apt20210331_10q.htm

10-Q 1 apt20210331_10q.htm FORM 10-Q apt20210331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 01-15725

Alpha Pro Tech, Ltd.

(Exact Name of Registrant as Specified in Its Charter)

Delaware, U.S.A.	63-1009183
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

60 Centurian Drive, Suite 112
Markham, Ontario, Canada	L3R 9R2
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (905) 479-0654

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock,

$0.01 par value

APT

NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding May 3, 2021
Common Stock, $0.01 par value		13,332,251 shares

Alpha Pro Tech, Ltd.

Index

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements	page
Condensed Consolidated Balance Sheets (Unaudited)	1

Condensed Consolidated Statements of Income (Unaudited)	2

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)	3

Condensed Consolidated Statements of Cash Flows (Unaudited)	4

Notes to Condensed Consolidated Financial Statements (Unaudited)	5

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	23

ITEM 4. Controls and Procedures	23

PART II. OTHER INFORMATION

ITEM IA. Risk Factors	24

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	26

ITEM 6. Exhibits	27

SIGNATURES	28

EXHIBITS

Alpha Pro Tech, Ltd.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets (Unaudited)

	March 31,		December 31,
	2021		2020 (1)
Assets
Current assets:
Cash and cash equivalents	$	17,884,000	$	23,292,000
Accounts receivable, net of allowance for doubtful accounts of $76,000 as of March 31, 2021 and $71,000 as of December 31, 2020		6,748,000		8,132,000
Accounts receivable, related party		1,275,000		905,000
Inventories, net		18,778,000		16,749,000
Prepaid expenses		10,235,000		6,225,000
Total current assets		54,920,000		55,303,000

Property and equipment, net		4,287,000		4,353,000
Goodwill		55,000		55,000
Definite-lived intangible assets, net		6,000		7,000
Right-of-use assets		3,315,000		3,535,000
Equity investment in unconsolidated affiliate		5,871,000		5,549,000
Total assets	$	68,454,000	$	68,802,000

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	1,219,000	$	1,983,000
Accrued liabilities		1,762,000		2,793,000
Customer advance payments of orders		113,000		209,000
Lease liabilities		871,000		867,000
Total current liabilities		3,965,000		5,852,000

Lease liabilities, net of current portion		2,496,000		2,719,000
Deferred income tax liabilities, net		211,000		211,000
Total liabilities		6,672,000		8,782,000
Commitments
Shareholders' equity:
Common stock, $.01 par value: 50,000,000 shares authorized; 13,323,341 and 13,419,847 shares outstanding as of March 31, 2021 and December 31, 2020, respectively		134,000		135,000
Additional paid-in capital		-		409,000
Retained earnings		61,648,000		59,476,000
Total shareholders' equity		61,782,000		60,020,000
Total liabilities and shareholders' equity	$	68,454,000	$	68,802,000

(1) The condensed consolidated balance sheet as of December 31, 2020 has been prepared using information from the audited consolidated balance sheet as of that date.

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

Alpha Pro Tech, Ltd.

Condensed Consolidated Statements of Income (Unaudited)

	For the Three Months Ended
	March 31,
	2021		2020

Net sales	$	23,161,000	$	18,154,000

Cost of goods sold, excluding depreciation and amortization		13,982,000		9,600,000
Gross profit		9,179,000		8,554,000

Operating expenses:
Selling, general and administrative		4,578,000		4,102,000
Depreciation and amortization		198,000		182,000
Total operating expenses		4,776,000		4,284,000

Income from operations		4,403,000		4,270,000

Other income:
Equity in income of unconsolidated affiliate		322,000		87,000
Loss on marketable securities		-		(59,000	)
Interest income, net		1,000		16,000
Total other income		323,000		44,000

Income before provision for income taxes		4,726,000		4,314,000

Provision (benefit) for income taxes		1,007,000		(1,028,000	)

Net income	$	3,719,000	$	5,342,000


Basic earnings per common share	$	0.28	$	0.41

Diluted earnings per common share	$	0.27	$	0.39

Basic weighted average common shares outstanding		13,342,398		13,121,867

Diluted weighted average common shares outstanding		13,717,404		13,664,710

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

Alpha Pro Tech, Ltd.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

For the Three Months Ended March 31, 2021

							Additional
	Common Stock						Paid-in			Retained
	Shares			Amount			Capital			Earnings			Total
Balance as of December 31, 2020		13,419,847		$	135,000		$	409,000		$	59,476,000		$	60,020,000
Net income		-			-			-			3,719,000			3,719,000
Common stock repurchased and retired		(186,000	)		(2,000	)		(817,000	)		(1,547,000	)		(2,366,000	)
Stock-based compensation expense		-			-			101,000			-			101,000
Options exercised		89,494			1,000			307,000			-			308,000
Balance as of March 31, 2021		13,323,341		$	134,000		$	-		$	61,648,000		$	61,782,000

For the Three Months Ended March 31, 2020

						Additional
	Common Stock					Paid-in			Retained
	Shares			Amount		Capital			Earnings		Total
Balance as of December 31, 2019		12,885,273		$	129,000	$	708,000		$	32,390,000	$	33,227,000
Net income		-			-		-			5,342,000		5,342,000
Common stock repurchased and retired		(35,100	)		-		(125,000	)		-		(125,000	)
Stock-based compensation expense		-			-		91,000			-		91,000
Options exercised		712,839			7,000		1,834,000			-		1,841,000
Balance as of March 31, 2020		13,563,012		$	136,000	$	2,508,000		$	37,732,000	$	40,376,000

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

Alpha Pro Tech, Ltd.

Condensed Consolidated Statements of Cash Flows (Unaudited)

	For the Three Months Ended March 30,
	2021			2020
Cash Flows From Operating Activities:
Net income	$	3,719,000		$	5,342,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation		101,000			91,000
Depreciation and amortization		198,000			182,000
Loss on marketable equity securities		-			59,000
Equity in income of unconsolidated affiliate		(322,000	)		(87,000	)
Operating lease expense, net of accretion		220,000			224,000
Changes in assets and liabilities:
Accounts receivable, net		1,384,000			(3,794,000	)
Accounts receivable, related party		(370,000	)		(192,000	)
Inventories		(2,029,000	)		155,000
Prepaid expenses		(4,011,000	)		(650,000	)
Accounts payable and accrued liabilities		(1,795,000	)		1,072,000
Customer advance payments of orders		(96,000	)		7,161,000
Lease liabilities		(219,000	)		(221,000	)

Net cash provided by (used in) operating activities		(3,220,000	)		9,342,000

Cash Flows From Investing Activities:
Purchases of property and equipment		(130,000	)		(288,000	)
Proceeds from sales of marketable securities		-			47,000

Net cash used in investing activities		(130,000	)		(241,000	)

Cash Flows From Financing Activities:
Proceeds from exercise of stock options		308,000			1,841,000
Repurchase of common stock		(2,366,000	)		(125,000	)

Net cash provided by (used in) financing activities		(2,058,000	)		1,716,000

Increase (decrease) in cash		(5,408,000	)		10,817,000

Cash, beginning of the period		23,292,000			6,548,000

Cash, end of the period	$	17,884,000		$	17,365,000

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

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 and synthetic roof underlayment, as well as other woven material.

