UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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

FORM 10-Q

~~FORM 10-Q~~

~~Quarterly Report pursuant to Section~~☒ 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 30, 2017~~quarterly period ended March 31, 2023

☐ 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~~001-15725

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
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___~~filer ☐ Accelerated filer ~~___~~☐ Non-accelerated filer ~~____~~☒ Smaller reporting company X ☒

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~~May 2, 2023
Common Stock, $0.01 par value		~~15,155,523~~12,188,206 shares

	March 31,			December 31,
	2023			2022 (1)
Assets
Current assets:
Cash and cash equivalents	$	13,821,000		$	16,290,000
Accounts receivable, net of allowance for doubtful accounts of $35,000 as of March 31, 2023 and $45,000 as of December 31, 2022		8,406,000			5,382,000
Accounts receivable, related party		726,000			1,591,000
Inventories		24,094,000			24,397,000
Prepaid expenses		4,712,000			4,902,000
Total current assets		51,759,000			52,562,000

Property and equipment, net		5,788,000			5,742,000
Goodwill		55,000			55,000
Definite-lived intangible assets, net		1,000			1,000
Right-of-use assets		1,488,000			1,725,000
Equity investment in unconsolidated affiliate		4,964,000			4,718,000
Total assets	$	64,055,000		$	64,803,000

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	383,000		$	674,000
Accrued liabilities		387,000			833,000
Lease liabilities		903,000			899,000
Total current liabilities		1,673,000			2,406,000

Lease liabilities, net of current portion		632,000			875,000
Deferred income tax liabilities, net		764,000			764,000
Total liabilities		3,069,000			4,045,000
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value: 50,000,000 shares authorized; 12,135,556 and 12,226,306 shares outstanding as of March 31, 2023 and December 31, 2022, respectively		122,000			123,000
Retained earnings		62,216,000			62,124,000
Accumulated other comprehensive loss		(1,352,000	)		(1,489,000	)
Total shareholders' equity		60,986,000			60,758,000
Total liabilities and shareholders' equity	$	64,055,000		$	64,803,000

(1) The condensed consolidated balance sheet as of December 31, ~~2016~~2022, 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
	March 31,
	2023		2022

Net sales	$	13,800,000	$	17,661,000

Cost of goods sold, excluding depreciation and amortization		8,818,000		11,219,000

Gross profit		4,982,000		6,442,000

Operating expenses:
Selling, general and administrative		4,313,000		4,306,000
Depreciation and amortization		243,000		212,000

Total operating expenses		4,556,000		4,518,000

Income from operations		426,000		1,924,000

Other income:
Equity in income of unconsolidated affiliate		109,000		49,000
Interest income, net		158,000		1,000

Total other income		267,000		50,000

Income before provision for income taxes		693,000		1,974,000

Provision for income taxes		141,000		452,000

Net income	$	552,000	$	1,522,000

Basic earnings per common share	$	0.05	$	0.12

Diluted earnings per common share	$	0.05	$	0.12

Basic weighted average common shares outstanding		12,150,067		13,058,871

Diluted weighted average common shares outstanding		12,193,602		13,159,490

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

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

													Accumulated
							Additional						Other
	Common Stock						Paid-in			Retained			Comprehensive
	Shares			Amount			Capital			Earnings			Income (Loss)			Total
Balance as of December 31, 2022		12,226,306		$	123,000		$	-		$	62,124,000		$	(1,489,000	)	$	60,758,000
Net income		-			-			-			552,000			-			552,000
Common stock repurchased and retired		(200,000	)		(2,000	)		(22,000	)		(809,000	)		-			(833,000	)
Stock-based compensation expense		-			-			22,000			-			-			22,000
Options exercised		109,250			1,000			-			349,000			-			350,000
Total comprehensive income		-			-			-			-			137,000			137,000
Balance as of March 31, 2023		12,135,556		$	122,000		$	-		$	62,216,000		$	(1,352,000	)	$	60,986,000

													Accumulated
							Additional						Other
	Common Stock						Paid-in			Retained			Comprehensive
	Shares			Amount			Capital			Earnings			Loss			Total
Balance as of December 31, 2021		13,115,341		$	132,000		$	-		$	62,488,000		$	(869,000	)	$	61,751,000
Net income		-			-			-			1,522,000			-			1,522,000
Common stock repurchased and retired		(170,000	)		(2,000	)		(55,000	)		(699,000	)		-			(756,000	)
Stock-based compensation expense		-			-			55,000			-			-			55,000
Total comprehensive loss		-			-			-			-			(153,000	)		(153,000	)
Balance as of March 31, 2022		12,945,341		$	130,000		$	-		$	63,311,000		$	(1,022,000	)	$	62,419,000

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

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

	For the Three Months Ended March 31,
	2023			2022
Cash Flows From Operating Activities:
Net income	$	552,000		$	1,522,000
Adjustments to reconcile net income to net cash used in operating activities:
Stock-based compensation		22,000			55,000
Depreciation and amortization		243,000			212,000
Equity in income of unconsolidated affiliate		(109,000	)		(49,000	)
Operating lease expense, net of accretion		237,000			228,000
Changes in operating assets and liabilities:
Accounts receivable, net		(3,024,000	)		(3,814,000	)
Accounts receivable, related party		865,000			(214,000	)
Inventories		303,000			1,086,000
Prepaid expenses		190,000			736,000
Accounts payable and accrued liabilities		(737,000	)		(714,000	)
Lease liabilities		(239,000	)		(227,000	)

Net cash used in operating activities		(1,697,000	)		(1,179,000	)

Cash Flows From Investing Activities:
Purchases of property and equipment		(289,000	)		(133,000	)

Net cash used in investing activities		(289,000	)		(133,000	)

Cash Flows From Financing Activities:
Proceeds from exercise of stock options		350,000			-
Repurchase of common stock		(833,000	)		(756,000	)

Net cash used in financing activities		(483,000	)		(756,000	)

Decrease in cash		(2,469,000	)		(2,068,000	)

Cash and cash equivalents, beginning of the period		16,290,000			16,307,000

Cash and cash equivalents, end of the period	$	13,821,000		$	14,239,000

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”~~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, housewrap accessories, namely tape and flashing, and synthetic roof underlayment,, as well as other woven material.

