UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, ~~D.C.~~DC 20549

~~FORM 10-Q~~

~~Quarterly Report pursuant to Section~~FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d)

~~of the Securities Exchange Act of~~ OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~Quarterly Period Ended September~~quarterly period ended June 30, ~~2017~~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. 0~~1-15725~~01-15725

Alpha Pro Tech, Ltd.

(~~exact name~~Exact Name of ~~registrant~~Registrant as ~~specified~~Specified in ~~its charter)~~Its Charter)

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

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

~~Registrant~~’sRegistrant’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 X ☒ No ~~___~~☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes X ☒ 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~~ X

~~Emerging growth company ___~~

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 X ☒

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

Class		Outstanding ~~November 3, 2017~~ August 2, 2021
Common Stock, $0.01 par value		~~15,155,523~~13,217,251 shares

	June 30,		December 31,
	2021			2020 (1)
Assets
Current assets:
Cash and cash equivalents	$	15,538,000	$	23,292,000
Accounts receivable, net of allowance for doubtful accounts of $79,000 as of June 30, 2021 and $71,000 as of December 31, 2020		6,079,000		8,132,000
Accounts receivable, related party		997,000		905,000
Inventories, net		21,997,000		16,749,000
Prepaid expenses		8,360,000		6,225,000
Total current assets		52,971,000		55,303,000

Property and equipment, net		5,422,000		4,353,000
Goodwill		55,000		55,000
Definite-lived intangible assets, net		5,000		7,000
Right-of-use assets		3,094,000		3,535,000
Equity investment in unconsolidated affiliate		6,059,000		5,549,000
Total assets	$	67,606,000	$	68,802,000

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	642,000	$	1,983,000
Accrued liabilities		1,240,000		2,793,000
Customer advance payments of orders		103,000		209,000
Lease liabilities		876,000		867,000
Total current liabilities		2,861,000		5,852,000

Lease liabilities, net of current portion		2,272,000		2,719,000
Deferred income tax liabilities, net		211,000		211,000
Total liabilities		5,344,000		8,782,000
Commitments
Shareholders' equity:
Common stock, $.01 par value: 50,000,000 shares authorized; 13,208,341 and 13,419,847 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		132,000		135,000
Additional paid-in capital		0		409,000
Retained earnings		62,130,000		59,476,000
Total shareholders' equity		62,262,000		60,020,000
Total liabilities and shareholders' equity	$	67,606,000	$	68,802,000

(1) The condensed consolidated balance sheet as of December 31, ~~2016~~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).

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020

Net sales	$	17,806,000	$	25,500,000	$	40,967,000	$	43,654,000

Cost of goods sold, excluding depreciation and amortization		11,574,000		12,887,000		25,556,000		22,487,000
Gross profit		6,232,000		12,613,000		15,411,000		21,167,000

Operating expenses:
Selling, general and administrative		4,199,000		4,553,000		8,777,000		8,656,000
Depreciation and amortization		203,000		178,000		401,000		360,000
Total operating expenses		4,402,000		4,731,000		9,178,000		9,016,000

Income from operations		1,830,000		7,882,000		6,233,000		12,151,000

Other income:
Equity in income of unconsolidated affiliate		188,000		119,000		510,000		206,000
Gain /(Loss) on marketable securities		0		41,000		0		(18,000	)
Interest income, net		0		0		1,000		16,000
Total other income		188,000		160,000		511,000		204,000

Income before provision for income taxes		2,018,000		8,042,000		6,744,000		12,355,000

Provision for income taxes		347,000		1,822,000		1,354,000		794,000

Net income	$	1,671,000	$	6,220,000	$	5,390,000	$	11,561,000


Basic earnings per common share	$	0.13	$	0.47	$	0.41	$	0.87

Diluted earnings per common share	$	0.12	$	0.46	$	0.40	$	0.84

Basic weighted average common shares outstanding		13,246,676		13,351,675		13,294,571		13,351,674

Diluted weighted average common shares outstanding		13,511,497		13,651,995		13,621,101		13,813,094

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

Condensed Consolidated Statements of ~~Comprehensive Income~~Shareholders’ Equity (Unaudited)

For the Six Months Ended June 30, 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		-			0			0			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		-			0			101,000			0			101,000
Options exercised		89,494			1,000			307,000			0			308,000
Balance as of March 31, 2021		13,323,341			134,000			0			61,648,000			61,782,000
Net income		-			0			0			1,671,000			1,671,000
Common stock repurchased and retired		(150,000	)		(2,000	)		(151,000	)		(1,189,000	)		(1,342,000	)
Stock-based compensation expense		-			0			68,000			0			68,000
Options exercised		35,000			0			83,000			0			83,000
Balance as of June 30, 2021		13,208,341		$	132,000		$	0		$	62,130,000		$	62,262,000

For the Six Months Ended June 30, 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		-			0		0			5,342,000		5,342,000
Common stock repurchased and retired		(35,100	)		0		(125,000	)		0		(125,000	)
Stock-based compensation expense		-			0		91,000			0		91,000
Options exercised		712,839			7,000		1,834,000			0		1,841,000
Balance as of March 31, 2020		13,563,012			136,000		2,508,000			37,732,000		40,376,000
Net income		-			0		0			6,220,000		6,220,000
Stock-based compensation expense		-			0		92,000			0		92,000
Options exercised		24,835			0		94,000			0		94,000
Balance as of June 30, 2020		13,587,847		$	136,000	$	2,694,000		$	43,951,000	$	46,781,000

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

~~Condensed~~ ~~Consolidated Statement of Shareholders’ Equity (Unaudited)~~

	For the Six Months Ended June 30,
	2021			2020
Cash Flows From Operating Activities:
Net income	$	5,390,000		$	11,561,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation		169,000			183,000
Depreciation and amortization		401,000			360,000
Loss on marketable equity securities		0			18,000
Equity in income of unconsolidated affiliate		(510,000	)		(206,000	)
Operating lease expense, net of accretion		441,000			450,000
Changes in operating assets and liabilities:
Accounts receivable, net		2,053,000			(3,093,000	)
Accounts receivable, related party		(92,000	)		(228,000	)
Inventories		(5,248,000	)		(677,000	)
Prepaid expenses		(2,135,000	)		(523,000	)
Accounts payable and accrued liabilities		(2,894,000	)		2,872,000
Customer advance payments of orders		(106,000	)		6,475,000
Lease liabilities		(438,000	)		(443,000	)

Net cash provided by (used in) operating activities		(2,969,000	)		16,749,000

Cash Flows From Investing Activities:
Purchases of property and equipment		(1,468,000	)		(419,000	)
Proceeds from sales of marketable securities		0			47,000

Net cash used in investing activities		(1,468,000	)		(372,000	)

Cash Flows From Financing Activities:
Proceeds from exercise of stock options		391,000			1,935,000
Repurchase of common stock		(3,708,000	)		(125,000	)

Net cash provided by (used in) financing activities		(3,317,000	)		1,810,000

Increase (decrease) in cash		(7,754,000	)		18,187,000

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

Cash, end of the period	$	15,538,000		$	24,735,000

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

Alpha Pro Tech, Ltd.

~~Condensed~~ ~~Consolidated Statements of Cash Flows (Unaudited)~~

For the Nine Months Ended September 30,

2017

2016

Cash Flows From Operating Activities:

Net income
$ 2,457,000 $ 2,323,000
Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation expense
244,000 115,000
Depreciation and amortization
426,000 425,000
Equity in income of unconsolidated affiliate
(339,000 ) (433,000 )
Gain on sale of property
(385,000 ) -
Changes in assets and liabilities:

Accounts receivable, net
(797,000 ) (1,953,000 )
Accounts receivable, unconsolidated affiliate
(276,000 ) (11,000 )
Inventories
1,530,000 4,544,000
Prepaid expenses and other current assets
254,000 191,000
Accounts payable and accrued liabilities
(440,000 ) 815,000

Net cash provided by operating activities
2,674,000 6,016,000

Cash Flows From Investing Activities:

Purchase of property and equipment
(923,000 ) (212,000 )
Proceeds from sale of property
537,000 -
Purchase of marketable securities
- (41,000 )

Net cash used in investing activities
(386,000 ) (253,000 )

Cash Flows From Financing Activities:

Repurchase of common stock
(2,901,000 ) (3,689,000 )
Proceeds from exercise of stock options
125,000 17,000

Net cash used in financing activities
(2,776,000 ) (3,672,000 )

Increase (decrease) in cash
(488,000 ) 2,091,000

Cash, beginning of the period
9,456,000 9,681,000

Cash, end of the period
$ 8,968,000 $ 11,772,000

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

~~Alpha Pro Tech, Ltd.~~

Alpha Pro Tech, Ltd. (“Alpha Pro ~~Tech”~~Tech,” the “Company,” “we”, “us” or ~~the “Company”~~“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;~~markets and a line of disposable protective apparel for the cleanroom, industrial, ~~and~~ pharmaceutical, ~~markets; and a line of infection control products for the~~ 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 ~~shoecovers,~~disposable protective clothing (shoecovers, bouffant caps, coveralls, gowns, frocks and lab ~~coats.~~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 ~~Infection Control segment consists of a line of face masks and eye shields.~~

~~The Company~~’sCompany’s products are sold under the "Alpha Pro Tech" brand name ~~and~~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.