The Disposable Protective Apparel segment consists of a complete line of disposable protective clothing (shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields. All of our disposable protective apparel products, including face masks and face shields, are sold through similar distribution channels, are single-use and disposable, have the purpose of protecting people, products and environments, and have to be produced in Food and Drug Administration (“FDA”) approved facilities, regardless of the market served.

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

The ongoing novel coronavirus (COVID-19) pandemic has adversely affected global economies, financial markets and the overall environment in which we do business. Overall, the increase in sales of our Disposable Protective Apparel segment products resulting from the pandemic has had a positive impact on our year-to-date results, but the positive impact in 2021 is less than in 2020, as the effects of COVID-19 are normalizing. The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity in certain sectors. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any certainty the likely impact of the COVID-19 pandemic on our future operations.

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 (“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, 2020, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Form 10-K”), filed with the SEC on March 10, 2021. The results of operations for the three months ended March 31, 2021 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, 2020 was prepared using information from the audited consolidated balance sheet contained in the 2020 Form 10-K; however, it does not include all disclosures required by U.S. GAAP for annual consolidated financial statements.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Net sales includes revenue from products and shipping and handling charges, net of estimates for product returns and any related sales incentives. Our customer contracts have a single performance obligation: transfer control of products to customers. Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring control of products. All revenue is recognized when we satisfy our performance obligations under the applicable contract. We recognize revenue in connection with transferring control of the promised products to the customer, with revenue being recognized at the point in time when the customer obtains control of the products, which is generally when title passes to the customer upon delivery to a third party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements, at which time a receivable is created for the invoice sent to the customer. Shipping and handling activities are performed prior to the customer obtaining control of the goods, and are accounted for as fulfillment activities and are not a promised good or service. Shipping and handling charges billed to customers are included in revenue. Shipping and handling costs, associated with the distribution of the Company’s product to the customers, are recorded in cost of goods sold and are recognized when control of the product is transferred to the customer, which is 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 labelling. The Company has determined as of March 31, 2021 that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. As of March 31, 2021, we had contract liabilities of $113,000 as a result of customer advance payments of orders in connection with the COVID-19 pandemic. 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.

3.	Stock-Based Compensation

The Company maintains a stock option plan (the “2004 Option Plan”) under which the Company may grant incentive stock options and non-qualified stock options to employees and non-employee directors. Stock options have been granted with exercise prices at or above the fair market value of the underlying shares of common stock on the date of grant. Options vest and expire according to terms established at the grant date.

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, terminates or is cancelled or forfeited under the terms of the 2004 Option Plan. As a result of the approval of the 2020 Incentive Plan, no future equity awards will be made pursuant to the 2004 Option Plan. Although no new awards may be granted under the 2004 Option Plan, all previously granted awards under the 2004 Option Plan will continue to be governed by the terms of the 2004 Option Plan. As of March 31, 2021, 8,912 restricted stock equity awards had been granted under the 2020 Incentive Plan.

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

For the three months ended March 31, 2021 and 2020, no stock options were granted under the Company’s 2004 Option Plan. The Company recognized $74,000 and $91,000 in stock-based compensation expense for the three months ended March 31, 2021 and 2020, respectively, related to outstanding options. For the three months ended March 31, 2021 and 2020 no restricted stock equity awards were granted under the 2020 Incentive Plan. The Company recognized $27,000 and $0 in compensation expense associated with restricted stock awards for the three months ended March 31, 2021 and 2020, respectively.

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 stock option activity for the three months ended March 31, 2021:

				Weighted Average
				Exercise Price
	Options			Per Option

Options outstanding, December 31, 2020		568,740		$	3.42
Granted to employees and non-employee directors		-			-
Exercised		(89,494	)		3.45
Canceled/expired/forfeited		-			-
Options outstanding, March 31, 2021		479,246			3.42
Options exercisable, March 31, 2021		182,002			5.80

As of March 31, 2021, $152,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 1.04 years.

4.	Investments

As of March 31, 2021, we had no investments. As of March 31, 2020 investments totaled $228,000 which consisted of equity securities. These marketable securities were sold during the three months ended March 31, 2020. The total loss on marketable securities during the three months ended March 31, 2020 was $59,000. The loss for the three months ended March 31, 2020 was due to an unrealized loss of $76,000 and a realized gain of $17,000.

5.	Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 is effective for public companies for the annual periods, including interim periods within those annual periods, beginning after December 15, 2019. This guidance was applicable to the Company’s fiscal year beginning January 1, 2020. Adoption of the new standard did not have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. Adoption of the new standard did not have a material impact on our consolidated financial statements.

Management periodically reviews new accounting standards that are issued. Management has not identified any other new standards that it believes merit further discussion at this time.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

6.	Inventories

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

	March 31,		December 31,
	2021		2020

Raw materials	$	10,866,000	$	9,729,000
Work in process		2,180,000		2,003,000
Finished goods		5,732,000		5,017,000
	$	18,778,000	$	16,749,000

7.	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 41.66% owned by Alpha ProTech Engineered Products, Inc. and 58.34% 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 Disposable Protective Apparel segment.

The capital from the initial funding and a bank loan, which loan is guaranteed exclusively by the individual shareholders of Maple Industries and associates and collateralized by the assets of Harmony, were utilized to purchase the original manufacturing facility in India. Harmony currently has four facilities in India (three owned and one rented), consisting of: (1) a 113,000 square foot building for manufacturing building products; (2) a 73,000 square foot building for manufacturing coated material and sewing proprietary disposable protective apparel; (3) a 16,000 square foot facility for sewing proprietary disposable protective apparel; and (4) a 93,000 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 or not 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 condensed 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 condensed 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, 2021 or December 31, 2020.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the three months ended March 31, 2021 and 2020, Alpha Pro Tech purchased $6,354,000 and $4,705,000 of inventories, respectively, from Harmony. For the three months ended March 31, 2021 and 2020, the Company recorded equity in income of unconsolidated affiliate of $322,000 and $87,000, respectively, related to Harmony. For the three months ended March 31, 2021 and 2020, the Company sold $370,000 and $182,000 of inventories, respectively, to Harmony.