The Disposable Protective Apparel segment consists of a complete line of ~~shoecovers,~~disposable protective garments (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”~~U.S.”).

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,~~2022, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the ~~“2016~~“2022 Form 10-K”), ~~which was~~ filed with the SEC on March ~~8, 2017.~~16, 2023. The results of operations for the ~~nine~~three months ended ~~September 30, 2017 reported~~March 31, 2023 in this Quarterly Report on Form 10-Q are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet as of December 31, ~~2016~~2022 was prepared using information from the audited consolidated balance sheet contained in the ~~2016~~2022 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 labeling. The Company has determined as of March 31, 2023 that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. See Note 10 and Note 11 of these Notes to Condensed Consolidated Financial Statements (Unaudited) for information on revenue disaggregated by type and by geographic region.

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. The 2004 Option Plan provides for a total of 5,000,000 common shares eligible for issuance. Under the 2004 Option Plan, approximately 5,009,750 options (taking into account cancelled and expired options that were added back to the plan reserve) had been granted as of December 31, 2020. Due to the cancelation and expiration of options, the 2004 Plan had 1,305,251 options available to grant at the time the 2004 Plan was replaced in 2020.

At the Company’s 2020 Annual Meeting of Shareholders, 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.

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~~three months ended ~~September 30, 2017, 25,000~~March 31, 2023 and 2022, no stock options were granted under the ~~Company’s option plan. For~~2004 Option Plan or the ~~nine months ended September 30, 2016, 810,000 stock options were granted under the Company’s option plan.~~2020 Incentive Plan. The Company recognized ~~$244,000~~$3,000 and ~~$115,000~~$28,000 in stock-based compensation expense for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively, related to outstanding options previously granted under the ~~vesting~~2004 Option Plan. For the three months ended March 31, 2023 and 2022, no restricted stock awards were granted under the 2020 Incentive Plan. The Company recognized $18,000 and $27,000 in compensation expense associated with outstanding restricted stock awards for the three months ended March 31, 2023 and 2022, respectively. As of ~~previously issued options.~~

~~Stock options~~March 31, 2023, $44,000 of total unrecognized compensation cost related to ~~purchase~~ ~~999,999 shares~~outstanding restricted stock awards was expected to be recognized over a weighted-average remainder period of ~~common stock were outstanding as of September 30, 2017, and stock options to purchase 1,065,000 shares of common stock were outstanding as of December 31, 2016.~~0.63 years.

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~~three months ended ~~September 30, 2017:~~March 31, 2023:

As of ~~September 30, 2017, $602,000~~March 31, 2023, $33,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of ~~1.70~~4.48 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 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:~~

~~No marketable securities were sold during the~~ nine months ended September 30, 2017 and the year ended December 31, 2016. The change in unrealized loss of $208,000 and unrealized 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.

~~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, the FASB issued ASU 2015-17,~~ ~~Income Taxes~~ ~~(Topic 740):~~ ~~Balance Sheet Classification of Deferred Taxes~~, which requires deferred income tax liabilities and assets to be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. The guidance was effective for public entities for annual periods beginning after December 15, 2016 and interim periods within those annual periods, with early adoption being permitted. The Company adopted this guidance in the first quarter of 2017. The Company netted $410,000 in deferred tax assets against deferred tax liabilities as of the end of the first quarter of 2017. Prior periods were not retrospectively adjusted.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments~~ - ~~Overall~~ ~~(Subtopic 825-10):~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~, which provides guidance for the recognition, measurement, presentation and disclosure of financial instruments. The new guidance revises the accounting requirements related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The 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 guidance is effective for fiscal years and interim periods within those 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, with early adoption permitted. Management is evaluating the requirements of this guidance and has not yet determined the impact of the adoption on the Company’s 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.

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 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, 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 Company’s 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) a ~~102,000~~139,000 square foot building for manufacturing building products; (2) a ~~71,500~~121,000 square foot building for manufacturing coated material and sewing proprietary disposable protective apparel; (3) a ~~16,000~~23,000 square foot facility for sewing proprietary disposable protective apparel; and (4) a ~~12,000~~159,000 square foot ~~rented~~ facility (rented) for ~~coating material; and (5) a 93,000 square foot rented facility 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 income. The Company periodically reviews its investment in Harmony for impairment. Management has determined that no impairment was required as of ~~September 30, 2017.~~March 31, 2023, or December 31, 2022. Under the equity method, since the Company’s reporting currency is different from of Harmony’s reporting currency, the Company is required to translate our proportionate share of equity for effects of translations in foreign currency and adjust the investment accordingly and accrue the adjustment as a component of Accumulated other comprehensive loss (“AOCL”).

For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, Alpha Pro Tech~~2022, the Company purchased ~~$3,258,000~~$5,036,000 and ~~$3,716,000~~$6,183,000 of inventories, respectively, from Harmony. For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, Alpha Pro Tech purchased $11,097,000~~2022, the Company sold $0 and ~~$9,646,000~~$258,000 of inventories, respectively, ~~from~~to Harmony.

For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, the Company recorded equity in income of unconsolidated affiliate of ~~$105,000~~$109,000 and ~~$242,000,~~$49,000, respectively, related to Harmony. ~~For the nine months ended September 30, 2017 and 2016, the Company recorded equity in income of unconsolidated affiliate of $339,000 and $433,000, respectively, related to Harmony.~~

As of ~~September 30, 2017,~~March 31, 2023, the Company’s investment in Harmony was ~~$3,877,000,~~$4,964,000, which consisted of its original $1,450,000 investment and cumulative equity in income of unconsolidated affiliate of ~~$3,446,000,~~$5,885,000, less $942,000 in repayments of ~~the~~an advance ~~and~~ $77,000 in ~~dividends.~~payments of dividends and $1,352,000 in AOCL on foreign currency translations.

As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, 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~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022:

Accumulated other comprehensive loss (“AOCL”), a component of shareholders' equity, consists of foreign currency translation adjustments related to foreign currency gains or losses on our unconsolidated affiliate as its functional currency is other than the U.S. dollar. The resulting foreign currency translation gains or losses are deferred as AOCL and reclassified to earnings only upon sale or liquidation of that business. The accumulated other comprehensive loss on equity in unconsolidated affiliate was $1,352,000 and $1,489,000 as of March 31, 2023 and December 31, 2022, respectively.