The interim financial information included ~~herein~~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.~~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 USU.S. generally accepted accounting principles (“USU.S. GAAP”). The interim condensed consolidated financial statements should be read in conjunction with the Company’s current year SEC filings, ~~on Form 10-Q and Form 8-K,~~ as well as the Company’s consolidated financial statements for the year ended December 31, ~~2016,~~ 2020, which are included in the Company’s Annual Report on Form ~~10-K (the “2016~~10-K for the fiscal year ended December 31, 2020 (the “2020 Form ~~10-K”~~10-K”), ~~which was~~ filed with the SEC on March ~~8, 2017.~~ 10, 2021. The results of operations for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017 reported~~ 2021 in this Quarterly Report on Form ~~10-Q~~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, ~~2016~~ 2020 was prepared using information from the audited consolidated balance sheet contained in the ~~2016~~2020 Form ~~10-K and~~10-K; however, it does not include all disclosures required by USU.S. GAAP for annual consolidated financial statements.

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 June 30, 2021 that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. As of June 30, 2021, we had contract liabilities of $103,000 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.

The Company ~~maintains a stock option plan under which the Company may grant incentive stock options and non-qualified~~previously granted stock options to employees and non-employee ~~directors.~~directors under a stock option plan (the “2004 Option Plan”). 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 June 30, 2021, 8,912 restricted stock equity awards had been granted under the 2020 Incentive Plan.

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

For the ~~nine~~six months ended ~~September~~June 30, ~~2017, 25,000~~2021 and 2020,no stock options were granted under the Company’s ~~option plan. For the nine months ended September 30, 2016, 810,000 stock options were granted under the Company’s option plan.~~2004 Option Plan. The Company recognized ~~$244,000~~$169,000 and ~~$115,000~~$183,000 in stock-based compensation expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, respectively, related to outstanding options. For the ~~vesting of previously issued options.~~

~~Stock options to purchase~~ ~~999,999 shares of common~~six months ended June 30, 2021 and 2020no restricted stock awards were granted under the 2020 Incentive Plan. The Company recognized $54,000 and $0 in compensation expense associated with outstanding ~~as of September~~restricted stock awards for the six months ended June 30, ~~2017,~~ 2021 and ~~stock options to purchase 1,065,000 shares of common stock were outstanding as of December 31, 2016.~~2020, respectively.

The Company ~~use~~suses 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 ~~the~~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 ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2021:

As of ~~September~~June 30, ~~2017, $602,000~~2021, $111,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of ~~1.70~~0.82 years.

~~As a result of the Company adopting Accounting Standards Update (“ASU”) 2016-09,~~ ~~Compensation - Stock Compensation~~ ~~(Topic 718):~~ ~~Improvements to Employee Share-Based Payment Accounting~~, during the quarter ended March 31, 2017, the Company recorded a one-time $866,000 cumulative-effect adjustment to reduce additional paid-in capital and increase retained earnings for excess tax benefits from stock option exercises that had previously been recorded to additional paid-in capital.

As of ~~September~~June 30, ~~2017 and December 31, 2016, investments totaled $252,000 and $607,000 respectively, which consisted of marketable securities.~~

~~The following provides information regarding the Company’s marketable securities as of September 30, 2017 and December 31, 2016:~~

No2021, we had no investments. NaN marketable securities were sold during the ~~nine~~six months ended ~~September~~June 30, ~~2017 and~~2020.

Certain marketable securities were sold during the ~~year~~six months ended ~~December 31, 2016.~~ June 30, 2020. The ~~change in~~total loss on marketable securities during the six months ended June 30, 2020 was $18,000. The loss for the six months ended June 30, 2020 was due to an unrealized loss of ~~$208,000~~$35,000 and ~~unrealized~~a realized gain of $28,000 for the three months ended September 30, 2017 and 2016, respectively, in the statements of comprehensive income are presented net of tax for the quarters ended September 30, 2017 and 2016, respectively. The tax benefit on the unrealized loss was $105,000, and the tax expense on the unrealized gain was $15,000 for the quarters ended September 30, 2017 and 2016, respectively. The change in unrealized loss of $243,000 and $50,000 for the nine months ended September 30, 2017 and 2016, respectively, in the statements of comprehensive income are presented net of tax for the nine months ended September 30, 2017 and 2016. The tax benefit on the unrealized loss was $113,000 and $31,000 for the nine months ended September 30, 2017 and 2016, respectively.$17,000.

~~Accounting Standards Update (“ASU”) 2014-09,~~ ~~Revenue from Contracts with Customers~~ (Topic 606) (“ASU 2014-09”) is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration that it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 is effective for the first interim period within an annual reporting period beginning after December 15, 2017, and early adoption is not permitted. The Company will adopt ASU 2014-09 during the first quarter of 2018. Management is evaluating the provisions of this update and at this point in time has determined that its adoption will have limited to no impact on the Company’s financial position or results of operations.

In ~~November 2015,~~ June 2016, the FASB issued ASU ~~2015-17,~~ ~~Income Taxes~~2016-13 Financial Instruments - Credit Losses (Topic ~~740)~~326): ~~Balance Sheet Classification~~Measurement of ~~Deferred Taxes~~~~, which~~Credit Losses on Financial Instruments. ASU 2016-13 requires ~~deferred income tax liabilities~~an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and ~~assets to be classified as noncurrent on the balance sheet rather than being separated into current~~reasonable and ~~noncurrent. The guidance was~~supportable forecasts. ASU 2016-13 is effective for public ~~entities~~companies for the annual periods, ~~beginning after December 15, 2016 and~~including interim periods within those annual periods, ~~with early adoption being permitted. The Company adopted this~~beginning after December 15, 2019. This guidance inwas applicable to the ~~first quarter of 2017. The Company netted $410,000 in deferred tax assets against deferred tax liabilities as~~Company’s fiscal year beginning January 1, 2020. Adoption of the ~~end of the first quarter of 2017. Prior periods were~~ new standard did not ~~retrospectively adjusted.~~ have a material impact on our consolidated financial statements.

In ~~January 2016,~~ December 2019, the FASB issued ASU ~~2016-01,~~ ~~Financial Instruments~~No.2019-~~Overall~~ ~~(Subtopic 825-10)~~12, Income Taxes (Topic 740): ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~,Simplifying the Accounting for Income Taxes, which ~~provides guidance for the recognition, measurement, presentation and disclosure of financial instruments. The new guidance revises the accounting requirements~~is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the ~~classification~~general principles in Topic 740 and ~~measurement of investments in equity securities~~also clarifies and ~~the presentation of certain fair value changes for financial liabilities measured at fair value. The~~amends existing guidance ~~also changes certain disclosure requirements associated with the fair value of financial instruments. These changes will require an entity~~ to ~~measure, at fair value, investments in equity securities and other ownership interests in an entity and recognize the changes in fair value within net income. The~~improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2017. The Company has not yet adopted this guidance and has not yet determined the impact of adoption on the Company’s financial position or results of operations.~~

I~~n February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ (Topic 842), which requires lessees to recognize most leases on the balance sheet. The provisions of this guidance are effective for annual periods beginning after December 15, 2018 and interim periods within those years, 2020, with early adoption permitted. ~~Management is evaluating the requirements of this guidance and has not yet determined the impact~~Adoption of the ~~adoption~~new standard did not have a material impact on ~~the Company’s~~our consolidated financial ~~position or results of operations.~~

~~In March 2016, the FASB issued ASU~~ ~~2016-09,~~ ~~Compensation - Stock Compensation~~ ~~(Topic 718):~~ ~~Improvements to Employee Share-Based Payment Accounting~~, which simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The provisions of this guidance were effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods, with early adoption permitted. The Company adopted this guidance during the quarter ended March 31, 2017, and the Company recorded a one-time $866,000 cumulative-effect adjustment to reduce additional paid-in capital and increase retained earnings for excess tax benefits from stock option exercises that had previously been recorded to additional paid-in capital. The adoption of this guidance also increased the number of dilutive shares because excess tax benefits are no longer included in the assumed proceeds when calculating the number of dilutive shares. In addition, the effective tax rate will be reduced in future periods when there are excess tax benefits from stock options exercised.statements.