As of March 31, 2021, the Company’s investment in Harmony was $5,871,000, which consisted of its original $1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $5,440,000, less $942,000 in repayments of the advance and $77,000 in dividends.

8.	Accrued Liabilities

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

	March 31,		December 31,
	2021		2020

Payroll expenses and taxes payable	$	1,415,000	$	123,000
Commissions and bonuses payable and general accrued liabilities		347,000		2,670,000
Total accrued liabilities	$	1,762,000	$	2,793,000

9.	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, 2021 and 2020:

	For the Three Months Ended
	March 31,
	2021		2020
Net income (numerator)	$	3,719,000	$	5,342,000

Shares (denominator):
Basic weighted average common shares outstanding		13,342,398		13,121,867
Add: dilutive effect of common stock options		375,006		542,843

Diluted weighted average common shares outstanding		13,717,404		13,664,710

Earnings per common share:
Basic	$	0.28	$	0.41
Diluted	$	0.27	$	0.39

10.

Activity of Business Segments

The Company operates through two business segments:

(1) Building Supply: consisting of a line of construction supply weatherization products. The construction supply weatherization products consist of housewrap and synthetic roof underlayment, as well as other woven material. 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.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(2) Disposable Protective Apparel: consisting of a complete line of disposable protective clothing, 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.

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.

The following table presents consolidated net sales for each segment for the three months ended March 31, 2021 and 2020:

	For the Three Months Ended
	March 31,
	2021		2020
Building Supply	$	8,340,000	$	7,557,000
Disposable Protective Apparel		14,821,000		10,597,000
Consolidated net sales	$	23,161,000	$	18,154,000

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three months ended March 31, 2021 and 2020:

	For the Three Months Ended
	March 30,
	2021		2020
Building Supply	$	1,551,000	$	1,410,000
Disposable Protective Apparel		4,750,000		4,453,000
Total segment income		6,301,000		5,863,000

Unallocated corporate overhead expenses		1,575,000		1,549,000
Provision (benefit) for income taxes		1,007,000		(1,028,000	)
Consolidated net income	$	3,719,000	$	5,342,000

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

	March 30,		December 31,
	2021		2020

Building Supply	$	1,756,000	$	1,806,000
Disposable Protective Apparel		1,428,000		1,432,000
Total segment assets		3,184,000		3,238,000

Unallocated corporate assets		1,164,000		1,177,000
Total consolidated assets	$	4,348,000	$	4,415,000

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, 2021 and 2020:

	For the Three Months Ended
	March 31,
	2021		2020
Net sales by geographic region
United States	$	20,898,000	$	15,619,000
International		2,263,000		2,535,000

Consolidated net sales	$	23,161,000	$	18,154,000

Net sales by geographic region are based on the countries in which our customers are located. For the three months ended March 31, 2021, the Company generated approximately $2,115,000, in sales from Canada. No other single country other than the United States was significant to consolidated net sales. During the three months ended March 31, 2020, the Company did not generate sales from any single country, other than the United States, that were significant to the Company’s consolidated net sales.

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

	March 31,		December 31,
	2021		2020
Long-lived assets by geographic region
United States	$	2,747,000	$	2,787,000
International		1,540,000		1,566,000

Consolidated total long-lived assets	$	4,287,000	$	4,353,000

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

12.

Related Party Transactions

As of March 31, 2021, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony. See Note 7 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 2024. The Company’s primary operating lease commitments at March 31, 2021 related to the Company’s manufacturing facilities in Valdosta, Georgia; Nogales, Arizona; and Salt Lake City, Utah, as well as the Company’s corporate headquarters in Markham, Ontario, Canada.

As of March 31, 2021, the Company had operating lease right-of-use assets of $3,315,000 and operating lease liabilities of $3,367,000. As of March 31, 2021, we did not have any finance leases recorded on the Company’s condensed consolidated balance sheet. Operating lease expense was approximately $204,000 during the three months ended March 31, 2021.

The aggregate future minimum lease payments and reconciliation to lease liabilities as of March 31, 2021 were as follows:

	March 31,
	2021
Remaining nine months of 2021	$	747,000
2022		1,010,000
2023		1,017,000
2024		484,000
2025		365,000
Total future minimum lease payments		3,623,000
Less imputed interest		(256,000	)
Total Lease liabilities	$	3,367,000

As of March 31, 2021, the weighted average remaining lease term of the Company’s operating leases was 3.97 years. During the three months ended March 31, 2021, the weighted average discount rate with respect to these leases was 4.07%.

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.

The Company had an estimated nonrecurring tax benefit of approximately $2.0 million in the first quarter of 2020 as a result of the exercise of disqualified ISOs and the exercise of NQSOs, partially offset by estimated tax expense of approximately $1.0 million.

On March 27, 2020, President Trump signed into U.S. federal law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which is aimed at providing emergency assistance and health care for individuals, families and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act currently has minimal impact on the Company.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

15.

Subsequent Events

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of March 31, 2021 through the filing date of this Quarterly Report on Form 10-Q that would require accounting or disclosure and has concluded that there are no such subsequent events.

Alpha Pro Tech, Ltd.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and the notes to our unaudited condensed consolidated financial statements, which appear elsewhere in this report, as well as our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2021 (the “2020 Form 10-K”).

Special Note Regarding Forward-Looking Statements

Certain information set forth in this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of federal securities laws. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions, including, without limitation, our expected orders, production levels and sales in 2021 and 2022, and other information that is not historical information. When used in this report, the words “estimates,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes” and variations of such words or similar expressions are intended to identify forward-looking statements. We may make additional forward-looking statements from time to time. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. All forward-looking statements, whether written or oral and whether made by us or on our behalf, are expressly qualified by this special note.

The following are some of the risks that could affect our financial performance or that could cause actual results to differ materially from those expressed or implied in our forward-looking statements:

●

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

●

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

●

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

●

We rely on suppliers and contractors, and our business could be seriously harmed if these suppliers and contractors are not able to meet our requirements.

●

Risks associated with international manufacturing could have a significant effect on our business.

●

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

●

Our success depends in part on protection of our intellectual property, and our failure to protect our intellectual property could adversely affect our competitive advantage, our brand recognition and our business.

●

Our industry is highly competitive, which may negatively affect our ability to grow our customer base and generate sales.

●

The Company’s results are affected by competitive conditions and customer preferences.

●

The Company’s growth objectives are largely dependent on the timing and market acceptance of our new product offerings, including our ability to continually renew our pipeline of new products and to bring those products to market.

●

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

●

The Company’s future results may be affected by various legal and regulatory proceedings and legal compliance risks.

●

Our common stock price is volatile, which could result in substantial losses for individual shareholders.