(1) Building ~~Supply~~:Supply: consisting of a line of construction supply weatherization products. The construction supply weatherization products consist of housewrap and housewrap accessories including window and door flashing and seam tape, 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~~:Apparel: consisting of a complete line of disposable protective ~~clothing, such as~~garments, including shoecovers (including the Aqua Trak® and spunbond shoecovers), bouffant caps, coveralls, frocks, lab coats, gowns and hoods, as well as face masks and face shields for the pharmaceutical, cleanroom, industrial, medical and ~~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 accounting policies of the segments are the same as those described previously under Summary of Significant Accounting Policies (see Note 2).

The following table presents consolidated net sales for each segment for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016:~~2022:

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016:~~2022:

The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016:~~2022:

~~The Company has historically used a law firm for various legal matters whose majority member was a member of the Company~~’s Board of Directors. Effective March 31, 2017, 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, the Company’s outstanding balance to this related party was $163,000.

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 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 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 defense of these claims, any material loss amount that might be incurred cannot reasonably be estimated at this time.

The following table summarizes the Company’s net sales by geographic region for the three months ended March 31, 2023 and 2022:

Net sales by geographic region are based on the countries in which our customers are located. For the three months ended March 31, 2023 and 2022, the Company generated approximately $45,000 and $474,000, respectively, in sales from Canada. No country other than the United States was significant to the Company’s consolidated net sales.

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

As of March 31, 2023, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony. See Note 6 of these Notes to Condensed Consolidated Financial Statements (Unaudited).

The Company has operating leases for the Company’s corporate office and manufacturing facilities, which expire at various dates through 2025. The Company’s primary operating lease commitments at March 31, 2023 related to the Company’s manufacturing facilities in Valdosta, Georgia; Nogales, Arizona; and Salt Lake City, Utah.

As of March 31, 2023, the Company had operating lease right-of-use assets of $1,488,000 and operating lease liabilities of $1,535,000. As of March 31, 2023, the Company did not have any finance leases recorded on the Company’s condensed consolidated balance sheet. Operating lease expense was approximately $322,000, during the three months ended March 31, 2023.

The aggregate future minimum lease payments and reconciliation to lease liabilities as of March 31, 2023 were as follows:

As of March 31, 2023, the weighted average remaining lease term of the Company’s operating leases was 1.9 years. During the three months ended March 31, 2023, 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 June 7, 2022, the Company filed a lawsuit (the “Lawsuit”) in Utah naming as defendants the vendors from which the Company ordered equipment for its facility in Utah (collectively the “Defendants”). The Lawsuit relates to certain equipment ordered from Defendants and paid for by the Company, which Defendants never delivered. In the Lawsuit the Company is seeking the following relief: compensatory damages in the amount $490,000, representing the money the Company paid for the machines it never received, lost profits in the form of mask sales it could have made if Defendants had delivered the machines on the promised date, and other monetary and equitable relief. As of March 31, 2023, the Company has written off the $490,000 balance of the deposit paid for the equipment, pending any recovery in the Lawsuit. As of the date hereof, no counterclaims have been asserted against the Company. The Company believes there would not be any meritorious claims against the Company in the Lawsuit. The Lawsuit has not been resolved and the final outcome, including the potential amount of any recovery for the Company’s claims, is uncertain. Any potential recovery represents a gain contingency in accordance with ASC 450, Contingencies, that has not been recorded as the matter was not resolved as of March 31, 2023. Any recovery will be recorded when received.

The Company is subject to ~~other~~various pending and threatened litigation actions in the ordinary course of business. Although it is not possible to determine with certainty at this point in time what liability, if any, the Company will have as a result of such litigation, based on consultation with legal counsel, management does not anticipate that the ultimate liability, if any, resulting from such litigation will have a material effect on the Company’s financial condition and results of operations.

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of ~~September 30, 2017~~March 31, 2023 through the filing date of this Quarterly Report on Form 10-Q that would require accounting or disclosure and has concluded that there are no such subsequent events.

ITEM 2.2. 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, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2023 (the “2022 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 2023 and 2024, 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~~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 2022 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. 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 3 – “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements in Item 8 of the 2022 Form 10-K. Since December 31, 2022, there have been no material changes to our critical accounting ~~policies 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~~policies and estimates 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 investmentsdescribed 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:~~Accounts receivable are recorded at the invoice amount and do not bear interest. 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 remote.

~~Revenue Recognition:~~ ~~For sales transactions, we comply with the provisions of the SEC Staff Accounting Bulletin No. 104,~~ ~~Revenue Recognition~~, which states that revenue should be recognized when all of the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) title transfers and the customer assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. These criteria are satisfied upon shipment of product, and sales are recognized accordingly.

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

~~Stock-Based Compensation:~~ ~~We record compensation expense for the fair value of stock-based awards determined on the date of grant, including employee stock options.~~

The fair values of stock option grants are determined using the Black-Scholes option-pricing model and are based on the following assumptions: expected stock price volatility based on historical data and management’s expectations of future volatility, risk-free interest rates from published sources, expected life based on historical data and no dividend yield, as the Board of Directors has no current plans to pay dividends in the near future. 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 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.2022 Form 10-K.

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~~“Alpha Pro ~~Tech"~~Tech” brand name, as well as under private label.

Our products are grouped into ~~three~~two business segments: (i) the Building Supply segment, consisting of construction weatherization products, such as housewrap and housewrap accessories and synthetic roof underlayment as well as other woven material; and (ii) 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 reflects the current segmentation.~~

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

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.

After the start of the COVID-19 pandemic in early 2020, 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 2020 and to a lesser extent during 2021, especially with respect to face masks 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, but even with these increases and improvements, customer demand for PPE products exceeded industry supply from time to time.

Since 2020, we have encountered a number of constraints within our supply chain due to government-mandated shutdowns, raw materials shortages and shipping delays. Although we continue to work to alleviate these supply chain issues by securing additional supply sources, in the event of subsequent shutdowns, shortages or delays, our production and sales could be further impacted. Further, we have experienced increases in the costs of raw materials, and if the prices of raw materials continue to rise more rapidly than our sales prices, our profits may be impacted negatively.