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

As of ~~September~~June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, inventories net of reserves consisted of the following:

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.~~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~~.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~~associates and collateralized by the assets of Harmony, were utilized to purchase the original manufacturing facility in India. Harmony currently has ~~five~~four facilities in India ~~(three~~(three owned and ~~two~~one rented), consisting of: ~~(1)~~(1) a ~~102,000~~113,000 square foot building for manufacturing building products; ~~(2)~~(2) a ~~71,500~~73,000 square foot building for manufacturing coated material and sewing proprietary disposable protective apparel; ~~(3)~~(3) a 16,000 square foot facility for sewing proprietary disposable protective apparel; ~~(4) a 12,000 square foot rented facility for coating material;~~ and ~~(5)~~(4) a 93,000 square foot ~~rented~~ facility (rented) for ~~the~~ manufacturing ~~of building~~Building Supply segment products. All additions have been financed by Harmony with no guarantees from the Company.

In accordance with ~~Accounting Standards Codification (“ASC”)~~ 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 comprehensive income. The Company periodically reviews its investment in Harmony for impairment. Management has determined that no impairment was required as of ~~September~~June 30, ~~2017.~~2021 or December 31, 2020.

For the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, Alpha Pro Tech purchased ~~$3,258,000~~$7,435,000 and ~~$3,716,000~~$3,774,000 of inventories, respectively, from Harmony. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, Alpha Pro Tech purchased ~~$11,097,000~~$13,789,000 and ~~$9,646,000~~$8,480,000 of inventories, respectively, from Harmony. For the three months ended June 30, 2021 and 2020, the Company sold $451,000 and $471,000 of inventories, respectively, to Harmony. For the six months ended June 30, 2021 and 2020, the Company sold $821,000 and $653,000 of inventories, respectively, to Harmony.

For the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, the Company recorded equity in income of unconsolidated affiliate of ~~$105,000~~$188,000 and ~~$242,000,~~$119,000, respectively, related to Harmony. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, the Company recorded equity in income of unconsolidated affiliate of ~~$339,000~~$510,000 and ~~$433,000,~~$206,000, respectively, related to Harmony.

As of ~~September~~June 30, ~~2017,~~ 2021, the Company’s investment in Harmony was ~~$3,877,000,~~$6,059,000, which consisted of its original $1,450,000 investment and cumulative equity in income of unconsolidated affiliate of ~~$3,446,000,~~$5,628,000, less $942,000 in repayments of the advance and $77,000 in dividends.

As of ~~September~~June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, accrued liabilities consisted of the following:

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 and ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016.~~2020:

(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.

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

~~Infection Control~~~~: consisting of a line of face masks and eye shields.~~

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 and ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016:~~2020:

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016:~~2020:

The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated ~~assets”~~assets��) by segment as of ~~September~~June 30, ~~2017~~ 2021 and December 31, ~~2016:~~2020:

The ~~Company has historically used a law firm~~following table summarizes the Company’s net sales by geographic region for ~~various legal matters whose majority member was a member of~~the three and six months ended June 30, 2021 and 2020:

Net sales by geographic region are based on the countries in which our customers are located. For the three and six months ended June 30, 2021 and 2020, the Company~~’s Board of Directors. Effective March 31, 2017,~~ did not generate sales from any single country, other than the Board member resigned from the Board of Directors, which removed the related party relationship with this law firm. For the three months ended September 30, 2016, the Company expensed $95,000 for legal services from this related party. For the nine months ended September 30, 2017 and 2016, the Company expensed $65,000 and $145,000, respectively, for legal services from this related party. As of December 31, 2016,United States, that were significant to the Company’s ~~outstanding balance to this related party was $163,000.~~consolidated net sales.

The ~~Company is presently involved in protracted litigation against a competitor in an action styled Alpha Pro Tech, Inc. v. VWR International, LLC, pending in~~following table summarizes the ~~U.S. District Court for~~locations of the ~~Eastern District~~Company’s long-lived assets by geographic region as of ~~Pennsylvania, CV 12-1615, wherein the Company originally sought damages for unfair trade practices~~ June 30, 2021 and ~~false advertising against the competitor, and the competitor has counterclaimed asserting similar claims against the Company. In August~~December 31, 2020:

As of ~~2017, the court ruled against~~ June 30, 2021, the Company onhad no related party transactions, other than the Company’s transactions with its claims against the competitor, and the competitor is presently seeking attorneys’ fees and costs as the prevailing party with respect to those claims. The Company is in the process of evaluating, with current litigation counsel, the remaining counterclaims against the Company and the claim for attorneys’ fees and costs and intends to vigorously defend against these claims. Although the Company believes that it will prevail in its defenseunconsolidated affiliate, Harmony. See Note 7 of these ~~claims, any material loss amount that might be incurred cannot reasonably be estimated at this time.~~Notes to Condensed Consolidated Financial Statements (Unaudited).

The Company ~~is subject~~has operating leases for the Company’s corporate office and manufacturing facilities, which expire at various dates through 2025. The Company’s primary operating lease commitments at June 30, 2021 related to ~~other pending~~the Company’s manufacturing facilities in Valdosta, Georgia; Nogales, Arizona; and ~~threatened litigation actions~~Salt Lake City, Utah, as well as the Company’s corporate headquarters in ~~the ordinary course~~Markham, Ontario, Canada.

As of ~~business. Although it is not possible to determine with certainty at this point in time what liability, if any,~~ June 30, 2021, the Company ~~will~~had operating lease right-of-use assets of $3,094,000 and operating lease liabilities of $3,148,000. As of June 30, 2021, we did not have ~~as a result of such litigation, based on consultation with legal counsel, management does not anticipate that the ultimate liability, if~~ any ~~resulting from such litigation will have a material effect~~finance leases recorded on the Company’s ~~financial condition~~condensed consolidated balance sheet. Operating lease expense was approximately $221,000 and ~~results of operations.~~$425,000, respectively during the three and six months ended June 30, 2021.

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

As of June 30, 2021, the weighted average remaining lease term of the Company’s operating leases was 3.67 years. During the six months ended June 30, 2021, the weighted average discount rate with respect to these leases was 4.07%.

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.

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.

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of ~~September~~June 30, ~~2017~~ 2021 through the filing date of this Quarterly Report on Form ~~10-Q~~10-Q that would require accounting or disclosure and has concluded that there are no such subsequent events.

ITEM 22. .MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION 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.~~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”).

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, ~~relating to potential acquisitions~~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.

~~Any expectations based on these~~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 are subject~~statements:

The foregoing list of risks ~~and uncertainties.~~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. These and many other factors could affect the ~~Company~~’sCompany’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.

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 ~~Internet~~ website ~~(http:~~(http://~~www.alphaprotech.com)~~www.alphaprotech.com) our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q, any ~~current reports~~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 ~~Securities and Exchange Commission (“SEC”).~~SEC. In addition, in accordance with SEC rules, we provide ~~electronic or~~ paper copies of our filings free of charge upon request.

The preparation of our financial statements in conformity with USU.S. generally accepted accounting principles (“USU.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 ~~reported periods.~~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~~policies and estimates include the following:

~~Marketable Securities~~: The Company periodically invests a portion of its cash in excess of short-term operating needs in marketable equity securities. These investments are classified as available-for-sale in accordance with US GAAP. The Company does not have any investments classified as held-to-maturity or trading securities. Available-for-sale investments are carried at their fair value using quoted prices in active markets for identical securities, with unrealized gains and losses, net of deferred income taxes, reported as a component of accumulated other comprehensive income (loss). Realized gains and losses, and declines in value deemed to be other-than-temporary on available-for-sale investments, are recognized in earnings. The cost of securities sold is based on the specific identification method. Investments that the Company intends to hold for more than one year are classified as long-term investments in the accompanying condensed consolidated balance sheets.

I~~nventories:~~ 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 quantities on hand, if necessary. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Accounts ~~Receivable:~~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 ~~management determines that~~ 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.

Revenue Recognition: ~~For~~ Net sales ~~transactions,~~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 ~~comply~~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 ~~provisions~~distribution of the ~~SEC Staff Accounting Bulletin No. 104,~~ ~~Revenue Recognition~~~~, which states that revenue should be~~Company’s product to the customers, are recorded in cost of goods sold and are recognized when ~~all~~control of the ~~following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) title transfers and~~product is transferred to the customer, ~~assumes~~which is at the ~~risk of loss; (3)~~time products are delivered to the ~~selling price is fixed or determinable;~~third party carrier for FOB shipping point arrangements and ~~(4) collection~~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 ~~resulting receivable is reasonably assured. These criteria~~contract. Sales taxes and value added taxes in foreign and domestic jurisdictions that are ~~satisfied~~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 ~~shipment~~the nature of ~~product,~~the private labelling. The Company has determined that, as of June 30, 2021, it had no material contract assets, and ~~sales are recognized accordingly.~~concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. As of June 30, 2021, the Company had contract liabilities of $103,000 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~~product specific and sales volume rebates to select distributors. Our rebates are based on actual sales and are accrued monthly.