The foregoing list of risks is not exclusive. For a more detailed discussion of the risk factors associated with our business, see the risks described in Part I, Item IA, “Risk Factors,” in the 2020 Form 10-K and in Part II, Item IA, “Risk Factors,” in this Quarterly Report on Form 10-Q. These and many other factors could affect the Company’s future operating results and financial condition and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by the Company or on its behalf.

Alpha Pro Tech, Ltd.

Special Note Regarding Smaller Reporting Company Status

We are filing this report as a “smaller reporting company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended). As a result of being a smaller reporting company, we are allowed and have elected to omit certain information from this Management’s Discussion and Analysis of Financial Condition and Results of Operations; however, we have provided all information for the periods presented that we believe to be appropriate.

Where to find more information about us. We make available, free of charge, on our website (http://www.alphaprotech.com) our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q, any Current Reports on Form 8-K furnished or filed since our most recent Annual Report on Form 10-K, and any amendments to such reports, as soon as reasonably practicable following the electronic filing of such reports with the SEC. In addition, in accordance with SEC rules, we provide paper copies of our filings free of charge upon request.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the periods reported. We base estimates on past experience and on various other assumptions that are believed to be reasonable under the circumstances. Our estimates are subject to uncertainties associated with the ongoing COVID-19 pandemic. The application of these accounting policies on a consistent basis enables us to provide timely and reliable financial information. Our significant accounting policies and estimates are more fully described in Note 2, “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements in Item 8 of the 2020 Form 10-K. Our critical accounting policies and estimates include the following:

Accounts Receivable: Accounts receivable are recorded at the invoice amount and do not bear interest. The general terms for receivables is net 30 days. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. The Company determines the allowance based upon historical write-off experience and known conditions about customers’ current ability to pay. Account balances are charged against the allowance when the potential for recovery is considered remote. For new customers with no order history with the Company we may require advance payments to reduce our credit risk.

Inventories: Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost or net realizable value. Allowances are recorded for slow-moving, obsolete or unusable inventory. We assess our inventory for estimated obsolescence or unmarketable inventory and write down the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future sales and supply on-hand, if necessary. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Leases: We determine if an arrangement is a lease at inception. Operating leases are included as right-of-use (“ROU”) assets and lease liabilities on our consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Our leases do not provide an implicit rate, and, therefore, we estimate our collateralized borrowing rate under similar terms based on the information available at the commencement date in determining the present value of future minimum lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. We do not record leases on our consolidated balance sheet with a term of one year or less. We elected a package of transition practical expedients, which included not reassessing whether any expired or existing contracts are or contain leases, not reassessing the lease classification of expired or existing leases, and not reassessing initial direct costs for existing leases. We also elected a practical expedient to not separate lease and non-lease components. We did not elect the practical expedient to use hindsight in determining our lease terms or assessing impairment of our ROU assets.

Alpha Pro Tech, Ltd.

Revenue Recognition: Net sales includes revenue from products and shipping and handling charges, net of estimates for product returns and any related sales incentives. Our customer contracts have a single performance obligation: transfer control of products to customers. Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring control of products. All revenue is recognized when we satisfy our performance obligations under the applicable contract. We recognize revenue in connection with transferring control of the promised products to the customer, with revenue being recognized at the point in time when the customer obtains control of the products, which is generally when title passes to the customer upon delivery to a third party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements, at which time a receivable is created for the invoice sent to the customer. Shipping and handling activities are performed prior to the customer obtaining control of the goods, and are accounted for as fulfillment activities and are not a promised good or service. Shipping and handling charges billed to customers are included in revenue. Shipping and handling costs, associated with the distribution of the Company’s product to the customers, are recorded in cost of goods sold and are recognized when control of the product is transferred to the customer, which is at the time products are delivered to the third party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements. We estimate product returns based on historical return rates and estimate rebates based on contractual agreements. Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract. Sales taxes and value added taxes in foreign and domestic jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from net sales. The Company manufactures certain private label goods for customers and has determined that control does not pass to the customer at the time of manufacture, based upon the nature of the private labelling. The Company has determined that, as of March 31, 2021, it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. As of March 31, 2021, the Company had contract liabilities of $113,000 as a result of customer advance payments of orders connected to the COVID-19 pandemic (see “Impact of the Novel Coronavirus (COVID-19)” below).

Sales Returns, Rebates and Allowances: Sales are reduced for any anticipated sales returns, rebates and allowances based on historical experience. Since our return policy is only 90 days and our products are not generally susceptible to external factors such as technological obsolescence or significant changes in demand, we are able to make a reasonable estimate for returns. We offer end-user product specific and sales volume rebates to select distributors. Our rebates are based on actual sales and are accrued monthly.

Stock-Based Compensation: The Company accounts for stock-based awards using Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Stock Compensation. ASC 718 requires companies to record compensation expense for the value of all outstanding and unvested share-based payments, including employee stock options and similar awards.

The fair values of stock option grants are determined using the Black-Scholes option-pricing model and are based on the following assumptions: expected stock price volatility based on historical data and management’s expectations of future volatility, risk-free interest rates from published sources, expected term based on historical data, and no dividend yield, as the Board of Directors currently has no plans to pay dividends in the foreseeable future. The Company accounts for option forfeitures as they occur. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and that are fully transferable. In addition, the option-pricing model requires the input of highly subjective assumptions, including expected stock price volatility. Our stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value of such options.

Alpha Pro Tech, Ltd.

OVERVIEW

Alpha Pro Tech is in the business of protecting people, products and environments. We accomplish this by developing, manufacturing and marketing a line of high-value, disposable protective apparel products for the cleanroom, industrial, pharmaceutical, medical and dental markets. We also manufacture a line of building supply construction weatherization products. Our products are sold under the "Alpha Pro Tech" brand name, as well as under private label.

Our products are grouped into two business segments: the Building Supply segment, consisting of construction weatherization products, such as housewrap and synthetic roof underlayment as well as other woven material; and the Disposable Protective Apparel segment, consisting of disposable protective garments (including shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields. All financial information presented in this report reflects the current segmentation.

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

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.

Impact of the Novel Coronavirus (COVID-19)

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. COVID-19 continues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. COVID-19 has had, and we expect the virus to continue to have, a number of effects, both positive and negative, on our business operations and financial condition.

Since the start of the COVID-19 pandemic, we experienced a significant surge in customer demand for our proprietary N-95 Particulate Respirator face mask product and other personal protective equipment (“PPE”) products as a result of COVID-19. We experienced a dramatic increase in revenue from sales of PPE products during the year of 2020, especially with respect to face masks, face shields and disposable protective garments, including shoecovers, coveralls, gowns, lab coats and bouffant caps.