Global shortages in important components and logistics challenges have resulted in, and will continue to cause, inflationary cost pressure in the Company’s supply chain. To date, the inflationary cost pressure has been more pronounced in the Company’s logistics costs, but these supply chain challenges have had an impact on the Company’s results of operations and ability to deliver products and services to its customers. If shortages in important supply chain materials or logistics challenges continue, the Company could fail to meet product demand. Additionally, if inflationary pressures in logistics or component costs persist, we may not be able to quickly or easily adjust pricing, reduce costs, or implement countermeasures, all of which would adversely impact our business, financial condition, results of operations, or cash flows. In addition, the war in Ukraine has further increased existing global supply chain, logistics, and inflationary challenges.

COVID-19 and other factors have resulted in a downturn in the global financial markets and a slowdown in the global economy. This economic environment may impact some of our customers’ ability to pay or lead them to request extended payment terms, and we have experienced cost increases from some of our suppliers. Additionally, we expect that demand for our Building Supply segment products could be negatively impacted as the overall market for housing starts has decreased and there is increased uncertainty in the housing market and the economy in general, although to date the negative impact on our Building Supply segment has been limited.

Overall, the increase in sales of our PPE products resulting from the pandemic had a positive impact on our 2021 and, to a lesser extent, 2022 financial results. The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments, including the duration, scope and severity of the pandemic and new variants, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the efficacy of mass vaccinations, and the resumption of widespread economic activity in certain sectors. Due to the inherent uncertainty of the unprecedented evolving situation, we are unable to predict with any certainty the likely impact of the COVID-19 pandemic on our future operations.

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 30, 2017~~ March 31, 2023 compared to three ~~and~~ ~~nine~~months ended ~~September~~ ~~30, 201~~6March 31, 2022

Sales. Consolidated sales for the ~~three months~~quarter ended ~~September 30, 2017 increased~~March 31, 2023 decreased to ~~$12,049,000~~$13,800,000, from ~~$11,779,000~~$17,661,000 for the ~~three months~~quarter ended ~~September 30, 2016,~~March 31, 2022, representing ~~an increase~~a decrease of ~~$270,000,~~$3,861,000, or ~~2.3%~~21.9%. This ~~increase~~decrease consisted of ~~increased~~decreased sales in both the Building Supply segment of ~~$54,000, increased sales in~~$1,606,000 and the Disposable Protective Apparel segment of ~~$147,000 and increased sales in the Infection Control segment of $69,000.~~$2,255,000.

Building Supply segment sales for the ~~three months~~quarter ended ~~September 30, 2017 increased~~March 31, 2023 decreased by ~~$54,000,~~$1,606,000, or ~~0.8%~~15.7%, to ~~$7,076,000,~~$8,631,000, compared to ~~$7,022,000~~$10,237,000 for the ~~same period of 2016. This~~quarter ended March 31, 2022. The Building Supply segment ~~increase~~decrease during the quarter ended March 31, 2023 was primarily due to a ~~20.3% increase~~6.9% decrease in sales of housewrap, ~~and~~ a ~~37.2% increase in sales of other woven material, partially offset by a 14.9%~~28.7% decrease in sales of synthetic roof underlayment ~~(including REX™, TECHNOply™~~ and ~~TECHNO SB).~~ a 5.6% decrease in sales of other woven material.

The sales mix of the Building Supply segment for the ~~three months~~quarter ended ~~September 30, 2017~~March 31, 2023 was approximately 41% for synthetic roof underlayment, 45% for housewrap and 14% for other woven material. That is compared to approximately 48% for synthetic roof underlayment, ~~42%~~40% for housewrap and ~~10% for other woven material. This compared to 57% for synthetic roof underlayment, 35% for housewrap and 8%~~12% for other woven material for the ~~three months~~quarter ended ~~September 30, 2016.~~

~~Although~~March 31, 2022. Our synthetic roof underlayment product line primarily includes REX SynFelt®, REX TECHNOply® and TECHNO SB®, and our housewrap product line primarily consists of REX Wrap®, REX Wrap Plus® and REX™ Wrap Fortis. Housewrap accessories consist of REXTREME Window and Door Flashing and REX™ Premium Seam Tape.

The Building Supply segment ~~sales were down, housewrap sales remained strong, with increased~~showed some weakness in sales in the ~~third~~first quarter of ~~20.3%~~2023, due to a significant decrease in demand for new home starts as a result of interest rates hikes and ~~10.0%~~economic uncertainty, as well as high levels of inventory on the dealer and distributor side. In the first quarter of 2023, single family housing starts were down 28.6% compared to the same period a year ago. Overall, sales of housewrap products and accessories were down only 6.9%, which is much better than the slowdown in housing starts. Sales of our REX Wrap® and REX Wrap Plus®, our entry level housewrap products, were down 13.0%, despite the major decrease in housing starts as we have continued to ~~date. At~~acquire new dealers across the ~~end of the third quarter, we announced a new, innovative and exciting product~~ ~~line to~~country. Management is encouraged by our ~~housewrap family,~~growth opportunities in REX™ Wrap Fortis, our premium housewrap line, as we continue to make inroads into the multi-family and commercial construction sector as evidenced by an increase of 21.6% in sales in the first quarter of 2023. This is also evident with ~~JX ALTA 360° Drainage Technology™. With its one-of-a-kind construction, this~~a 65% increase in sales of housewrap accessories, REXTREME Window and Door Flashing and REX™ Premium Seam Tape, in the first quarter of 2023. Based on product ~~uniquely enables~~information provided to a growing number of architects who could specify our products as well as the ~~drainage~~number of ~~water~~jobs we are specified on and the growth of additional bids taking place, Management expects that we will see positive trends relative to the industry for both our entry level and premium housewrap product lines.

There is uncertainty in the ~~coming year. Management expects~~economy in relation to interest rates and a possible recession and the continued slowdown in building that could impact the Building Supply segment, ~~to experience~~but we are encouraged regarding the future growth ~~in 2018.~~

~~Sales for the~~ Disposable Protective Apparel ~~segment for the~~ three months ended September 30, 2017 increased by $147,000, or 4.0%, to $3,845,000, 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 months ended September 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.

