 1,169,000 ) Cash Flows From Investing Activities: Purchases of property and equipment ( 135,000 ) ( 83,000 ) Net cash and cash equivalents used in investing activities ( 135,000 ) ( 83,000 ) Cash Flows From Financing Activities: Proceeds from exercise of stock options - 815,000 Repurchase of common stock ( 1,178,000 ) ( 1,417,000 ) Treasury stock excise tax ( 12,000 ) ( 14,000 ) Net cash and cash equivalents used in financing activities ( 1,190,000 ) ( 616,000 ) Increase (decrease) in cash and cash equivalents ( 5,284,000 ) ( 1,868,000 ) Cash and cash equivalents, beginning of the period 18,636,000 20,378,000 Cash and cash equivalents, end of the period $ 13,352,000 $ 18,510,000 Supplemental disclosure of non-cash transactions: Net non-cash changes to operating leases $ - $ 4,803,000 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 5 Alpha Pro Tech, Ltd. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. The Company Alpha Pro Tech, Ltd. (“Alpha Pro Tech,” the “Company,” “we”, “us” or “our”) is in the business of protecting people, products and environments. The Company accomplishes this by developing, manufacturing and marketing a line of building supply products for the new home and re-roofing markets and a line of disposable protective apparel for the cleanroom, industrial, pharmaceutical, medical and dental markets. The Building Supply segment consists of construction weatherization products, such as housewrap, housewrap accessories including window and door flashing, seam tape, synthetic roof underlayment and synthetic roof underlayment accessories, as well as other woven materials. The Disposable Protective Apparel segment consists of a complete line of disposable protective garments (shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields. All of our disposable protective apparel products, including face masks and face shields, are sold through similar distribution channels, are single-use and disposable, have the purpose of protecting people, products and environments, and have to be produced in Food and Drug Administration approved facilities, regardless of the market served. 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 (“U.S.”). 2. Basis of Presentation and Revenue Recognition Policy The interim financial information included in this report is unaudited; however, the information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for the fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods reflected herein. These interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“the SEC”) and, therefore, omit certain information and note disclosures that would be necessary to present the statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). 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, 2024, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”), filed with the SEC on March 12, 2025. The results of operations for the three months ended March 31, 2025, 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, 2024 was prepared using information from the audited consolidated balance sheet contained in the 2024 Form 10-K; however, it does not include all disclosures required by U.S. GAAP for annual consolidated financial statements. Net sales include revenue from products and shipping and handling charges, net of estimates for product returns and any related sales incentives. Our customer contracts have a single performance obligation: transfer control of products to customers. Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring control of products. All revenue is recognized when we satisfy our performance obligations under the applicable contract. We recognize revenue in connection with transferring control of the promised products to the customer, with revenue being recognized at the point in time when the customer obtains control of the products, which is generally when title passes to the customer upon delivery to a third-party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements, at which time a receivable is created for the invoice sent to the customer. Shipping and handling activities are performed prior to the customer obtaining control of the goods and are accounted for as fulfillment activities and are not a promised good or service. Shipping and handling charges billed to customers are included in revenue. Shipping and handling costs, associated with the distribution of the Company’s product to the customers, are recorded in cost of goods sold and are recognized when control of the product is transferred to the customer, which is generally when title passes to the customer upon delivery to a third-party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements. We estimate product returns based on historical return rates and estimate rebates based on contractual agreements. Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract. Sales taxes and value added taxes in foreign and domestic jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from net sales. The Company 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 March 31, 2025, that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. See Note 10 and Note 11 of these Notes to Condensed Consolidated Financial Statements (Unaudited) for information on revenue disaggregated by type and by geographic region. 6 Alpha Pro Tech, Ltd. Notes to Condensed Consolidated Financial Statements (Unaudited) 3. Shareholder’s Equity Repurchase Program During the three months ended March 31, 2025, the Company repurchased and retired 221,413 shares of its common stock for $ 1,178,000 . During the three months ended March 31, 2024, the Company repurchased and retired 270,000 shares of its common stock for $ 1,417,000 . As of March 31, 2025, the Company had $ 1,564,000 available to repurchase common shares under the repurchase program. The excess of repurchase price over par value is allocated between additional paid-in capital and retained earnings. Option Activity The Company previously granted stock options to employees and non-employee directors under the 2004 Stock Option Plan (the “2004 Plan”). Options vest and expire according to terms established at the grant date. The 2004 Plan provided for a total of 5,000,000 common shares eligible for issuance. Under the 2004 Plan, approximately 5,009,750 options (taking into account cancelled, forfeited, and expired options that were added back to the plan reserve) had been granted as of December 31, 2020. At the Company’s 2020 Annual Meeting of Shareholders held on June 9, 2020, the Company’s shareholders approved the Alpha Pro Tech, Ltd. 2020 Omnibus Incentive Plan (the “2020 Incentive Plan”). The 2020 Incentive Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, awards of restricted stock and restricted stock units, performance share awards, cash awards and other equity-based awards to employees (including officers), consultants and non-employee directors of the Company and its affiliates. A total of 1,800,000 shares of the Company’s common stock are reserved for issuance under the 2020 Incentive Plan, plus the number of shares underlying any award granted under the 2004 Option Plan that expires or is cancelled or forfeited under the terms of the 2004 Option Plan. As a result of the approval of the 2020 Incentive Plan, no future equity awards will be made pursuant to the 2004 Option Plan. Although no new awards may be granted under the 2004 Option Plan, all previously granted awards under the 2004 Option Plan will continue to be governed by the terms of the 2004 Option Plan. 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, and restricted stock units (“RSUs”), over the determined requisite service period, which is generally ratably over the vesting term. The following table summarizes restricted stock and RSU awards activity for the three months ended March 31, 2025: Weighted Average Grant Date Price Shares Restricted stock awards Outstanding, December 31, 2024 256,675 $ 4.38 Granted to employees and non-employee directors 9,870 5.79 Vested ( 10,715 ) 5.32 Outstanding, March 31, 2025 255,830 4.40 During the three months ended March 31, 2025 and 2024, 9,870 and 10,715 RSU stock awards were granted under the 2020 Incentive Plan, respectively. The Company recognized $ 121,000 and $ 94,000 in stock-based compensation expense associated with outstanding RSU awards for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, $ 574,000 of total unrecognized compensation cost related to the RSU grants was expected to be recognized over a weighted average remainder period of 1.50 years. 7 Alpha Pro Tech, Ltd. Notes to Condensed Consolidated Financial Statements (Unaudited) The Company uses the Black-Scholes option-pricing model to value the options. The Company uses historical data to estimate the expected life of the options. The risk-free interest rate for periods within the contractual life of an award is based on the US Treasury yield curve in effect at the time of grant. The estimated volatility is based on historical volatility and management’s expectations of future volatility. The Company uses an estimated dividend payout of zero, as the Company has not paid dividends in the past and, at this time, does not expect to do so in the future. The Company accounts for option forfeitures as they occur. The following table summarizes option activity for the three months ended March 31, 2025: Weighted Average Exercise Price Options Per Option Options outstanding, December 31, 2024 61,100 $ 4.17 Exercised - 0.00 Options outstanding, March 31, 2025 61,100 4.17 Options exercisable, March 31, 2025 25,264 4.14 As of March 31, 2025, $ 74,000 of total unrecognized compensation cost related to the stock option grants was expected to be recognized over a weighted average remainder period of 1.37 years. 