In an effort to meet the unprecedented demand, and to aid communities around the world in responding to the ongoing healthcare crisis, the Company ramped up production during the first quarter of 2020 of our PPE products, in particular our N-95 face mask, which is manufactured by the Company in the United States. We addressed the growing customer demand for PPE products by increasing and improving the human, mechanical, and supply chain components behind production.

During 2020, we encountered a number of constraints within our supply chain due to government-mandated shutdowns, raw materials shortages and shipping delays. Although we worked to alleviate these supply chain issues by securing additional supply sources, in the event of subsequent shutdowns, shortages or delays, our production and sales could be further impacted. Further, we expect that prices of raw materials may rise more rapidly in the current environment than our sales prices, which could decrease our profits.

We are continuing to serve our customers while taking every precaution to provide a safe work environment for our employees. We have enacted enhanced operating protocols to assure the safety and well-being of our employees, placed restrictions on non-essential travel, and otherwise adjusted work schedules to maximize our capacity while adhering to recommended precautions such as social distancing. We believe that we may have to take further actions that we determine are in the best interests of our employees or as required by federal, state, or local authorities. Although we will continue to adhere to restrictions imposed by local governments in the jurisdictions in which we operate, government regulations have impacted workforce availability and expense in certain of the Company’s manufacturing facilities, and we expect this to continue for some time.

Alpha Pro Tech, Ltd.

As detailed below under “Results of Operations,” we witnessed a softening in the demand for our N-95 particulate respirator face mask during the first quarter of 2021 and expect sales will decline to be more in-line with pre-pandemic levels in future periods. We expect growth in pre-pandemic demand for our disposable protective garments and continued growth in Building Supply segment products, although this demand could be negatively impacted if we experience a decrease in housing starts and increased uncertainty in the housing market and the economy in general.

The impact of the COVID-19 pandemic continues to unfold. The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments. Future developments include the duration, scope and severity of the pandemic and new variants, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the efficacy of mass vaccinations, and the resumption of widespread economic activity in certain sectors. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any certainty the likely impact of the COVID-19 pandemic on our future operations.

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

RESULTS OF OPERATIONS

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

	For the Three Months Ended March 31,
	2021			2020
Net sales		100.0	%		100.0	%
Gross profit		39.6	%		47.1	%
Selling, general and administrative expenses		19.8	%		22.6	%
Income from operations		19.0	%		23.5	%
Income before provision for income taxes		20.4	%		23.8	%
Net income		16.1	%		29.4	%

Three months ended March 31, 2021, compared to three months ended March 31, 2020

Sales. Consolidated sales for the three months ended March 31, 2021 increased to a record first quarter, of $23,161,000, from $18,154,000 for the three months ended March 31, 2020, representing an increase of $5,007,000, or 27.6%. This increase consisted of increased sales in the Disposable Protective Apparel segment of $4,224,000 and increased sales in the Building Supply segment of $783,000.

Disposable Protective Apparel Segment

Sales for the Disposable Protective Apparel segment for the three months ended March 31, 2021 increased by $4,224,000, or 39.9%, to a record first quarter of $14,821,000, compared to $10,597,000 for the same period of 2020. This segment increase was due to a 40.7% increase in sales of disposable protective garments, 24.0% increase in sales of face masks and a 93.6% increase in face shields. The increases for face masks, face shields and to a lesser extent disposable protective garments were primarily due to increased demand resulting from the COVID-19 pandemic. The sales mix of the Disposable Protective Apparel segment for the three months ended March 31, 2021 was approximately 45% for disposable protective garments, 38% for face masks and 17% for face shields. This sales mix is compared to approximately 45% for disposable apparel garments, 43% for face masks and 12% for face shields for the three months ended March 31, 2020.

Alpha Pro Tech, Ltd.

Sales for the disposable protective garments in the first quarter of 2021 were a record and up a very strong 40.7%. This was as a result of strong open orders, primarily from our major international channel partner. We continue to realize higher than historical open orders for disposable protective garments and are working closely with all our channel partners uncovering new end-customer sales opportunities.

The increase in face mask sales of 24.0% was primarily attributable to sales of our proprietary N-95 Particulate Respirator face mask resulting from customer demand associated with the COVID-19 pandemic. Although we showed face mask revenue growth in the first quarter of 2021, sales were materially lower than prior pandemic quarters. We are witnessing a softening in demand due various factors such as: (i) decreased demand from distributors and their customers in light of high levels of stockpiled inventory, resulting from a rush to obtain face masks in the early months of the pandemic, (ii) increased availability of N-95 face masks from manufacturers ramping up production capacity, (iii) increased competition as more manufacturers entered the market as well as Emergency Use Authorization in the U.S. that has allowed foreign manufactured, non-NIOSH approved KN-95 face masks, and (iv) the improvement in outlook with respect to the pandemic and the growing number of individuals being vaccinated to protect against COVID-19. Management expects sales of face mask will decline to be more in-line with pre-pandemic levels in future periods.

The increase in face shield sales of 93.6% was also attributable to the pandemic and resulted in demand primarily from one distributor. Management expect sales of face shields to decrease in the coming quarters and to be more in-line with pre-pandemic levels.

Building Supply Segment

Building Supply segment sales for the three months ended March 31, 2021 increased by $783,000, or 10.4%, to a first quarter record of $8,340,000, compared to $7,557,000 for the three months ended March 31, 2020. The Building Supply segment increase was primarily due to an 18.2% increase in our core building products, including an increase in sales of synthetic roof underlayment of 31.6% and an increase in sales of housewrap of 4.1% compared to the same period of 2020. Sales of other woven material decreased by 26.1% compared to the same period of 2020.

The sales mix of the Building Supply segment for the three months ended March 31, 2021 was approximately 52% for synthetic roof underlayment, 41% for housewrap and 7% for other woven material. This compared to approximately 45% for synthetic roof underlayment, 45% for housewrap and 10% for other woven material for the three months ended March 31, 2020. Our synthetic roof underlayment product line includes REX SynFelt®, REX TECHNOply® and TECHNO SB®, and our housewrap product line consists of REX Wrap®, REX Wrap® Plus and REX Wrap Fortis®.

Open orders for our core building products, consisting of synthetic roof underlayment and housewrap, continue to be at unprecedented levels as the new home construction and residential re-roofing markets were strong in the first quarter of 2021 and optimism remains high going into the second quarter. Our line of synthetic roof underlayment enjoyed strong growth of 31.6% related to these two factors and our housewrap continued growth in the new home construction market. Management is optimistic about continued growth in this segment and has committed to increasing production capacity of this segment by investing approximately $4.0 million in new equipment, which is expected to be operational later in the year.