Stock-Based Compensation: We 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 ~~fair~~ value of ~~stock-based awards determined on the date of grant,~~all outstanding and unvested share-based payments, including employee stock ~~options.~~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~~’smanagement’s expectations of future volatility, risk-free interest rates from published sources, expected ~~life~~term based on historical data, and no dividend yield, as the Board of Directors currently has no ~~current~~ plans to pay dividends in the ~~near~~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. ~~The~~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 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 ~~and infection control~~ 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 ~~three~~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 ~~apparel such as~~garments (including shoecovers, bouffant caps, ~~gowns,~~ coveralls, ~~lab coats,~~gowns, frocks and ~~other miscellaneous products; and the Infection Control segment, consisting of~~lab coats), face masks and ~~eye~~face shields. All financial information presented ~~herein~~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.

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

We are continuing to serve our customers while taking every precaution to provide a safe work environment for our employees. We have enacted enhanced operating protocols to assure the safety and well-being of our employees, placed restrictions on non-essential travel, and otherwise adjusted work schedules to maximize our capacity while adhering to recommended precautions such as social distancing. We 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.

As detailed below under “Results of Operations,” we witnessed a softening in the demand for our N-95 particulate respirator face mask during the six months 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 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, including the Delta variant the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the efficacy of mass vaccinations, and the resumption of widespread economic activity in certain sectors. 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.

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

Th~~ree and~~ ~~nine~~Three months ended ~~September~~June 30, ~~2017~~ 2021 compared to three ~~and~~ ~~nine~~months ended ~~September~~June 30, ~~201~~62020

Sales. Consolidated sales for the three months ended ~~September~~June 30, ~~2017 increased~~2021 decreased to ~~$12,049,000~~$17,806,000, from ~~$11,779,000~~$25,500,000 for the three months ended ~~September~~June 30, ~~2016,~~2020, representing ~~an increase~~a decrease of ~~$270,000,~~$7,694,000, or ~~2.3%~~30.2%. This ~~increase~~decrease consisted of decreased sales in the Disposable Protective Apparel segment of $10,040,000, partially offset by increased sales in the Building Supply segment of ~~$54,000, increased sales in~~$2,346,000.

Sales for the Disposable Protective Apparel segment for the three months ended June 30, 2021 decreased by $10,040,000, or 55.6%, to $8,008,000, compared to $18,048,000 for the same period of ~~$147,000~~2020. This segment decrease was due to a 89.4% decrease in sales of face masks and a 93.2% decrease in face shields, partially offset by a 36.3% increase in sales of disposable protective garments. The decreases for face masks and face shields were primarily due to increased demand resulting from the COVID-19 pandemic in the second quarter of 2020. Management expects future sales of face mask and face shields to be more in-line with pre-pandemic levels in future periods.

Sales for the disposable protective garments in the second quarter of 2021 were a record and up a very strong 36.3%. This represents two consecutive quarters of record sales for disposable protective garments as the first quarter of 2021 was the previous record. This was due to strong open orders, generated largely in 2020 primarily from our major international channel partner. Open orders for the disposable protective garments are now more in line with pre-pandemic levels and sales in the ~~Infection Control~~coming quarters could be negatively affected as current inventory levels in the supply chain, primarily with our major international channel partner, are higher than historical. We are working closely with all our channel partners to uncover new end-customer sales opportunities.

The sales mix of the Disposable Protective Apparel segment ~~of $69,000.~~for the three months ended June 30, 2021 was approximately 85% for disposable protective garments, 11% for face masks and 4% for face shields. This sales mix is compared to approximately 28% for disposable protective garments, 47% for face masks and 25% for face shields for the three months ended June 30, 2020.

Building Supply segment sales for the three months ended ~~September~~June 30, ~~2017~~2021 increased by ~~$54,000,~~$2,346,000, or ~~0.8%~~31.5%, to ~~$7,076,000,~~$9,798,000, compared to ~~$7,022,000~~$7,452,000 for the ~~same period of 2016. This~~three months ended June 30, 2020. The Building Supply segment increase was primarily due to a ~~20.3%~~35.6% increase in sales of synthetic roof underlayment, a 29.1% increase in sales of housewrap and a ~~37.2%~~19.6% increase in sales of other woven material ~~partially offset by a 14.9% decrease in sales~~compared to the same period of ~~synthetic roof underlayment (including REX™, TECHNOply™ and TECHNO SB).~~ 2020.

The sales mix of the Building Supply segment for the three months ended ~~September~~June 30, ~~2017~~2021 was approximately 48% for synthetic roof underlayment, ~~42%~~43% for housewrap and ~~10%~~9% for other woven material. This compared to ~~57%~~approximately 46% for synthetic roof underlayment, ~~35%~~44% for housewrap and 8%10% for other woven material for the three months ended ~~September~~June 30, ~~2016.~~

~~Although~~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®.

Building Supply segment ~~sales were down, housewrap~~ sales remained strong in the second quarter of 2021 bolstered by a stronger than expected demand for new home construction. The synthetic roof underlayment sales increase of 35.6% was attributed to both an increase in the growth of the brand coupled with ~~increased sales~~demand from product shortages in the market. Our Housewrap family of products remained strong with a 29.1% increase, driven by the new home construction market.

Management is optimistic about continued growth in this segment as open orders for our synthetic roof underlay and housewrap remain very strong. As a result of our continued optimism, we have committed to increasing production capacity of this segment by investing approximately $4.0 million in new equipment, part of which is expected to be operational in the third and fourth quarters of 2021. As a result of a delay in the relevant supply chain, the final piece of equipment is now anticipated to arrive in the latter part of the fourth quarter of ~~20.3%~~2021 and ~~10.0% year to date. At the end of the third quarter, we announced a new, innovative and exciting product~~ line to our housewrap family, REX™ Wrap Fortis with JX ALTA 360° Drainage Technology™. With its one-of-a-kind construction, this product uniquely enables the drainage of water in EVERY direction to protect buildings from the elements exponentially better than a traditional housewrap, while decreasing job site material waste, simplifying installation to reduce labor and allowing fewer productsis expected to be carried. This new product offering will compete in a segment of the housewrap market that is currently untapped for us, and we anticipate that it will provide us with significant growth opportunities. Synthetic roof underlayment sales were downoperational in the ~~third~~first quarter of 2017, primarily due to lower sales to private label customers and competitive pricing pressure. In particular, sales to one of our largest private label distributors were down significantly in the third quarter as well as year to date, as they are struggling with a general decline in their overall building sales. In addition, sales to another smaller private label distributor were down due to a change in strategy during 2016. Although sales were down, the number of rolls of label synthetic roof underlayment sold, excluding sales to the two distributors mentioned above, were actually up 5.9% for the quarter. We believe that our line of synthetic roof underlayment will be a growth driver in the coming year. Management expects the Building Supply segment to experience growth in 2018.

~~Sales for the Disposable Protective Apparel segment for the~~ ~~three~~Six months ended ~~September~~June 30, ~~2017 increased by $147,000, or 4.0%, to $3,845,000,~~2021 compared to ~~$3,698,000 for the same period of 2016, primarily due to increased sales to our major international supply chain partner, partially offset by decreased sales to national and regional distributors.~~

~~Infection Control segment sales for the~~ ~~three~~six months ended ~~September~~June 30, 2017 increased by $69,000, or 6.5%, to $1,128,000, compared to $1,059,000 for the same period of 2016. Mask sales were up by 6.1%, or $43,000, to $751,000, and shield sales were up by 7.4%, or $26,000, to $377,000.2020

Consolidated sales for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 decreased to ~~$34,082,000~~$40,967,000 from ~~$36,334,000~~$43,654,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2020, representing a decrease of ~~$2,252,000,~~$2,687,000, or 6.2%. This decrease ~~was due to~~consisted of decreased sales in the Disposable Protective Apparel Segment of $5,817,000 and increased sales in the Building Supply segment of ~~$2,402,000 and decreased sales in the~~ $3,130,000.

Disposable Protective Apparel ~~segment of $233,000, partially offset by increased sales in the Infection Control segment of $383,000.~~

~~Building Supply segment sales for the~~ nine months ended September 30, 2017 decreased by $2,402,000, or 11.1%, to $19,298,000, compared to $21,700,000 for the same period of 2016. This segment decrease was primarily due to a 25.3% decrease in sales of synthetic roof underlayment (including REX™, TECHNOply™ and our new TECHNO SB), partially offset by a 10.0% increase in sales of housewrap and a 30.3% increase in sales of other woven material. The sales mix of the Building Supply segment for the nine months ended September 30, 2017 was 51% for synthetic roof underlayment, 41% for housewrap and 8% for other woven material. This compared to 61% for synthetic roof underlayment, 33% for housewrap and 6% for other woven material for the nine months ended September 30, 2016.Segment

Sales for the Disposable Protective Apparel segment for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 decreased by ~~$233,000,~~$5,817,000, or ~~2.1%~~20.3%, to ~~$10,914,000,~~$22,829,000, compared to ~~$11,147,000~~$28,646,000 for the same period of ~~2016. Although~~2020. This segment decrease was due to a 50.0% decrease in sales of face masks, a 52.3% decrease in sales of face shields and a 38.4% increase in sales of disposable protective garments, all primarily due to customer demand associated with the pandemic.