4. Recent Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. These amendments address investor requests for enhanced transparency regarding income tax information. Specifically, they improve income tax disclosures related to rate reconciliation and income taxes paid. ASU 2023-09 becomes effective for fiscal years beginning after December 15, 2024, with early adoption permitted. In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of evaluating the impact of this pronouncement on its related disclosures. Management periodically reviews new accounting standards that are issued. Management has not identified any other new standards that it believes merit further discussion at this time. 8 Alpha Pro Tech, Ltd. Notes to Condensed Consolidated Financial Statements (Unaudited) 5. Inventories As of March 31, 2025 and December 31, 2024, inventories net of reserves consisted of the following: March 31, December 31, 2025 2024 Raw materials $ 11,232,000 $ 10,948,000 Work in process 3,616,000 2,934,000 Finished goods 8,717,000 8,851,000 $ 23,565,000 $ 22,733,000 6. Equity Investment in Unconsolidated Affiliate In 2005, Alpha ProTech Engineered Products, Inc. (a subsidiary of Alpha Pro Tech, Ltd.) entered into a joint venture with a manufacturer in India, Maple Industries and associates, for the production of building products. Under the terms of the joint venture agreement, a private company, Harmony Plastics Private Limited (“Harmony”), was created with ownership interests of 41.7 % owned by Alpha ProTech Engineered Products, Inc. and 58.3 % owned by Maple Industries and associates. This joint venture positions Alpha ProTech Engineered Products, Inc. to respond to current and expected increased product demand for housewrap and synthetic roof underlayment and provides future capacity for sales of specialty roofing component products and custom products for industrial applications requiring high quality extrusion coated fabrics. In addition, the joint venture now supplies products for the Company’s Disposable Protective Apparel segment. 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. Harmony currently has four facilities in India ( three owned and one rented), consisting of: (1) a 139,000 square foot building for manufacturing building products; (2) a 121,000 square foot building for manufacturing coated material and sewing proprietary disposable protective apparel; (3) a 23,000 square foot facility for sewing proprietary disposable protective apparel; and (4) a 159,000 square foot facility (rented) for manufacturing Building Supply segment products. All additions have been financed by Harmony with no guarantees from the Company. In accordance with ASC 810, Consolidation, the Company assesses whether or not related entities are variable interest entities (“VIEs”). For those related entities that qualify as VIEs, ASC 810 requires the Company to determine whether the Company is the primary beneficiary of the VIE, and, if so, to consolidate the VIE. The Company has determined that Harmony is not a VIE and is, therefore, considered to be an unconsolidated affiliate. The Company records its investment in Harmony as “equity investment in unconsolidated affiliate” in the accompanying consolidated balance sheets. The Company records its equity interest in Harmony’s results of operations as “equity in income of unconsolidated affiliate” in the accompanying consolidated statements of income. The Company periodically reviews its investment in Harmony for impairment. Management has determined that no impairment was required as of March 31, 2025, or December 31, 2024. 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 March 31, 2025 and 2024, the Company purchased $ 4,755,000 and $ 5,329,000 of inventories, respectively, from Harmony. For both three months ended March 31, 2025 and 2024, the Company sold $ 0 of inventories, to Harmony. For the three months ended March 31, 2025 and 2024, the Company recorded equity in income of unconsolidated affiliate of $ 141,000 and $ 138,000 , respectively, related to Harmony. As of March 31, 2025, the Company’s investment in Harmony was $ 5,890,000 , which consisted of its original $ 1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $ 7,023,000 , less $ 942,000 in repayments of an advance, $ 77,000 in payments of dividends, and $ 1,564,000 in AOCL on foreign currency translations. 