Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q**

 

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**Quarterly Report pursuantto Section 13 or 15(d)**

**of the Securities ExchangeAct of 1934**

 

**For theQuarterly Period Ended March 31, 2010**

 

**CommissionFile No. 01-15725**

 

**Alpha Pro Tech, Ltd.**

(exact name of registrant as specified in its charter)

 

| **Delaware, U.S.A.**                           | ** ** | **63-1009183**                       |
|------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation) |       | (I.R.S. Employer Identification No.) |

 

| **Suite 112, 60 Centurian Drive**   | ** ** | ** **  |
|------------------------------------------|------------|-------------|
| **Markham, Ontario, Canada**             | ** ** | **L3R 9R2** |
| (Address of principal executive offices) |       | (Zip Code)  |

 

Registrant’s telephone number, including areacode:  **(905)479-0654**

 

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

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files).  Yes o  No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2of the Exchange Act).

 

| Large accelerated  filer o |   | Accelerated filer o              |
|---------------------------------|--------|----------------------------------|
|                            |   |                             |
| Non-accelerated filer o         |   | Smaller Reporting Company x |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o  No x

 

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

 

| **Class**                     | ** ** | **Outstanding May 5, 2010** |
|-------------------------------|------------|----------------------------------|
| Common Stock, $0.01 par value |       | 22,424,283 shares                |

 

 

 

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Table of Contents

 

**Alpha Pro Tech, Ltd.**

 

Table of Contents

 
| ** **                                                                                          | **Page No.**                                  |
|-----------------------------------------------------------------------------------------------------|----------------------------------------------------|
|                                                                                                |                                               |
| PART I.  FINANCIAL INFORMATION                                                                 |                                               |
|                                                                                                |                                               |
| ITEM 1.  Financial Statements (Unaudited)                                                           |                                               |
|                                                                                                |                                               |   |   |
|                                                                                                | a)                                                 | Consolidated Balance Sheets | 2 |
|                                                                                                |                                               |   |   |
|                                                                                                | b)                                                 | Consolidated  Income Statements | 3 |
|                                                                                                |                                               |   |   |
|                                                                                                | c)                                                 | Consolidated  Statement of Shareholders’ Equity | 4 |
|                                                                                                |                                               |   |   |
|                                                                                                | d)                                                 | Consolidated  Statements of Cash Flows | 5 |
|                                                                                                |                                               |   |   |
|                                                                                                | e)                                                 | Notes to  Consolidated Financial Statements (Unaudited) | 6 |
|                                                                                                |                                               |   |   |
| ITEM 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations | 13                                                 |
|                                                                                                |                                               |   |
|                                                                                                | Special Note Regarding Forward-Looking Information | 13 |
|                                                                                                |                                               |   |
|                                                                                                | New  Accounting Standards                          | 19 |
|                                                                                                |                                               |   |
| ITEM 3. Quantitative and Qualitative Disclosures About  Market Risk                                 | 20                                                 |
|                                                                                                |                                               |
| ITEM  4. Controls and Procedures                                                                    | 21                                                 |
|                                                                                                |                                               |
| PART II.  OTHER INFORMATION                                                                    |                                               |
|                                                                                                |                                               |
| ITEM  1. Legal Proceedings                                                                          | 21                                                 |
|                                                                                                |                                               |
| ITEM  1A. Risk Factors                                                                              | 21                                                 |
|                                                                                                |                                               |
| ITEM 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                | 22                                                 |
|                                                                                                |                                               |
| ITEM 3. Defaults Upon Senior Securities                                                             | 22                                                 |
|                                                                                                |                                               |
| ITEM 4.  Reserved                                                                                   | 22                                                 |
|                                                                                                |                                               |
| ITEM  5. Other Information                                                                          | 22                                                 |
|                                                                                                |                                               |
| ITEM 6.  Exhibits                                                                                   | 22                                                 |
|                                                                                                |                                               |
| SIGNATURES                                                                                          | 24                                                 |
|                                                                                                |                                               |
| EXHIBITS                                                                                            | 25                                                 |

 

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##### ***Table of Contents***

 

##### ***PART I. FINANCIAL INFORMATION***

##### *** ***

#### **ITEM 1. FINANCIAL STATEMENTS**

#### ** **

Alpha Pro Tech, Ltd. (“Alpha Pro Tech” or the “Company”)prepared the following unaudited interim consolidated financial statementspursuant to the rules and regulations of the Securities and ExchangeCommission (the “SEC”). Certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with accountingprinciples generally accepted in the United States of America (“GAAP”) havebeen omitted pursuant to these rules and regulations, although the Companybelieves that the disclosures made are adequate to make the information notmisleading.