~~Consolidated sales for the~~ nine months ended September 30, 2017 decreased to $34,082,000 from $36,334,000 for the nine months ended September 30, 2016, representing a decrease of $2,252,000, or 6.2%. This decrease was due to decreased sales in the Building Supply segment of $2,402,000 and decreased sales in the 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 months~~quarter ended ~~September 30, 2017~~March 31, 2023 decreased by ~~$233,000,~~$2,255,000, or ~~2.1%~~30.4%, to ~~$10,914,000,~~$5,169,000, compared to ~~$11,147,000~~$7,424,000 for the same period of ~~2016. Although~~2022. This segment experienced an increase of 10.6% in sales of disposable protective garments, offset by a 75.2% decrease in sales of face masks and an 81.0% decrease in sales of face shields.

The sales mix of the Disposable Protective Apparel segment for the quarter ended March 31, 2023 was approximately 85% for disposable protective garments, 11% for face masks and 4% for face shields. This sales ~~were~~ ~~down year~~mix is compared to ~~date, sales have been up~~approximately 53% for disposable protective garments, 31% for face masks and 16% for face shields for the quarter ended March 31, 2022.

Sales of disposable protective garments in the ~~two most recent quarters. The year~~first quarter of 2023 were up 10.6% as our channel partners and our end customers are working through their inventory and their ordering patterns return to ~~date decrease was primarily~~normal. Face mask and face shield sales are still suffering from the COVID-19 residual excess inventories at the distributor level. Comparatively, sales of face masks and face shields were inordinately high during the first quarter of 2022 due to ~~decreased sales to our national and regional distributors, partially offset by an increase to our major international supply chain partner.~~the ongoing demand for COVID-19 products.

~~Infection Control segment~~During the three months ended March 31, 2023, our Disposable Protective Apparel sales and marketing team presented at numerous national trade shows and distributor meetings for the ~~nine months ended September 30, 2017 increased by $383,000, or 11.0%,~~first time in three years. We are at a point where our team is now directly interacting with our channel partners and end-customers on a regular basis. We are also engaged in many product demonstrations and evaluations in the marketplace. To that end, we just signed an agreement with a larger channel partner and together, we expect to ~~$3,870,000, compared~~open new doors leading to ~~$3,487,000 for the same period of 2016. Mask sales were up by 12.7%, or $303,000, to $2,695,000, and shield sales were up by 7.3%, or $80,000, to $1,175,000.~~organic growth.

Gross ~~Profit.~~Profit. Gross profit ~~increased~~decreased by ~~$196,000,~~$1,460,000, or ~~4.3%~~22.7%, to ~~$4,712,000~~$4,982,000 for the ~~three months~~quarter ended ~~September 30, 2017~~March 31, 2023, from ~~$4,516,000~~$6,442,000 for the ~~same period of 2016.~~quarter ended March 31, 2022. The gross profit margin was ~~39.1%~~36.1% for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2023, compared to ~~38.3%~~36.5% for the ~~same period of 2016.~~quarter ended March 31, 2022.

~~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 gross profit margin ~~was 39.6% for~~is being negatively affected by inventory purchased during last year, which incurred high ocean freight and other transportation costs. Ocean freight rates have come down significantly since the ~~nine months ended September 30, 2017, compared~~latter part of the fourth quarter but our lower cost inventory will start to ~~36.6% for~~be sold in the ~~same period of 2016.~~

coming months. Management expects the gross profit margin to be ~~around 39% for fiscal 2017.~~improve in 2023, although continuing inflationary pressures could affect such improvements.

Selling, General and Administrative ~~Expenses.~~Expenses. Selling, general and administrative expenses increased by ~~$292,000,~~$7,000, or ~~9.2%~~0.2%, to ~~$3,450,000~~$4,313,000 for the ~~three months~~quarter ended ~~September 30, 2017~~March 31, 2023, from ~~$3,158,000~~$4,306,000 for the ~~three months~~quarter ended ~~September 30, 2016.~~March 31, 2022. As a percentage of net sales, selling, general and administrative expenses increased to ~~28.6%~~31.3% for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2023, from ~~26.8%~~24.4% for the same period of ~~2016.~~2022, 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~~ended March 31, 2023 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,~~$22,000, or ~~3.5%,~~1.8%; Building Supply was up $174,000, or 10.2%; and corporate unallocated expenses were ~~up $108,000,~~down $189,000, or ~~9.3%~~13.9%. The increase in the Disposable Protective Apparel segment expenses was primarily related to marketing and sales travel expenses, partially offset by decreased employee compensation. The increase in the Building Supply segment expenses was related to increased employee compensation, insurance and travel expenses, partially offset by decreased commission expense. The decrease in corporate unallocated expenses was primarily due to ~~an increase in sales~~decreased accrued bonuses, stock option and ~~marketing~~restricted stock expenses ~~as we invested in additional sales representatives primarily in the Building Supply segment.~~

~~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 $37,000 was accrued for the ~~three months~~quarter ended ~~September 30, 2017, as~~March 31, 2023, compared to ~~$76,000~~$104,000 for the ~~same period of 2016. Bonuses of $392,000 were accrued for the nine months~~quarter 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.~~March 31, 2022.

Depreciation and ~~Amortization.~~Amortization. Depreciation and amortization expense ~~decreased~~increased by ~~$6,000,~~$31,000, or ~~3.9%~~14.6%, to ~~$147,000~~$243,000 for the ~~three months~~quarter ended ~~September 30, 2017~~March 31, 2023, from ~~$153,000~~$212,000 for the ~~same period of 2016.~~quarter ended March 31, 2022. The increase was primarily attributable to increased depreciation for machinery and equipment in the Building Supply segment.