The sales mix of the Disposable Protective Apparel segment for the six months ended June 30, 2021 was 59% for disposable protective garments, 29% for masks and 12% for shields. This sales ~~were~~ ~~down year~~mix is compared to ~~date, sales have been up in~~34% for disposable protective garments, 46% for masks and 20% for shields for the two most recent quarters. The year to date decrease was primarily due to decreased sales to our national and regional distributors, partially offset by an increase to our major international supply chain partner.six months ended June 30, 2020.

~~Infection Control~~Building Supply segment sales for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 increased by ~~$383,000,~~$3,130,000, or ~~11.0%~~20.9%, to ~~$3,870,000,~~$18,138,000, compared to ~~$3,487,000~~$15,008,000 for the same period of ~~2016. Mask~~2020. The Building Supply segment increase was primarily due to an increase in sales of synthetic roof underlayment of 33.6%, an increase in sales of housewrap of 16.5%, and a decrease in sales of other woven material of 3.8% compared to the same period of 2020. Synthetic roof underlayment sales increased as a result of increased sales of the Company’s TECHNO family of products. Synthetic roof underlayment and housewrap sales were uppositively affected during the six months ended June 30, 2021 by ~~12.7%, or $303,000,~~improved U.S. housing starts.

The sales mix of the Building Supply segment for the six months ended June 30, 2021 was 50% for synthetic roof underlayment, 42% for housewrap and 8% for other woven material. This compared to ~~$2,695,000,~~45% for synthetic roof underlayment, 45% for housewrap and ~~shield sales were up by 7.3%, or $80,000, to $1,175,000.~~10% for other woven material for the six months ended June 30, 2020.

Gross Profit. Gross profit ~~increased~~decreased by ~~$196,000,~~$6,381,000, or ~~4.3%~~50.6%, to ~~$4,712,000~~$6,232,000 for the three months ended ~~September~~June 30, ~~2017~~2021, from ~~$4,516,000~~$12,613,000 for the three months ended June 30, 2020. The gross profit margin was 35.0% for the three months ended June 30, 2021, compared to 49.5% for the three months ended June 30, 2020.

Gross profit decreased by $5,756,000, or 27.2%, to $15,411,000 for the six months ended June 30, 2021, from $21,167,000 for the same period of ~~2016.~~2020. The gross profit margin was ~~39.1%~~37.6% for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~38.3%~~48.5% for the same period of ~~2016.~~2020.

~~Gross profit~~ ~~increased by $191,000, or 1.4%, to $13,493,000 for the nine months ended September 30, 2017 from $13,302,000 for the same period of 2016. The~~Management believes that gross profit margin ~~was 39.6%~~will be negatively affected in 2021 as a result of changes in product mix as the need for ~~the nine months ended September 30, 2017, compared to 36.6% for the same period of 2016.~~

~~Management expects~~face masks and face shields, which have a higher gross profit margin ~~to be~~ ~~around 39% for fiscal 2017.~~than our other products, declines from the surge in customer demand in 2020 as a result of the COVID-19 pandemic. 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. 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 decreased by $354,000, or 7.8%, to $4,199,000 for the three months ended June 30, 2021, from $4,553,000 for the three months ended June 30, 2020. However, as a percentage of net sales, selling, general and administrative expenses increased to 23.6% three months ended June 30, 2021, up from 17.9% for the same period of 2020, primarily as a result of lower net sales.

The change in expenses by segment for the three months ended June 30, 2021 was as follows: Disposable Protective Apparel was down $188,000, or 12.2%; Building Supply was up $22,000, or 1.7%; and corporate unallocated expenses were down $188,000, or 11.2%. The decrease in the Disposable Protective Apparel segment expenses was primarily related to decreased commission and general factory expenses. The increase in the Building Supply segment expenses was primarily related to increased employee compensation and travel expenses, partially offset by decreased insurance costs. The decrease in corporate unallocated expenses was primarily due to lower employee compensation.

Selling, general and administrative expenses increased by ~~$292,000,~~$121,000, or ~~9.2%~~1.4%, to ~~$3,450,000~~$8,777,000 for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2021, from ~~$3,158,000~~$8,656,000 for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2020. As a percentage of net sales, selling, general and administrative expenses increased to ~~28.6%~~21.4% for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2021, up from ~~26.8%~~19.8% for the same period of ~~2016.~~2020, primarily as a result of lower net sales.

The change in ~~selling, general and administrative~~ expenses by segment for the ~~third quarter of 2017 by segment~~six months ended June 30, 2021 was as follows: ~~Building Supply was up $153,000, or 14.6%, Infection Control was up $2,000, or 1.5%,~~ Disposable Protective Apparel was up ~~$29,000,~~$236,000, or ~~3.5%,~~8.4%; Building Supply was up $13,000, or 0.5%; and corporate unallocated expenses were ~~up $108,000,~~down $128,000, or ~~9.3%~~4.0%. The increase in the Disposable Protective Apparel segment expenses was primarily related to increased employee compensation, partially offset by decreased commission and general factory expenses. The increase in the Building Supply segment expenses was related to increased employee compensation and increased insurance costs. The decrease in corporate unallocated expenses was primarily due to ~~an increase in sales~~decreased accrued bonuses and ~~marketing~~decreased professional fees, partially offset by increased public company expenses, ~~as we invested in additional sales representatives primarily in the Building Supply segment.~~increased professional fees and increased insurance expense.

~~Selling, general and administrative expenses~~ ~~increased by $319,000, or 3.2%, to $10,269,000 for~~In accordance with the ~~nine months ended September 30, 2017 from $9,950,000 for the nine months ended September 30, 2016. As a percentage~~terms of ~~net sales, selling, general and administrative expenses increased to 30.1% for the nine months ended September 30, 2017, from 27.4% for the same period of 2016.~~

~~The change in~~ selling, general and administrative expenses for the first nine months of 2017 by segment was as follows: Building Supply was up $204,000, or 6.1%, Infection Control was up $4,000, or 1.0%, corporate unallocated expenses were up $234,000, or 6.8%, and Disposable Protective Apparel was down $123,000, or 4.5%.

~~Pursuant to~~ ~~their~~his employment ~~agreements,~~agreement, the Company’s current President and Chief Executive Officer ~~and President are each~~is entitled to aan annual bonus equal to 5% of the pre-tax profits of the Company, excluding bonus ~~expense. Bonuses~~expense, up to a maximum of ~~$190,000 were~~$1.0 million. A bonus amount of $123,000 was accrued for the three months ended ~~September~~June 30, ~~2017,~~2021, compared to $423,000 for the three months ended June 30, 2020. A bonus amount of $372,000 was accrued for the six months ended June 30, 2021, as compared to ~~$76,000~~$650,000 for the same period of 2016. Bonuses of $392,000 were accrued for the nine months ended September 30, 2017, as compared to $177,000 for the same period of 2016. The Chief Executive Officer was not entitled to receive this bonus during 2016.2020.

Depreciation and Amortization. Depreciation and amortization expense ~~decreased~~increased by ~~$6,000,~~$25,000, or ~~3.9%~~14.0%, to ~~$147,000~~$203,000 for the three months ended ~~September~~June 30, ~~2017~~2021, from ~~$153,000~~$178,000 for the three months ended June 30, 2020. Depreciation and amortization expense increased by $41,000, or 11.4%, to $401,000 for the six months ended June 30, 2021, from $360,000 for the same period of ~~2016.~~

~~Depreciation~~2020. The increase was primarily attributable to increased depreciation for machinery and ~~amortization expense~~ equipment in the Building Supply segment and increased ~~by $1,000, or 0.2%,~~corporate depreciation related to ~~$426,000 for the nine months ended September 30, 2017 from $425,000 for the same period of 2016.~~computer technology.

Income from Operations.Income from operations decreased by ~~$90,000,~~$6,052,000, or ~~7.5%~~76.8%, to ~~$1,115,000~~$1,830,000 for the three months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$1,205,000~~$7,882,000 for the three months ended ~~September~~June 30, ~~2016.~~2020. The decreased income from operations was primarily due to a decrease in gross profit of $6,381,000 and an increase in depreciation and amortization expense of $25,000, partially offset by a decrease in selling, general and administrative expenses of $354,000 Income from operations as a percentage of net sales for the three months ended June 30, 2021 was 10.3%, compared to 30.9% for the same period of 2020.