9 Alpha Pro Tech, Ltd. Notes to Condensed Consolidated Financial Statements (Unaudited) 7. Accrued Liabilities As of March 31, 2025 and December 31, 2024, accrued liabilities consisted of the following: March 31, December 31, 2025 2024 Payroll expenses and taxes payable $ 350,000 $ 221,000 Commissions and bonuses payable and general accrued liabilities 152,000 726,000 Total accrued liabilities $ 502,000 $ 947,000 8. Basic and Diluted Earnings Per Common Share The following table provides a reconciliation of both net income and the number of shares used in the computation of “basic” 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 months ended March 31, 2025 and 2024: For the Three Months Ended March 31, 2025 2024 Net income (numerator) $ 613,000 $ 576,000 Shares (denominator): Basic weighted average common shares outstanding 10,724,760 11,285,296 Add: dilutive effect of common stock options 111,821 104,098 Diluted weighted average common shares outstanding 10,836,581 11,389,394 Earnings per common share: Basic $ 0.06 $ 0.05 Diluted $ 0.06 $ 0.05 9. Accumulated Other Comprehensive Loss AOCL, a component of shareholders' equity, consists of foreign currency translation adjustments related to foreign currency gains or losses on our unconsolidated affiliate as its functional currency is other than the U.S. dollar. 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 AOCL on equity in unconsolidated affiliate was $ 1,564,000 and $ 1,499,000 as of March 31, 2025 and December 31, 2024, respectively. 10. Segments Reporting The Company has determined that it has two reporting segments, which are also operating segments: (1) Building Supply: consisting of construction weatherization products, such as housewrap, housewrap accessories including window and door flashing, seam tape, synthetic roof underlayment and synthetic roof underlayment accessories, as well as other woven materials. The majority of the Company’s equity in income of unconsolidated affiliate (Harmony) is included in the total segment income for the Building Supply segment. (2) Disposable Protective Apparel : consisting of a complete line of disposable protective garments, including shoecovers (including the Aqua Trak® and spunbond shoecovers), bouffant caps, coveralls, frocks, lab coats, gowns and hoods, as well as face masks and face shields for the pharmaceutical, cleanroom, industrial, medical and dental markets. A portion of the Company’s equity in income of unconsolidated affiliate (Harmony) is included in the total segment income for the Disposable Protective Apparel segment. The chief operating decision maker (‘CODM”) of the Company is the Company’s chief executive officer. The CODM assesses performance and decides how to allocate resources, including employees, financial or capital resources, based on segment net sales. Segment data excludes charges allocated to the principal executive office and other unallocated corporate overhead expenses and income tax. The Company evaluates the performance of its segments and allocates resources to them based primarily on net sales. 10 Alpha Pro Tech, Ltd. Notes to Condensed Consolidated Financial Statements (Unaudited) The accounting policies of the segments are the same as those described previously under Summary of Significant Accounting Policies (see Note 2 in the notes to our consolidated financial statements in Item 8 of the 2024 Form 10-K). The following provides segment information as described below: For the Three Months Ended March 31, 2025 Building Supply Disposable Protective Apparel Segment sales $ 8,372,000 $ 5,450,000 Less: Cost of goods sold 5,368,000 3,062,000 Selling, general and administrative 1,878,000 1,446,000 Depreciation and amortization 189,000 27,000 Other income ( 119,000 ) ( 21,000 ) Segment net income $ 1,056,000 $ 936,000 For the Three Months Ended March 31, 2024 Building Supply Disposable Protective Apparel Segment sales $ 8,240,000 $ 5,242,000 Less: Cost of goods sold 5,223,000 2,842,000 Selling, general and administrative 1,986,000 1,359,000 Depreciation and amortization 185,000 30,000 Other income ( 117,000 ) ( 21,000 ) Segment net income $ 963,000 $ 1,032,000 The following table presents consolidated net sales for each segment for the three months ended March 31, 2025 and 2024: For the Three Months Ended March 31, 2025 2024 Building Supply $ 8,372,000 $ 8,240,000 Disposable Protective Apparel 5,450,000 5,242,000 Consolidated net sales $ 13,822,000 $ 13,482,000 The following table presents the reconciliation of consolidated segment income to consolidated net income for the three months ended March 31, 2025 and 2024: For the Three Months Ended March 31, 2025 2024 Building Supply $ 1,056,000 $ 963,000 Disposable Protective Apparel 936,000 1,032,000 Total segment income 1,992,000 1,995,000 Unallocated corporate overhead expenses 1,220,000 1,273,000 Provision for income taxes 159,000 146,000 Consolidated net income $ 613,000 $ 576,000 