~~Depreciation and amortization expense~~ ~~increased~~Income from Operations. Income from operations decreased by ~~$1,000,~~$1,498,000, or ~~0.2%~~77.9%, to $426,000 for the ~~nine months~~quarter ended ~~September 30, 2017 from $425,000~~March 31, 2023, compared to $1,924,000 for the ~~same period of 2016.~~

~~Income from Operations.~~ ~~Income from operations decreased by $90,000, or 7.5%, to $1,115,000 for the three months~~quarter ended ~~September 30, 2017, compared to $1,205,000 for the three months ended September 30, 2016.~~March 31, 2022. The decreased income from operations was primarily due to a decrease in gross profit of $1,460,000, an increase in selling, general and administrative expenses of ~~$292,000, partially offset by~~$7,000 and an increase in ~~gross profit~~depreciation and amortization expense of ~~$196,000.~~

$31,000. Income from operations ~~decreased by $129,000, or 4.4%, to $2,798,000~~as a percentage of net sales for the ~~nine months~~quarter ended ~~September 30, 2017,~~March 31, 2023 was 3.1%, compared to ~~$2,927,000~~10.9% for the ~~nine months~~same period of 2022.

Other Income. Other income increased by $217,000, to $267,000 for the quarter ended ~~September 30, 2016.~~March 31, 2023, from $50,000 for the same period of 2022. 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, a gain on the sale of property of $385,000~~$60,000 and an increase in interest income of $1,000 for the three months ended September 30, 2017. Other income consisted primarily of equity in income of unconsolidated affiliate of $242,000 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 the same period of 2016. Other income consisted primarily of equity 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.$157,000.

Income before Provision for Income Taxes. Income before provision for income taxes for the ~~three months~~quarter ended ~~September 30, 2017~~March 31, 2023 was ~~$1,606,000,~~$693,000, compared to income before provision for income taxes of ~~$1,448,000~~$1,974,000 for the ~~three months ended September 30, 2016,~~same period of 2022, representing ~~an increase~~a decrease of ~~$158,000,~~$1,281,000, or ~~10.9%~~64.9%. 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.~~

~~Income before provision for income taxes for the~~ nine months ended September 30, 2017 was $3,525,000, compared to income before provision for income taxes of $3,363,000 for the nine months ended September 30, 2016, representing an increase of $162,000, or 4.8%. The increase in income before provision for income taxes was primarily due to$1,498,000, partially offset by an increase in other income of ~~$291,000, partially offset by a decrease in income from operations of $129,000.~~$217,000.

Provision for Income Taxes.The provision for income taxes for the ~~three months~~quarter ended ~~September 30, 2017~~March 31, 2023 was ~~$503,000,~~$141,000, compared to ~~$429,000~~$452,000 for the same period of ~~2016.~~2022. The estimated effective tax rate was ~~31.3%~~20.3% for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2023, compared to ~~29.6%~~22.9% for the ~~same period of 2016.~~quarter ended March 31, 2022. 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~~Net Income. Net income ~~taxes~~ for the ~~nine months~~quarter ended ~~September 30, 2017~~March 31, 2023 was ~~$1,068,000,~~$552,000, compared to ~~$1,040,000~~net income of $1,522,000 for the same period of ~~2016. The effective tax rate was 30.3% for the nine months ended September 30, 2017, compared to 30.9% for the same period~~2022, representing a decrease of ~~2016.~~

~~Net Income.~~ ~~Net income for the three months ended September 30, 2017 was $1,103,000, compared to net income of $1,019,000 for the three months ended September 30, 2016, representing an increase of $84,000,~~$970,000, or ~~8.2%~~63.7%. The net income ~~increase~~decrease comparing the first quarter of 2023 and 2022 was due to a decrease in income from operations of $1,498,000 partially offset by an increase in other income of $217,000, resulting in a decrease in income before provision for income taxes of ~~$158,000,~~$1,281,000, partially offset by ~~an increase~~a decrease in provision for income taxes of ~~$74,000.~~$311,000. Net income as a percentage of net sales for the ~~three months~~quarter ended ~~September 30, 2017~~March 31, 2023 was ~~9.2%~~4.0%, and net income as a percentage of net sales for the same period of ~~2016~~2022 was ~~8.7%~~8.6%. Basic ~~and diluted~~ earnings per common share for the ~~three months~~quarter ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 were ~~$0.07~~$0.05 and ~~$0.06,~~$0.12, respectively.

~~Net income for the~~ nine months ended September 30, 2017 was $2,457,000, compared to net income of $2,323,000 for the nine months ended September 30, 2016, representing an increase of $134,000, or 5.8%. The net income increase was due to an increase in income before provision for income taxes of $162,000, partially offset by an increase in provision for income taxes of $28,000. Net income as a percentage of net sales for the nine months ended September 30, 2017 was 7.2%, and net income as a percentage of net sales for the same period of 2016 was 6.4%. Basic and diluted Diluted earnings per common share for the ~~nine months~~quarter ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 were ~~$0.16~~$0.05 and ~~$0.14,~~$0.12, respectively.

As of ~~September 30, 2017, we~~March 31, 2023, the Company had cash and cash equivalents (“cash”) of ~~$8,968,000~~$13,821,000 and working capital of ~~$25,646,000, representing a decrease in working capital of 5.7%, or $1,552,000, from December 31, 2016.~~$50,086,000. As of ~~September 30, 2017, our~~March 31, 2023, the Company’s current ratio (current assets/current liabilities) was ~~14:~~31:1, compared to a ~~12:1~~ current ratio of 22:1 as of December 31, ~~2016.~~2022. Cash decreased by ~~5.2%~~15.2%, or ~~$488,000,~~$2,469,000 to ~~$8,968,000~~$13,821,000 as of ~~September 30, 2017,~~March 31, 2023, compared to ~~$9,456,000~~$16,290,000 as of December 31, ~~2016.~~2022, and working capital decreased by $70,000 from $50,156,000 as of December 31, 2022. The decrease in cash from December 31, 2022, was due to cash used in ~~financing~~operating activities of ~~$2,776,000 and~~$1,697,000, cash used in investing activities of ~~$386,000, partially offset by~~$289,000 and cash ~~provided by operating~~used in financing activities of ~~$2,674,000.~~

~~We have 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 in May 2016 and expires in May 2018. The available line of credit is based on a formula of eligible accounts receivable and inventories. Our borrowing capacity on the line of credit was $3,500,000 as of September 30, 2017. As of September 30, 2017, we did not have any borrowings under this credit facility and do not anticipate using it in the near future.$483,000.