Income from operations decreased by $5,918,000, or 48.7%, to $6,233,000 for the six months ended June 30, 2021, compared to $12,151,000 for the six months ended June 30, 2020. The decreased income from operations was primarily due to a decrease in gross profit of $5,756,000, an increase in selling, general and administrative expenses of ~~$292,000, partially offset by~~$121,000 and an increase in ~~gross profit~~depreciation and amortization expense of ~~$196,000.~~

$41,000. Income from operations ~~decreased~~as a percentage of net sales for the six months ended June 30, 2021 was 15.2%, compared to 27.8% for the same period of 2020.

Other Income. Other income increased by ~~$129,000,~~$28,000, or ~~4.4%~~17.5%, to ~~$2,798,000~~$188,000 for the ~~nine~~three months ended ~~September~~June 30, ~~2017, compared to $2,927,000~~2021, from $160,000 for the ~~nine~~three months ended ~~September~~June 30, ~~2016.~~2020. The ~~decreased income from operations~~increase was primarily due to an increase in ~~selling, general and administrative expenses of $319,000, partially offset by an increase in gross profit of $191,000.~~

~~Other Income.~~ ~~Other income increased by $248,000 to $491,000 for the three months ended September 30, 2017 from $243,000 for the same period of 2016. Other income consisted primarily of~~ equity in income of unconsolidated affiliate of ~~$105,000,~~$69,000, and partially offset by a ~~gain~~decrease of $41,000 on ~~the sale of property of $385,000 and interest~~gains on marketable securities.

Other income ~~of $1,000~~increased by $307,000 to $511,000 for the ~~three~~six months ended ~~September~~June 30, ~~2017. Other income consisted~~2021, from $204,000 for the same period of 2020. The increase was primarily ofdue an increase in equity in income of unconsolidated affiliate of ~~$242,000~~$304,000 and ~~interest income of $1,000 for the three months ended September 30, 2016.~~

~~Other income~~ ~~increased by $291,000~~ to ~~$727,000 for the nine months ended September 30, 2017 from $436,000 for~~a loss on marketable securities in 2020 compared to no gain or loss on marketable securities during the same period of ~~2016. Other income consisted primarily~~2021, for a net increase of ~~equity~~$18,000, partially offset by a decrease in ~~income of unconsolidated affiliate of $339,000, a gain on the sale of property of $385,000 and~~ interest income of $3,000 for the nine months ended September 30, 2017. Other income consisted primarily of equity in income of unconsolidated affiliate of $433,000 and interest income of $3,000 for the nine months ended September 30, 2016.$15,000.

Income before Provision for Income Taxes. Income before provision for income taxes for the three months ended ~~September~~June 30, ~~2017~~2021 was ~~$1,606,000,~~$2,018,000, compared to income before provision for income taxes of ~~$1,448,000~~$8,042,000 for the ~~three months ended September 30, 2016,~~same period of 2020, representing ~~an increase~~a decrease of ~~$158,000,~~$6,024,000, or ~~10.9%~~74.9%. This ~~increase~~decrease in income before provision for income taxes was ~~primarily~~ due to ~~an increase in other income of $248,000, partially offset by~~ a decrease in income from operations of ~~$90,000.~~$6,052,000 and partially offset by an increase in other income of $28,000.

Income before provision for income taxes for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 was ~~$3,525,000,~~$6,744,000, compared to income before provision for income taxes of ~~$3,363,000~~$12,355,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2020, representing ~~an increase~~a decrease of ~~$162,000,~~$5,611,000, or ~~4.8%~~45.4%. ~~The increase~~This decrease in income before provision for income taxes was ~~primarily~~ due to ~~an increase in other income of $291,000, partially offset by~~ a decrease in income from operations of ~~$129,000.~~$5,918,000, partially offset by an increase in other income of $307,000.

Provision for Income ~~Taxes.~~Taxes. The provision for income taxes for the three months ended ~~September~~June 30, ~~2017~~2021 was ~~$503,000,~~$347,000, compared to ~~$429,000~~$1,822,000 for the same period of ~~2016.~~2020. The estimated effective tax rate was ~~31.3%~~17.2% for the three months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~29.6%~~22.7% for the ~~same period of 2016.~~three months ended June 30, 2020. The Company does not record a tax provision on equity in income of unconsolidated ~~affiliate. For the three months ended September 30, 2017, the estimated effective tax rate would have been 33.5% if the equity in income of unconsolidated~~ affiliate, ~~was taxable. Management expects~~which reduces the effective tax ~~rate to be in the low 30% range for fiscal 2017.~~rate.

The provision for income taxes for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 was ~~$1,068,000,~~$1,354,000, compared to ~~$1,040,000~~$794,000 for the same period of ~~2016.~~2020. The provision for income taxes consisted of an estimated nonrecurring tax benefit of $2.0 million in the first quarter of 2020 as a result of the exercise of disqualified Incentive Stock Options and the exercise of Non-Qualified Stock Options. The estimated effective tax rate was ~~30.3%~~20.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~30.9%~~6.4% for the ~~same period~~six months ended June 30, 2020. Excluding the estimated nonrecurring tax benefit of ~~2016.~~$2.0 million, the estimated effective tax rate was 22.6% for the six months ended June 30, 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 ~~September~~June 30, ~~2017~~2021 was ~~$1,103,000,~~$1,671,000, compared to net income of ~~$1,019,000~~$6,220,000 for the three months ended ~~September~~June 30, ~~2016,~~2020, representing ~~an increase~~a decrease of ~~$84,000,~~$4,549,000, or ~~8.2%~~73.1%. ~~The net income increase was due to an increase in income before provision for income taxes of $158,000, partially offset by an increase in provision for income taxes of $74,000.~~ Net income as a percentage of net sales for the three months ended ~~September~~June 30, ~~2017~~2021 was ~~9.2%~~9.4%, and net income as a percentage of net sales for the same period of ~~2016~~2020 was ~~8.7%~~24.4%. Basic ~~and diluted~~ earnings per common share for the three months ended ~~September~~June 30, ~~2017~~2021, and ~~2016~~2020 were ~~$0.07~~$0.13 and ~~$0.06,~~$0.47, respectively. Diluted earnings per common share for the three months ended June 30, 2021 and 2020 were $0.12 and $0.46, respectively.

Net income for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 was ~~$2,457,000,~~$5,390,000, compared to net income of ~~$2,323,000~~$11,561,000 for the ~~nine months ended September 30, 2016,~~same period of 2020, representing ~~an increase~~a decrease of ~~$134,000,~~$6,171,000, or ~~5.8%~~53.4%. The net income ~~increase~~decrease comparing the 2021 and 2020 periods was due to ~~an increase~~a decrease in income before provision for income taxes of ~~$162,000, partially offset by~~$5,611,000, and an increase in provision for income taxes of ~~$28,000.~~$712,000. As mentioned above, a tax benefit from stock options exercised positively impacted net income in the first quarter of 2020 by an estimated $2.0 million. Net income as a percentage of net sales for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 was ~~7.2%~~13.2%, and net income as a percentage of net sales for the same period of ~~2016~~2020 was ~~6.4%~~26.5%. Basic ~~and diluted~~ earnings per common share for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 were ~~$0.16~~$0.41 and ~~$0.14,~~$0.87, respectively.

Diluted earnings per common share for the six months ended June 30, 2021 and 2020 were $0.40 and $0.84, respectively.

As of ~~September~~June 30, ~~2017, we~~2021, the Company had cash of ~~$8,968,000~~$15,538,000 and working capital of ~~$25,646,000, representing a decrease in working capital of 5.7%, or $1,552,000, from December 31, 2016.~~$50,110,000. As of ~~September~~June 30, ~~2017, our~~2021, the Company’s current ratio (current assets/current liabilities) was ~~14:~~19:1, compared to a ~~12:1~~ current ratio of 9:1 as of December 31, ~~2016.~~2020. Cash decreased by ~~5.2%~~33.3%, or ~~$488,000,~~$7,754,000, to ~~$8,968,000~~$15,538,000 as of ~~September~~June 30, ~~2017,~~2021, compared to ~~$9,456,000~~$23,292,000 as of December 31, ~~2016.~~2020, and working capital increased by $659,000 from $49,451,000 as of December 31, 2020. The decrease in cash from December 31, 2020 was due to cash used in ~~financing~~operating activities of ~~$2,776,000 and~~$2,969,000, cash used in investing activities of ~~$386,000, partially offset by~~$1,468,000 and cash ~~provided by operating~~used in financing activities of ~~$2,674,000.~~$3,317,000.