Gross Profit. Gross profit increased by $625,000, or 7.3%, to $9,179,000 for the three months ended March 31, 2021, from $8,554,000 for the three months ended March 31, 2020. The gross profit margin was 39.6% for the three months ended March 31, 2021, compared to 47.1% for the three months ended March 31, 2020. The gross profit margin on our face masks, in particular our N-95 Particulate Respirator face mask, and face shields, which have a higher gross profit margin than our other products, were negatively impacted in the first quarter of 2021 by a change in distribution channels associated with the pandemic, including higher sales to our legacy distribution channel partners as compared to newer COVID-19 based customers. In addition, our portfolio of products, as well as a spectrum of industries worldwide, have been affected by increases in raw material costs, as well as significant increases in ocean freight and other transportation costs.

Alpha Pro Tech, Ltd.

Management believes that gross profit margin will be negatively affected in 2021 as a result of changes in product mix as the need for face masks and face shields declines from the surge in customer demand in 2020 as a result of the COVID-19 pandemic. As discussed above, we expect increases in raw material costs, resin in particular, which is a base component material in our disposable protective garments and building products, as well as increases in ocean freight and other transportation costs. In the current environment, cost increases may rise more rapidly than our sales prices, which could decrease gross profit.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $476,000, or 11.6%, to $4,578,000 for the three months ended March 31, 2021, from $4,102,000 for the three months ended March 31, 2020. However, as a percentage of net sales, selling, general and administrative expenses decreased to 19.8% three months ended March 31, 2021, down from 22.6% for the same period of 2020, primarily as a result of the growth in net sales.

The change in expenses by segment for the three months ended March 31, 2021 was as follows: Disposable Protective Apparel was up $425,000, or 33.8%; Building Supply was down $9,000, or 0.6%; and corporate unallocated expenses were up $60,000, or 4.0%. The increase in the Disposable Protective Apparel segment expenses was related to increased employee compensation, insurance and general office expenses, partially offset by decreased travel expenses. The decrease in the Building Supply segment expenses was related to decreased marketing and travel expenses, partially offset by increased employee compensation and increased insurance costs. The increase in corporate unallocated expenses was primarily due to increased public company expenses and increased insurance and general office expenses, partially offset by lower employee compensation and decreased professional fees.

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 $249,000 was accrued for the three months ended March 31, 2021, compared to $227,000 for the three months ended March 31, 2020.

Depreciation and Amortization. Depreciation and amortization expense increased by $16,000, or 8.8%, to $198,000 for the three months ended March 31, 2021, from $182,000 for the three months ended March 31, 2020. The increase was primarily attributable to increased depreciation for machinery and equipment in the Building Supply segment and increased corporate depreciation related to computer technology.

Income from Operations. Income from operations increased by $133,000, or 3.1%, to $4,403,000 for the three months ended March 31, 2021, compared to $4,270,000 for the three months ended March 31, 2020. The increased income from operations was primarily due to an increase in gross profit of $625,000, partially offset by an increase in selling, general and administrative expenses of $476,000 and an increase in depreciation and amortization expense of $16,000. Income from operations as a percentage of net sales for the three months ended March 31, 2021 was 19.0%, compared to 23.5% for the same period of 2020.

Other Income. Other income increased by $279,000, or 634.1%, to $323,000 for the three months ended March 31, 2021, from $44,000 for the three months ended March 31, 2020. The increase was primarily due to an increase in equity in income of unconsolidated affiliate of $235,000, partially offset by a net change of $59,000 on gains and losses on marketable securities, and a decrease in interest income of $15,000.

Other income consisted primarily of equity in income of unconsolidated affiliate of $322,000, and interest income of $1,000 for the three months ended March 31, 2021. Other income consisted of equity in income of unconsolidated affiliate of $87,000, a loss on marketable securities of $59,000 and interest income of $16,000 for the three months ended March 31, 2020.

Alpha Pro Tech, Ltd.

Income before Provision (Benefit) for Income Taxes. Income before provision for income taxes for the three months ended March 31, 2021 was $4,726,000, compared to income before provision for income taxes of $4,314,000 for the same period of 2020, representing an increase of $412,000, or 9.6%. This increase in income before provision for income taxes was due to an increase in income from operations of $133,000 and an increase in other income of $279,000.

Provision (Benefit) for Income Taxes. The provision for income taxes for the three months ended March 31, 2021 was $1,007,000, compared to a tax benefit $1,028,000 for the same period of 2020. In the first quarter of 2020, the benefit for income taxes consisted of an estimated nonrecurring tax benefit of approximately $2.0 million as a result of the exercise of disqualified incentive stock options (“ISOs”) and the exercise of non-qualified stock options (“NQSOs”), partially offset by an estimated tax expense of approximately $1.0 million. The estimated effective tax rate was 21.3% for the three months ended March 31, 2021, compared to negative 23.8% for the three months ended March 31, 2020. Excluding the estimated nonrecurring tax benefit of $2.0 million, the estimated effective tax rate was 22.5% for the three months ended March 31, 2020. The Company does not record a tax provision on equity in income of unconsolidated affiliate, which reduces the effective tax rate.

Net Income. Net income for the three months ended March 31, 2021 was $3,719,000, compared to net income of $5,342,000 for the three months ended March 31, 2020, representing a decrease of $1,623,000, or 30.4%. As mentioned above, a tax benefit from stock options exercised positively impacted net income by an estimated $2.0 million in the first quarter of 2020. Excluding the tax benefit in 2020, net income for the three months ended March 31, 2021 would have exceeded net income for the three months ended March 31, 2020. Net income as a percentage of net sales for the three months ended March 31, 2021 was 16.1%, and net income as a percentage of net sales for the same period of 2020 was 29.4%. Basic earnings per common share for the three months ended March 31, 2021, and 2020 were $0.28 and $0.41, respectively. Diluted earnings per common share for the three months ended March 31, 2021 and 2020 were $0.27 and $0.39, respectively. Excluding the estimated tax benefit in 2020, basic and diluted earnings per common share for the three months ended March 31, 2021 would have exceeded the basic and diluted earnings per common share for the same period of 2020.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2021, the Company had cash of $17,884,000 and working capital of $50,955,000. As of March 31, 2021, the Company’s current ratio (current assets/current liabilities) was 14:1, compared to a current ratio of 9:1 as of December 31, 2020. Cash decreased by 23.2%, or $5,408,000, to $17,884,000 as of March 31, 2021, compared to $23,292,000 as of December 31, 2020, and working capital increased by $1,504,000 from $49,451,000 as of December 31, 2020. The decrease in cash from December 31, 2020 was due to cash used in operating activities of $3,220,000, cash used in investing activities of $130,000 and cash used in financing activities of $2,058,000.