Net cash ~~provided by~~used in operating activities of $~~2,674,000~~$1,697,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 was due to net income of ~~$2,457,000,~~$552,000, as adjusted primarily by the following: stock-based compensation expense of ~~$244,000,~~$22,000, depreciation and amortization expense of ~~$426,000,~~$243,000, equity in income of unconsolidated affiliate of ~~$339,000, gain on sale~~$109,000, operating lease expense net of ~~property~~accretion of ~~$385,000,~~$237,000, an increase in accounts receivable of ~~$1,073,000,~~$3,024,000, a decrease in accounts receivable related party of $865,000, a decrease in prepaid expenses of $190,000, a decrease in inventory of ~~$1,530,000, a decrease in prepaid expenses and other current assets of $254,000 and~~$303,000, a decrease in accounts payable and accrued liabilities of ~~$440,000.~~$737,000, and a decrease in lease liabilities of $239,000, all compared to December 31, 2022.

Accounts receivable increased by ~~$1,073,000,~~$2,159,000, or ~~22.3%~~31.0%, to ~~$5,895,000~~$9,132,000 as of ~~September 30, 2017~~March 31, 2023, from ~~$4,822,000~~$6,973,000 as of December 31, ~~2016.~~2022. The increase in accounts receivable was primarily related to increased ~~revenue~~payment terms to our major international channel partner and to higher sales in ~~the third quarter of 2017~~March 2023 compared to ~~the fourth quarter of 2016.~~December 2022. The number of days that sales remained outstanding as of ~~September 30, 2017,~~March 31, 2023, calculated by using an average of accounts receivable outstanding and annual revenue, was 4240 days, compared to 3035 days as of December 31, ~~2016.~~2022.

Inventory decreased by $~~1,530,000,~~$303,000, or ~~13.9%~~1.2%, to ~~$9,464,000~~$24,094,000 as of ~~September 30, 2017~~March 31, 2023, from ~~$10,994,000~~$24,397,000 as of December 31, ~~2016.~~2022. The decrease was ~~primarily~~ due to a decrease in inventory for the Disposable Protective Apparel segment of ~~$1,014,000,~~$181,000, or ~~27.1%~~1.3%, to ~~$2,722,000,~~$14,204,000 and a decrease in inventory for the Building Supply segment of ~~$474,000,~~$122,000, or ~~9.7%~~1.2%, to ~~$4,435,000, and a decrease in inventory for the Infection Control segment of $42,000, or 1.8%, to $2,307,000.~~$9,890,000.

Prepaid expenses ~~and other current assets~~ decreased by $~~254,000,~~$190,000, or ~~7.6%~~3.9%, to ~~$3,092,000~~$4,712,000 as of ~~September 30, 2017~~March 31, 2023, from ~~$3,346,000~~$4,902,000 as of December 31, ~~2016.~~2022. The decrease was primarily due to decreased prepaid inventory, partially offset by increased prepayments for insurance.

Right-of-use assets as of March 31, 2023, decreased by $237,000 to $1,488,000 from $1,725,000 as of December 31, 2022, as a result of amortization of the balance.

Lease liabilities as of March 31, 2023, decreased by $239,000 to $1,535,000 from $1,774,000 as of December 31, 2022. The decrease in the lease liabilities was the result of lease payments made during the year.

Accounts payable and accrued liabilities as of March 31, 2023 decreased by $737,000, or 48.9%, to $770,000, from $1,507,000 as of December 31, 2022. The decrease was primarily due to a decrease in ~~deposits for the purchase of inventory.~~

~~Accounts payable~~accrued bonuses 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.payroll.

Net cash used in investing activities was $~~386,000~~$289,000 for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, compared to net cash used in investing activities of ~~$253,000~~$133,000 for the same period of ~~2016. Our investing~~2022. Investing activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and 2022 consisted of the purchase of property and equipment of $923,000 and proceeds of $537,000 from the sale of property. Our investing activities for the nine months ended September 30, 2016 consisted of the purchase of property and equipment of $212,000 and the purchase of marketable securities of $41,000.equipment.

Net cash used in financing activities was $~~2,776,000~~$483,000 for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, compared to net cash used in financing activities of ~~$3,672,000~~$756,000 for the same period of ~~2016. The net~~2022. Net cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2017 was due to~~March 31, 2023 resulted from the payment of ~~$2,901,000~~$833,000 for the repurchase of ~~shares of our~~ common stock partially offset by the proceeds of $350,000 from the exercise of stock ~~options of $125,000. The net~~options. Net cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2016 was due to~~March 31, 2022 resulted from the payment of ~~$3,689,000~~$756,000 for the repurchase of ~~shares of our~~ common ~~stock, offset by proceeds from exercise of stock options of $17,000.~~stocks.

As of ~~September 30, 2017~~,March 31, 2023, we had ~~$1,604,000~~$1,362,000 available for additional stock purchases under our stock repurchase program. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, we repurchased ~~898,242~~200,000 shares of common stock at a cost of ~~$2,901,000.~~$833,000. As of ~~September 30, 2017,~~March 31, 2023, we had repurchased a total of ~~15,869,773~~19,660,617 shares of common stock at a cost of ~~$27,916,000~~approximately $47,158,000 through our repurchase ~~program.~~program which commenced in 1999. We retire all stock upon ~~its~~ repurchase. Future repurchases are expected to be funded from cash on hand and cash flows from operating activities.

We believe that our current cash balance and ~~the funds~~ ~~available under our credit facility~~expected cash flow from operations will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future.

~~In November 2015, the FASB issued ASU 2015-17,~~ ~~Income Taxes~~ ~~(Topic 740):~~ ~~Balance Sheet Classification of Deferred Taxes~~, which requires deferred income tax liabilities and assets to be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. The guidance was effective for public entities for annual periods beginning after December 15, 2016 and interim periods within those annual periods, with early adoption being permitted. The Company adopted this guidance in the first quarter of 2017. The Company netted $410,000 in deferred tax assets netted against deferred tax liabilities as of the end of the first quarter of 2017. Prior periods were not retrospectively adjusted.

~~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.

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 30, 2017,~~March 31, 2023, 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

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.