We ~~have~~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%~~. As of September 30, 2017, the prime interest rate was 4.25%~~. This credit line ~~was renewed~~expired in May ~~2016~~2020, and ~~expires in May 2018.~~the Company decided not to renew. The ~~available line~~Company has continued its relationship with Wells Fargo, with the exception of ~~credit is based on a formula of eligible accounts receivable and inventories. Our borrowing capacity on~~ the line of credit. The Company determined that the credit ~~was $3,500,000~~line is not necessary at this time, as ~~of September 30, 2017. As of September 30, 2017, we did~~it had not ~~have any borrowings under this credit facility~~been used in several years, and ~~do not anticipate using it in~~ the ~~near future.~~Company currently has sufficient funding from operations.

Net cash ~~provided by~~used in operating activities of $~~2,674,000~~$2,969,000 for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2021 was due to net income of ~~$2,457,000, adjusted~~$5,390,000, impacted primarily by the following: stock-based compensation expense of ~~$244,000,~~$169,000, depreciation and amortization expense of ~~$426,000,~~$401,000, equity in income of unconsolidated affiliate of ~~$339,000, gain on sale~~$510,000, operating lease expense net of ~~property~~accretion of ~~$385,000, an increase~~$441,000, a decrease in accounts receivable of ~~$1,073,000, a decrease~~$2,053,000, an increase in prepaid expenses of $2,135,000, an increase in inventory of ~~$1,530,000, a decrease in prepaid expenses and other current assets of $254,000 and~~$5,248,000, a decrease in accounts payable and accrued liabilities of ~~$440,000.~~$2,894,000, a decrease in customer advance payments of $106,000 and a decrease in lease liabilities of $438,000.

Accounts receivable ~~increased~~decreased by ~~$1,073,000,~~$1,961,000, or ~~22.3%~~21.7%, to ~~$5,895,000~~$7,076,000 as of ~~September~~June 30, ~~2017~~2021, from ~~$4,822,000~~$9,037,000 as of December 31, ~~2016.~~2020. The ~~increase~~decrease in accounts receivable was ~~primarily~~ related to ~~increased revenue in the third quarter of 2017~~decreased sales as compared to the fourth quarter of ~~2016.~~2020. The number of days that sales remained outstanding as of ~~September~~June 30, ~~2017,~~2021, calculated by using an average of accounts receivable outstanding and annual revenue, was 4239 days, compared to 3034 days as of December 31, ~~2016.~~2020.

Inventory ~~decreased~~increased by $~~1,530,000,~~$5,248,000, or ~~13.9%~~31.3%, to ~~$9,464,000~~$21,997,000 as of ~~September~~June 30, ~~2017~~2021, from ~~$10,994,000~~$16,749,000 as of December 31, ~~2016.~~2020. The increase was primarily due to an increase in inventory for the Disposable Protective Apparel segment of $3,777,000, or 32.9%, to $15,275,000 and an increase in inventory for the Building Supply segment of $1,471,000 or 28.0%, to $6,722,000.

Prepaid expenses increased by $2,135,000, or 34.3%, to $8,360,000 as of June 30, 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 June 30, 2021 decreased by $441,000 to $3,094,000 from $3,535,000 as of December 31, 2020 as a result of amortization of the balance.

Lease liabilities as of June 30, 2021 decreased by $438,000 to $3,148,000 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 June 30, 2021 decreased by $2,894,000, or 60.6%, to $1,882,000, from $4,776,000 as of December 31, 2020. The decrease was primarily due to a decrease in ~~inventory for the Disposable Protective Apparel segment of $1,014,000, or 27.1%, to $2,722,000, a decrease in inventory for the Building Supply segment of $474,000, or 9.7%, to $4,435,000,~~accrued bonuses and a decrease in ~~inventory for the Infection Control segment of $42,000, or 1.8%, to $2,307,000.~~trade accounts payable.

~~Prepaid expenses and other current assets decreased by $254,000, or 7.6%, to $3,092,000~~Customer advance payment of orders as of ~~September~~June 30, ~~2017 from $3,346,000~~2021 was $103,000, 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, ~~2016. The decrease was primarily due to a decrease in deposits for the purchase of inventory.~~

~~Accounts payable and accrued liabilities as of~~ September 30, 2017 decreased by $440,000, or 17.8%, to $2,025,000, from $2,465,000 as of December 31, 2016. The change was primarily due to a decrease in accrued liabilities of $483,000 and an increase in trade payables of $43,000.2020.

Net cash used in investing activities was $~~386,000~~$1,468,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to net cash used in investing activities of ~~$253,000~~$372,000 for the same period of ~~2016. Our investing~~2020. Investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 consisted of the purchase of property and equipment of ~~$923,000 and proceeds of $537,000 from the sale of property. Our investing~~$1,468,000. Investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2020 consisted of the purchase of property and equipment of ~~$212,000~~$419,000 and proceeds from the ~~purchase~~sale of marketable securities of ~~$41,000.~~$47,000.

Net cash used in financing activities was $~~2,776,000~~$3,317,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to net cash ~~used in~~provided by financing activities of ~~$3,672,000~~$1,810,000 for the same period of ~~2016. The net~~2020. Net cash used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017 was due to~~2021 resulted from the payment of ~~$2,901,000~~$3,708,000 for the repurchase of ~~shares of our~~ common stock, mainly offset by proceeds of $391,000 from the exercise of stock options. Net cash provided by financing activities for the six months ended June 30, 2020 resulted from proceeds of $1,935,000 from the exercise of stock options, ~~of $125,000. The net cash used in financing activities for the nine months ended September 30, 2016 was due to~~partially offset the payment of ~~$3,689,000~~$125,000 for the repurchase of ~~shares of our~~ common ~~stock, offset by proceeds from exercise of stock options of $17,000.~~stock.

As of ~~September~~June 30, ~~2017~~,2021, we had ~~$1,604,000~~$777,000 available for additional stock purchases under our stock repurchase program. During the ~~nine~~three months ended ~~September~~June 30, ~~2017,~~2021, we repurchased ~~898,242~~150,000 shares of common stock at a cost of ~~$2,901,000.~~$1,342,000. As of ~~September~~June 30, ~~2017,~~2021, we had repurchased a total of ~~15,869,773~~18,446,917 shares of common stock at a cost of ~~$27,916,000~~approximately $41,742,000 through our repurchase program. We retire all stock upon ~~its~~ repurchase. Future repurchases are expected to be funded from cash on hand and cash flows from operating ~~activities.~~activities

We believe that our current cash balance ~~and the funds~~ ~~available under our credit facility~~ will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future. We have made approximately $4,000,000 in commitments for capital investments to increase our production capacity in our Building supply segment, of which $2,450,000 has been paid as of June 30, 2021.

In ~~November 2015,~~June 2016, the FASB issued ASU ~~2015-17,~~ ~~Income Taxes~~2016-13 Financial Instruments - Credit Losses (Topic ~~740)~~326): ~~Balance Sheet Classification~~Measurement of ~~Deferred Taxes~~~~, which~~Credit Losses on Financial Instruments. ASU 2016-13 requires ~~deferred income tax liabilities~~an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and ~~assets to be classified as noncurrent on the balance sheet rather than being separated into current~~reasonable and ~~noncurrent. The guidance was~~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, ~~2016 and interim periods within those annual periods, with early adoption being permitted. The Company adopted this~~2019. This guidance inis applicable to the ~~first quarter of 2017. The Company netted $410,000 in deferred tax assets netted against deferred tax liabilities as~~Company’s fiscal year beginning January 1, 2020. Adoption of the ~~end of the first quarter of 2017. Prior periods were~~new standard did not ~~retrospectively adjusted.~~have a material impact on our consolidated financial statements.

In ~~January 2016,~~December 2019, the FASB issued ASU ~~2016-01,~~ ~~Financial Instruments~~ - ~~Overall~~ ~~(Subtopic 825-10)~~No. 2019-12, Income Taxes (Topic 740): ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~,Simplifying the Accounting for Income Taxes, which ~~provides guidance for the recognition, measurement, presentation and disclosure of financial instruments. The new guidance revises the accounting requirements~~is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the ~~classification~~general principles in Topic 740 and ~~measurement of investments in equity securities~~also clarifies and ~~the presentation of certain fair value changes for financial liabilities measured at fair value. The~~amends existing guidance ~~also changes certain disclosure requirements associated with the fair value of financial instruments. These changes will require an entity~~ to ~~measure, at fair value, investments in equity securities and other ownership interests in an entity and recognize the changes in fair value within net income. The~~improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2017. The Company has not yet adopted this guidance and has not yet determined the impact of adoption on the Company’s financial position or results of operations.~~

I~~n February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ (Topic 842), which requires lessees to recognize most leases on the balance sheet. The provisions of this guidance are effective for annual periods beginning after December 15, 2018 and interim periods within those years,2020, with early adoption permitted. ~~Management~~The Company is currently evaluating ~~the requirements of this guidance and has not yet determined~~ the impact of ~~the adoption~~this standard on ~~the Company’s~~its consolidated financial ~~position or results of operations.~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation~~ ~~(Topic 718):~~ ~~Improvements to Employee Share-Based Payment Accounting~~, which simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The provisions of this guidance were effective for annual reporting periods beginning after December 15, 2016statements and ~~interim periods within those annual periods, with early adoption permitted. T~~he Company adopted this guidance during the quarter ended March 31, 2017, and the Company recorded a one-time $866,000 cumulative-effect adjustment to reduce additional paid-in capital and increase retained earnings for excess tax benefits from stock option exercises that had previously been recorded to additional paid-in capital. The adoption of this guidance also increased the number of dilutive shares because excess tax benefits are no longer included in the assumed proceeds when calculating the number of dilutive shares. In addition, the effective tax rate will be reduced in future periods when there are excess tax benefits from stock options exercised.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.~~discussion at this time.