We previously had a $3,500,000 credit facility with Wells Fargo Bank, consisting of a line of credit with interest at prime plus 0.5%. This credit line expired in May 2020, and the Company decided not to renew. The Company has continued its relationship with Wells Fargo, with the exception of the line of credit. The Company determined that the credit line is not necessary at this time, as it had not been used in several years, and the Company currently has sufficient funding from operations.

Net cash used in operating activities of $3,220,000 for the three months ended March 31, 2021 was due to net income of $3,719,000, impacted primarily by the following: stock-based compensation expense of $101,000, depreciation and amortization expense of $198,000, equity in income of unconsolidated affiliate of $322,000, operating lease expense net of accretion of $220,000, a decrease in accounts receivable of $1,014,000, an increase in prepaid expenses of $4,010,000, an increase in inventory of $2,029,000, a decrease in accounts payable and accrued liabilities of $1,795,000, a decrease in customer advance payments of $96,000 and a decrease in lease liabilities of $219,000.

Accounts receivable decreased by $1,014,000, or 11.2%, to $8,023,000 as of March 31, 2021, from $9,037,000 as of December 31, 2020. The decrease in accounts receivable was related to decreased sales as compared to the fourth quarter of 2020. The number of days that sales remained outstanding as of March 31, 2021, calculated by using an average of accounts receivable outstanding and annual revenue, was 34 days, which was the same as of December 31, 2020.

Alpha Pro Tech, Ltd.

Inventory increased by $2,029,000, or 12.1%, to $18,778,000 as of March 31, 2021, from $16,749,000 as of December 31, 2020. The increase was primarily due to an increase in inventory for the Disposable Protective Apparel segment of $1,639,000, or 14.3%, to $13,138,000 and an increase in inventory for the Building Supply segment of $390,000, or 7.4%, to $5,640,000.

Prepaid expenses increased by $4,010,000, or 64.4%, to $10,235,000 as of March 31, 2021, from $6,225,000 as of December 31, 2020. The increase was primarily due to prepayments for machinery and equipment for the Building Supply segment and, to a lesser extent, for the Disposable Protective Apparel segment, as well as prepaid inventory.

Right-of-use assets as of March 31, 2021 decreased by $220,000 to $3,315,000 from $3,535,000 as of December 31, 2020 as a result of amortization of the balance.

Lease liabilities as of March 31, 2021 decreased by $219,000 to $3,367,000 from $3,586,000 as of December 31, 2020. The recording of the lease liabilities was the result of adopting ASC 842, Leases. The decrease in the lease liabilities was the result of lease payments made during the year.

Accounts payable and accrued liabilities as of March 31, 2021 decreased by $1,795,000, or 37.6%, to $2,981,000, from $4,776,000 as of December 31, 2020. The decrease was primarily due to a decrease in accrued bonuses and a decrease in trade accounts payable.

Customer advance payment of orders as of March 31, 2021 was $113,000, which was the result of customer deposits for future dated PPE orders in response to the COVID-19 pandemic, compared to $209,000 as of December 31, 2020.

Net cash used in investing activities was $130,000 for the three months ended March 31, 2021, compared to net cash used in investing activities of $241,000 for the same period of 2020. Investing activities for the three months ended March 31, 2021 consisted of the purchase of property and equipment of $130,000. Investing activities for the three months ended March 31, 2020 consisted of the purchase of property and equipment of $288,000 and proceeds from the sale of marketable securities of $47,000.

Net cash used in financing activities was $2,058,000 for the three months ended March 31, 2021, compared to net cash provided in financing activities of $1,716,000 for the same period of 2020. Net cash used in financing activities for the three months ended March 31, 2021 resulted from the payment of $2,366,000 for the repurchase of common stock, mainly offset by proceeds of $308,000 from the exercise of stock options. Net cash provided in financing activities for the three months ended March 31, 2020 resulted from proceeds of $1,841,000 from the exercise of stock options, partially offset the payment of $125,000 for the repurchase of common stock.

As of March 31, 2021, we had $2,119,000 available for additional stock purchases under our stock repurchase program. During the three months ended March 31, 2021, we repurchased 186,000 shares of common stock at a cost of $2,366,000. As of March 31, 2021, we had repurchased a total of 18,296,917 shares of common stock at a cost of approximately $40,400,000 through our repurchase program. We retire all stock upon repurchase. Future repurchases are expected to be funded from cash on hand and cash flows from operating activities

We believe that our current cash balance will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future. We have made approximately $4,000,000 in commitments for capital investments to increase our production capacity in our Building supply segment, of which $1,668,000 has been paid as deposits as of March 31, 2021.

Alpha Pro Tech, Ltd.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those reporting periods, with early adoption permitted. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the date of initial application of transition. Based on the effective date, we adopted this ASU beginning on January 1, 2019 and elected the transition option provided under ASU 2018-11. This standard had a material effect on our consolidated balance sheet with the recognition of new right-of-use assets and lease liabilities for all operating leases, as these leases typically have a non-cancelable lease term of greater than one year. Upon adoption, both assets and liabilities on our consolidated balance sheet increased by approximately $3,455,000. We elected a package of transition practical expedients, which included not reassessing whether any expired or existing contracts are or contain leases, not reassessing the lease classification of expired or existing leases, and not reassessing initial direct costs for existing leases. We also elected a practical expedient to not separate lease and non-lease components. We did not elect the practical expedient to use hindsight in determining the lease terms or assessing impairment of the ROU assets. See also Note 12 of these Notes to Condensed Consolidated Financial Statements for more information.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 is effective for public entities for the annual periods, including interim periods within those annual periods, beginning after December 15, 2019. This guidance is applicable to the Company’s fiscal year beginning January 1, 2020. Adoption of the new standard did not have a material impact on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. ASU 2018-07 is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted but no earlier than an entity’s adoption date of ASC Topic 606 - Revenue form Contracts with Customers. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. We adopted the provisions of this ASU in the first quarter of 2019. Adoption of the new standard did not have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our President and Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of March 31, 2021, pursuant to the evaluation of these controls and procedures required by Rule 13a-15 of the Exchange Act. Disclosure controls and procedures are the controls and other procedures that we have designed to ensure that we record, process, summarize and report in a timely manner the information that we must disclose in reports that we file with or submit to the SEC under the Exchange Act, and such controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

Alpha Pro Tech, Ltd.

In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and that we are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

During the quarter to which this report relates, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

A list of factors that could materially affect our business, financial condition or operating results is described in Part I, Item 1A, “Risk Factors” in the 2020 Form 10-K. There have been no material changes to our risk factors from those disclosed in Part I, Item 1A, “Risk Factors” in the 2020 Form 10-K, other than as described in the risk factor below.

Risks Related to the COVID-19 Pandemic

The effects of the COVID-19 pandemic have had, and could continue to have, a material adverse effect on our business, financial results and results of operations.