On June 7, 2022, the Company filed a lawsuit (the “Lawsuit”) in Utah naming as defendants the vendors from which the Company ordered equipment for its facility in Utah (collectively the “Defendants”). The Lawsuit relates to certain equipment ordered from Defendants and paid for by the Company, which Defendants never delivered. In the Lawsuit the Company is seeking the following relief: compensatory damages in the amount $490,000, representing the money the Company paid for the machines it never received, lost profits in the form of mask sales it could have made if Defendants had delivered the machines on the promised date, and other monetary and equitable relief. As of March 31, 2023, the Company has written off the $490,000 balance of the deposit paid for the equipment, pending any recovery in the Lawsuit. As of the date hereof, no counterclaims have been asserted against the Company. The Company believes there would not be any meritorious claims against the Company in the Lawsuit. The Lawsuit remains unresolved and the final outcome, including the potential amount of any recovery for the Company’s claims, is uncertain. Any potential recovery represents a gain contingency in accordance with ASC 450, Contingencies, that has not been recorded as the matter was not resolved as of March 31, 2023. Any recovery will be recorded when received.

The Company is ~~presently involved in protracted~~subject to various pending and threatened litigation ~~against a competitor in an action styled~~ ~~Alpha Pro Tech, Inc. v. VWR International, LLC, pending~~actions in the ~~U.S. District Court for the Eastern District~~ordinary course of ~~Pennsylvania, CV 12-1615, wherein~~business. Although it is not possible to determine with certainty at this point in time what liability, if any, the Company ~~originally sought damages for unfair trade practices~~will have as a result of such litigation, based on consultation with legal counsel, management does not anticipate that the ultimate liability, if any, resulting from such litigation will have a material effect on the Company’s financial condition and ~~false advertising against the competitor, and the competitor has counterclaimed asserting similar claims against the Company. In August~~results of ~~2017, the court ruled against the Company on its claims against the competitor, and the competitor~~operations.

A list of factors that could materially affect our business, financial condition or operating results is ~~presently seeking attorneys’ fees and costs as the prevailing party with respect to those claims. The Company is~~described in Part I, Item 1A, “Risk Factors” in the ~~process of evaluating, with current litigation counsel,~~2022 Form 10-K. There have been no material changes to our risk factors from those disclosed in Part I, Item 1A, “Risk Factors” in the 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.2022 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 22, 2017,~~December 15, 2022, the Company announced that the Board of Directors had authorized a $2,000,000 expansion of the Company’s existing share repurchase program. All of the shares included in this table were purchased pursuant to this program. Since the inception of the share repurchase program in 1999, the Company has authorized the repurchase of $48,520,000 of common stock, of which $1,362,000 was available for repurchase as of March 31, 2023. The share repurchase plan expires on December 15, 2024.

We did not sell any unregistered equity securities during the ~~period~~periods covered by this ~~report.~~Quarterly Report on Form 10-Q.

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.

	page
PART I.	FINANCIAL INFORMATION

ITEM 1.	Financial Statements	~~page~~

	Condensed Consolidated Balance Sheets (Unaudited)	1

	Condensed Consolidated Statements of Income (Unaudited)	2

	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	3

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

	Condensed Consolidated Statements of Cash Flows (Unaudited)	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

ITEM 2.	~~Management~~’s Management’s Discussion and Analysis of Financial Condition and Results of Operations	14 15

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	2122

ITEM 4.	Controls and Procedures	2122

PART II.	OTHER INFORMATION

ITEM 1.	I. Legal Proceedings	22

ITEM IA. Risk Factors	23

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2223

ITEM 6.	Exhibits	2324

SIGNATURES	2425

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

				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, 2022							410,615	$	3.50
Granted to employees and non-employee directors		25,000			3.66		-		-
Exercised		(70,001	)		1.78		109,250		3.20
Canceled/expired/forfeited		(20,000	)		1.58		-		-
Options outstanding, Septermber 30, 2017		999,999			2.13
Options exercisable, September 30, 2017		330,000			1.96
Options outstanding, March 31, 2023							301,365		3.61

Options exercisable, March 31, 2023							286,665		3.59

	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

	September 30,		December 31,		March 31,		December 31,
	2017		2016		2023		2022

Raw materials	$	4,081,000	$	4,313,000	$	12,220,000	$	13,018,000
Work in process		1,609,000		2,535,000		3,013,000		2,225,000
Finished goods		3,774,000		4,146,000		8,861,000		9,154,000
	$	9,464,000	$	10,994,000	$	24,094,000	$	24,397,000


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

	March 31,
	2023
Remaining nine months of 2023	$	763,000
2024		484,000
2025		365,000
Total future minimum lease payments		1,612,000
Less imputed interest		(77,000	)
Total lease liabilities	$	1,535,000

	●	We are exposed to foreign currency exchange risks related to our unconsolidated affiliate operations in India
	●	Failure to remediate the material weakness in our internal control over financial reporting could result in us being unable to accurately and timely report our financial results or comply with the requirements of being a public company, which would adversely affect us

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2017			2016			2023			2022
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Gross profit		39.1	%		38.3	%		39.6	%		36.6	%		36.1	%		36.5	%
Selling, general and administrative expenses		28.6	%		26.8	%		30.1	%		27.4	%		31.3	%		24.4	%
Income from operations		9.3	%		10.2	%		8.2	%		8.1	%		3.1	%		10.9	%
Income before provision for income taxes		13.3	%		12.3	%		10.3	%		9.3	%		5.0	%		11.2	%
Net income		9.2	%		8.7	%		7.2	%		6.4	%		4.0	%		8.6	%

	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	Amended and Restated 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~~3.1 to Form 8-K, filed on ~~October 26, 2017 (file~~December 19, 2022 (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 30, 2017.~~March 31, 2023, 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~~		~~BY: /~~s~~/ Lloyd Hoffman~~

			~~Lloyd Hoffman~~

DATE:	May 10, 2023	BY:	/s/ Lloyd Hoffman

			Lloyd Hoffman
			President and Chief Executive Officer


DATE:	~~November 8, 2017~~ May 10, 2023	BY:	~~BY:~~ ~~/s/~~ /s/ Colleen McDonald

			Colleen McDonald
			Chief Financial Officer