ITEM 3. Q~~UANTITATIVE~~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.

Under the supervision and with the participation of our management, including our President and ~~Chairman and our~~ Chief Executive Officer (principal executive ~~officers)~~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 ~~September~~June 30, ~~2017,~~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.~~ 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.

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 ~~officers~~ 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.

~~PART II~~. ~~OTHER INFORMATION~~Changes in Internal Control Over Financial Reporting

~~ITEM~~ 1. ~~LEGAL PROCEEDINGS~~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.

~~The Company is presently involved in protracted litigation against a competitor in an action styled~~

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 U.S. District Court for the Eastern District of Pennsylvania, CV 12-1615, wherein the Company originally sought damages for unfair trade practices and false advertising against the competitor, and the competitor has counterclaimed asserting similar claims against the Company. In August of 2017, the court ruled against the Company on its claims against the competitor, and the competitor is presently seeking attorneys’ fees and costs as the prevailing party with respect2020 Form 10-K. There have been no material changes to our risk factors from those ~~claims. The Company is~~disclosed in Part I, Item 1A, “Risk Factors” in the process of evaluating, with current litigation counsel, the remaining counterclaims against the Company and the claim for attorneys’ fees and costs and intends to vigorously defend against these claims. Although the Company believes that it will prevail in its defense of these claims, any material loss amount that might be incurred cannot reasonably be estimated at this time.2020 Form 10-K.

I~~TEM~~2. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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:

(1) ~~On June~~Pursuant to the Company’s share repurchase program, on September 22, ~~2017,~~2020, the Company announced that the Board of Directors had authorized a ~~$2,000,000~~$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.

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

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.

PART I.		FINANCIAL INFORMATION

ITEM 1.	Financial Statements	page

	~~Condensed Consolidated Balance Sheets (Unaudited)~~	1

	Condensed Consolidated ~~Statements of Income~~Balance Sheets (Unaudited)	2 1

	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	2

	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)	3

	Condensed Consolidated ~~Statement~~Statements of ~~Shareholders’ Equity~~Cash Flows (Unaudited)	4

	Notes to Condensed Consolidated Financial Statements ~~of Cash Flows~~ (Unaudited)	5

ITEM 2.	~~Notes to Condensed Consolidated~~Management’s Discussion and Analysis of Financial ~~Statements (Unaudited)~~ Condition and Results of Operations	6 14

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

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	21 24

ITEM 4.	Controls and Procedures	21 24

PART II.		OTHER INFORMATION

ITEM 1. IA.	~~Legal Proceedings~~ Risk Factors	22 25

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22 25

ITEM 6.	Exhibits	2326

SIGNATURES		24 27

~~EXHIBITS~~
EXHIBITS


	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2017			2016		2017			2016

Net income	$	1,103,000		$	1,019,000	$	2,457,000		$	2,323,000
Other comprehensive income (loss):
Change in unrealized gain (loss) on marketable securities, net of tax		(208,000	)		28,000		(243,000	)		(50,000	)
Comprehensive income	$	895,000		$	1,047,000	$	2,214,000		$	2,273,000


For the Nine Months Ended September 30, 2017
										Accumulated
							Additional			Other
	Common Stock						Paid-in			Comprehensive			Retained
	Shares			Amount			Capital			Loss			Earnings		Total
Balance as of December 31, 2016		15,411,556		$	154,000		$	9,990,000		$	(204,000	)	$	22,724,000	$	32,664,000
Common stock repurchased and retired		(898,242	)		(9,000	)		(2,892,000	)		-			-		(2,901,000	)
Stock-based compensation expense		-			-			244,000			-			-		244,000
Options exercised		70,001			1,000			124,000			-			-		125,000
Net income		-			-			-			-			2,457,000		2,457,000
Other comprehensive loss		-			-			-			(243,000	)		-		(243,000	)
Cumulative-effect adjustment of change in accounting for stock-based compensation		-			-			(866,000	)		-			866,000		-
Balance as of September 30, 2017		14,583,315		$	146,000		$	6,600,000		$	(447,000	)	$	26,047,000	$	32,346,000

				Weighted					Weighted Average
				Average					Exercise Price
				Exercise Price		Options			Per Option
	Shares			Per Option

Options outstanding, December 31, 2016		1,065,000		$	2.06
Options outstanding, December 31, 2020							568,740		$	3.42
Granted to employees and non-employee directors		25,000			3.66		0			0
Exercised		(70,001	)		1.78		(124,494	)		3.15
Canceled/expired/forfeited		(20,000	)		1.58		0			0
Options outstanding, Septermber 30, 2017		999,999			2.13
Options exercisable, September 30, 2017		330,000			1.96
Options outstanding, June 30, 2021							444,246			3.51
Options exercisable, June 30, 2021							285,583			3.47

	September 30,			December 31,
	2017			2016
Cost basis	$	543,000		$	543,000
Gains previously recognized on warrants		380,000			380,000
Loss included in accumulated other comprehensive loss before tax benefit		(671,000	)		(316,000	)
Fair value	$	252,000		$	607,000

	June 31,
	2021
Remaining six months of 2021	$	526,000
2022		1,010,000
2023		1,017,000
2024		484,000
2025		365,000
Total future minimum lease payments		3,402,000
Less imputed interest		(254,000	)
Total Lease liabilities	$	3,148,000

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016			2021			2020			2021			2020
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Gross profit		39.1	%		38.3	%		39.6	%		36.6	%		35.0	%		49.5	%		37.6	%		48.5	%
Selling, general and administrative expenses		28.6	%		26.8	%		30.1	%		27.4	%		23.6	%		17.9	%		21.4	%		19.8	%
Income from operations		9.3	%		10.2	%		8.2	%		8.1	%		10.3	%		30.9	%		15.2	%		27.8	%
Income before provision for income taxes		13.3	%		12.3	%		10.3	%		9.3	%		11.3	%		31.5	%		16.5	%		28.3	%
Net income		9.2	%		8.7	%		7.2	%		6.4	%		9.4	%		24.4	%		13.2	%		26.5	%

	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased		Weighted 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)
July 1 - 31, 2017		167,000	$	3.33		167,000	$	2,321,000
August 1 - 31, 2017		135,200		3.46		135,200		1,850,000
September 1 - 30, 2017		70,742		3.45		70,742		1,604,000
		372,942		3.40		372,942

~~3.1.1~~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~~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~~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~~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).
~~10.1~~	~~Amendment One to Executive Employment Agreement~~ ~~– Lloyd Hoffman – Chief Executive Officer, incorporated by reference to Exhibit 10.1 to Form 8-K, filed on October 26, 2017 (file No. 001-15725).~~
31.1	Certification of President and ~~Chairman pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.~~
~~31.2~~		~~Certification of~~ Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

~~31.3~~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~~Sarbanes-Oxley Act of 2002 – President and ~~Chairman.~~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 Executive Officer.~~
~~32.3~~		~~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~~’sLtd’s Form 10-Q for the period ended ~~September~~June 30, ~~2017.~~2021, formatted in Inline XBRL.


104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	(P) Indicates a paper filing with the SEC.

				ALPHA PRO TECH, LTD.

DATE:	~~November 8, 2017~~	August 5, 2021	BY: /s/ /s/Lloyd Hoffman

			Lloyd Hoffman
			President and Chief Executive Officer


DATE:	~~November 8, 2017~~August 5 , 2021		BY: ~~/s/~~/s/Colleen McDonald
			Colleen McDonald
			~~Colleen McDonald~~ Chief Financial Officer
			~~Chief Financial Officer~~

	September 30,		December 31,		June 30,		December 31,
	2017		2016		2021		2020

Raw materials	$	4,081,000	$	4,313,000	$	12,497,000	$	9,729,000
Work in process		1,609,000		2,535,000		2,796,000		2,003,000
Finished goods		3,774,000		4,146,000		6,704,000		5,017,000
	$	9,464,000	$	10,994,000	$	21,997,000	$	16,749,000