The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of March 31, 2025 and December 31, 2024: March 31, December 31, 2025 2024 Building Supply $ 5,969,000 $ 6,069,000 Disposable Protective Apparel 1,400,000 1,424,000 Total segment assets 7,369,000 7,493,000 Unallocated corporate assets 1,098,000 1,082,000 Total consolidated assets $ 8,467,000 $ 8,575,000 11 Alpha Pro Tech, Ltd. Notes to Condensed Consolidated Financial Statements (Unaudited) 11. Financial Information about Geographic Areas The following table summarizes the Company’s net sales by geographic region for the three months ended March 31, 2025 and 2024: For the Three Months Ended March 31, 2025 2024 Net sales by geographic region United States $ 13,647,000 $ 13,298,000 International 175,000 184,000 Consolidated net sales $ 13,822,000 $ 13,482,000 Net sales by geographic region are based on the countries in which our customers are located. For the three months ended March 31, 2025 and 2024, the Company did not generate sales from any single country, other than the United States, that were significant to the Company’s consolidated net sales. The following table summarizes the locations of the Company’s long-lived assets by geographic region as of March 31, 2025 and December 31, 2024: March 31, December 31, 2025 2024 Long-lived assets by geographic region United States $ 7,235,000 $ 7,325,000 International 1,177,000 1,195,000 Consolidated total long-lived assets $ 8,412,000 $ 8,520,000 12. Related Party Transactions As of March 31, 2025, 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). 13. Leases The Company has operating leases for the Company’s corporate office and manufacturing facilities, which expire at various dates through 2034. The Company’s primary operating lease commitments as of March 31, 2025, related to the Company’s manufacturing facilities in Valdosta, Georgia and Nogales, Arizona, as well as the Company’s corporate headquarters in Aurora, Ontario, Canada. As of March 31, 2025, the Company had operating lease right-of-use assets of $ 8,485,000 and operating lease liabilities of $ 8,562,000 . As of March 31, 2025, we did not have any finance leases recorded on the Company’s consolidated balance sheet. Operating lease expense was approximately $ 380,000 during the three months ended March 31, 2025. 12 Alpha Pro Tech, Ltd. Notes to Condensed Consolidated Financial Statements (Unaudited) The aggregate future minimum lease payments and reconciliation to lease liabilities as of March 31, 2025 were as follows: March 31, 2025 Remaining nine months of 2025 $ 1,107,000 2026 1,473,000 2027 1,459,000 2028 1,489,000 2029 1,520,000 2030 644,000 Thereafter 4,212,000 Total future minimum lease payments 11,904,000 Less imputed interest ( 3,342,000 ) Total lease liabilities $ 8,562,000 As of March 31, 2025, the weighted average remaining lease term of the Company’s operating leases was 9.88 years. During the three months ended March 31, 2025, the weighted average discount rate with respect to these leases was 7.0 %. 14. Income taxes The Company accounts for income taxes using the asset and liability method. A valuation allowance is recorded to reduce the carrying amounts of deferred income tax assets unless it is more likely than not that such assets will be realized. 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. and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. An employer generally does not claim a corporate income tax deduction (which would be in an amount equal to the amount of income recognized by the employee) upon the exercise of its employee's incentive stock options (“ISOs”) unless the employee does not meet the holding period requirements and sells early, making a disqualifying disposition, or if the options otherwise do not qualify as ISOs under applicable tax laws. With non-qualified stock options (“NQSOs”), on the other hand, the employer is typically eligible to claim a deduction upon its employee's exercise of the NQSOs. 15. Contingencies The Company is subject to various pending and threatened litigation actions in the ordinary course of business. Although it is not possible to determine with certainty at this point in time what liability, if any, the Company will have as a result of such litigation, based on consultation with legal counsel, management does not anticipate that the ultimate liability, if any, resulting from such litigation will have a material effect on the Company’s financial condition and results of operations. 16. Subsequent Events The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of March 31, 2025 through the filing date of this Quarterly Report on Form 10-Q that would require recognition or disclosure and has concluded that there are no such subsequent events. 13 Alpha Pro Tech, Ltd.