In December 2019, COVID-19 surfaced in Wuhan, China, and the World Health Organization characterized COVID-19 as a pandemic on March 11, 2020. The situation relating to the COVID-19 pandemic is complex and still evolving, with a broad number of governmental and commercial efforts to contain the spread of the virus globally. The duration and extent of the impact of the COVID-19 pandemic on our business, operations and financial results depends on factors that cannot be accurately predicted at this time, such as the severity and transmission rate of new variants of the COVID-19 virus, the extent and effectiveness of containment actions, the speed and efficacy of vaccination efforts, and the impact of these and other factors on our employees, customers, industry partners, suppliers and third-party dealers and distributors.

Federal, state and local governments, as well as foreign governments, have imposed numerous protocols and regulations in an effort to limit the spread of the COVID-19. We have implemented a number of measures in an effort to protect our employees’ health and well-being, including having certain office workers work remotely and suspending employee travel. The potential negative effects to our operations, including reductions in production levels, research and development activities and increased costs resulting from our efforts to mitigate the impact of COVID-19, may adversely affect our ability to provide our products. Furthermore, the implications of unsuccessfully implementing health and well-being measures, which could, for example, result in workers at our manufacturing facilities testing positive for COVID-19, would also adversely affect our business, including resulting in a product recall. Although we will continue to adhere to restrictions imposed by local governments in the jurisdictions in which we operate, government regulations have impacted workforce availability and expense in certain of the Company’s manufacturing facilities, and we expect this to continue for some time.

Alpha Pro Tech, Ltd.

Although we have experienced increased sales and significantly increased demand for our PPE products, the global COVID-19 pandemic has and may continue to have an adverse impact on our manufacturing and distribution capabilities. Disruptions relating to the COVID-19 pandemic, including shelter-in-place orders in the U.S., Mexico, India and other countries, have prevented and could again prevent employees, suppliers, distributors and others from accessing manufacturing facilities and from transporting our products or the components required to manufacture our products. For example, the government-mandated closure in India, which started in late March and ended in May 2020, impacted our order fulfillment and revenue growth related to our disposable protective garments. Any government regulation may also impact our ability to supply and ship our products to certain customers, which could lead to cancellation of some orders. Further, worldwide supply chain disruption relating to the COVID-19 pandemic has resulted in product shortages that have impacted and may continue to impact our ability to manufacture our products. We currently utilize third parties to, among other things, manufacture certain components and materials for our products, and to provide services such as sterilization services, and we purchase these materials and services from numerous suppliers worldwide. If either we or any third parties in the supply chain for materials used in the production of our products continue to be adversely impacted by the COVID-19 pandemic, including the restrictions resulting from the COVID-19 pandemic, our supply chain may continue to be disrupted, limiting our ability to manufacture our products. These disruptions may, among other things, continue to impact our ability to produce and supply products in quantities necessary to meet market demand.

Further, in connection with the COVID-19 pandemic and in an effort to increase the wider availability of needed medical and other supplies and products, we may elect to, or governments may require us to, allocate our products (for example, pursuant to the U.S. Defense Production Act (the “DPA”)) in a way that adversely affects our regular operations and financial results, results in differential treatment of customers and/or adversely affects our reputation and customer relationships. Likewise, suppliers of our raw materials who are subject to requests under the DPA may be unable to fulfill our orders for those raw materials, or such fulfillment could be delayed. In addition, unpredictable increases in demand for certain of our products could, or in some cases may continue to, exceed our capacity to meet such demand, which could adversely affect our financial results and customer relationships and result in negative publicity.

As a result of the COVID-19 pandemic, in 2020 we experienced a significant increase in orders of our PPE products from both legacy and new customers. In 2021 we experienced a softening in demand due to various factors, including decreased demand from distributors and their customers in light of high levels of stockpiled inventory, and increased competition, among other factors. Because of the uncertainty associated with the pandemic, we may experience a further decrease in sales as conditions related to the virus change or improve and demand for these products subsides, which could impact our expectations of future orders and sales. COVID-19 has resulted in a downturn in the global financial markets and a slowdown in the global economy. This economic environment may impact some of our customers’ ability to pay or lead them to request extended payment terms, and we have experienced and may continue to experience cost increases from some of our suppliers. Additionally, increased uncertainty in the housing market could negatively impact demand for our Building Supply segment products.

Moreover, the impacts of the COVID-19 pandemic may exacerbate other pre-existing risks, such as political, regulatory, social, financial, operational and cybersecurity risks, and those associated with global economic conditions, any of which could have a material adverse effect on our business.

Alpha Pro Tech, Ltd.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act:

	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Program (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)
January 1 - 31, 2021	57,000	$12.41	57,000	$ 3,773,000
February 1 - 28, 2021	45,000	15.28	45,000	3,080,000
March 1 - 31, 2021	84,000	11.34	84,000	2,119,000
	186,000	$12.62	186,000

(1) Pursuant to the Company’s share repurchase program, on September 22, 2020, the Company announced that the Board of Directors had authorized a $5,000,000 expansion of the Company’s existing share repurchase program. All of the shares included in this table were purchased pursuant to this program.

SECURITIES SOLD

We did not sell unregistered equity securities during the period covered by this report.

Alpha Pro Tech, Ltd.

ITEM 6. EXHIBITS


3.1.1(P)	Certificate of Incorporation of Alpha Pro Tech, Ltd., incorporated by reference to Exhibit 3(f) to Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (File No. 000-19893).
3.1.2(P)	Certificate of Amendment of Certificate of Incorporation of Alpha Pro Tech, Ltd., incorporated by reference to Exhibit 3(j) to Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (File No. 000-19893).
3.1.3(P)	Certificate of Ownership and Merger (BFD Industries, Inc. into Alpha Pro Tech, Ltd.), incorporated by reference to Exhibit 3(l) to Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (File No. 000-19893).
3.2(P)	Bylaws of Alpha Pro Tech, Ltd., incorporated by reference to Exhibit 3(g) to Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (File No. 000-19893).
31.1	Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – President and Chief Executive Officer.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer.
101	Interactive Data Files for Alpha Pro Tech, Ltd’s Form 10-Q for the period ended March 31, 2021. (P) Indicates a paper filing with the SEC.

Alpha Pro Tech, Ltd.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		ALPHA PRO TECH, LTD.

DATE:	May 7, 2021	BY:	/s/ Lloyd Hoffman
			Lloyd Hoffman
			President and Chief Executive Officer

DATE:	May 7, 2021	BY:	/s/Colleen McDonald
			Colleen McDonald
			Chief Financial Officer

SEC Form 10-Q filed by Alpha Pro Tech, Ltd.