 

You should read the following unaudited interimconsolidated financial statements and the accompanying notes together with theCompany’s current year filings on Form 10-Q and Form 8-K, as well asthe Company’s Annual Report on Form 10-K for the year ended December 31,2009 filed with the SEC.  The Company’s2009 Annual Report contains information that may be helpful in analyzing thefinancial information contained in this report and in comparing its results ofoperations for the three months ended March 31, 2010 with the same periodin 2009.

 

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**Consolidated Balance Sheets (Unaudited)**

 
| ** **                                                                                                                                                                      | ** ** | **March 31,  2010** | ** ** | **December 31,  2009 (1)** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|---------------------------------|------------|
|                                                                                                                                                                            |       |                     |       |                            |       |
| **Assets**                                                                                                                                                                      |       |                     |       |                            |       |
| Current assets:                                                                                                                                                                 |       |                     |       |                            |       |
| Cash and cash equivalents                                                                                                                                                       |       | $                        | 5,428,000  |                            | $          | 9,753,000 |   |
| Accounts receivable, net of allowance for doubtful  accounts of $63,000 at March 31, 2010 and $65,000 at December 31,  2009                                           |       | 6,360,000                |       | 8,593,000                       |       |
| Inventories, net                                                                                                                                                                |       | 16,033,000               |       | 13,094,000                      |       |
| Prepaid expenses and other current assets                                                                                                                                       |       | 3,105,000                |       | 2,792,000                       |       |
| Deferred income taxes                                                                                                                                                           |       | 457,000                  |       | 457,000                         |       |
| Total current assets                                                                                                                                                            |       | 31,383,000               |       | 34,689,000                      |       |
|                                                                                                                                                                            |       |                     |       |                            |       |
| Property and equipment, net                                                                                                                                                     |       | 4,011,000                |       | 3,843,000                       |       |
| Goodwill, net                                                                                                                                                                   |       | 55,000                   |       | 55,000                          |       |
| Intangible assets, net                                                                                                                                                          |       | 179,000                  |       | 184,000                         |       |
| Equity investments in and advances to unconsolidated  affiliates                                                                                                                |       | 1,697,000                |       | 1,701,000                       |       |
| Total assets                                                                                                                                                                    |       | $                        | 37,325,000 |                            | $          | 40,472,000 |   |
|                                                                                                                                                                            |       |                     |       |                            |       |
| **Liabilities and Shareholders’ Equity**                                                                                                                                   |       |                     |       |                            |       |
| Current liabilities:                                                                                                                                                            |       |                     |       |                            |       |
| Accounts payable                                                                                                                                                                |       | $                        | 1,292,000  |                            | $          | 2,963,000 |   |
| Accrued liabilities                                                                                                                                                             |       | 529,000                  |       | 2,732,000                       |       |
| Total current liabilities                                                                                                                                                       |       | 1,821,000                |       | 5,695,000                       |       |
|                                                                                                                                                                            |       |                     |       |                            |       |
| Deferred income taxes                                                                                                                                                           |       | 906,000                  |       | 906,000                         |       |
| Total liabilities                                                                                                                                                               |       | 2,727,000                |       | 6,601,000                       |       |
|                                                                                                                                                                            |       |                     |       |                            |       |
| Shareholders’ equity:                                                                                                                                                      |       |                     |       |                            |       |
| Common stock, $0.01 par value, 50,000,000 shares  authorized, 22,424,285 and 22,419,285 issued and outstanding at  March 31, 2010 and December 31, 2009, respectively |       | 224,000                  |       | 224,000                         |       |
| Additional paid-in capital                                                                                                                                                      |       | 23,204,000               |       | 23,164,000                      |       |
| Retained earnings                                                                                                                                                               |       | 11,170,000               |       | 10,483,000                      |       |
| Total shareholders’ equity                                                                                                                                                 |       | 34,598,000               |       | 33,871,000                      |       |
| Total liabilities and shareholders’ equity                                                                                                                                 |       | $                        | 37,325,000 |                            | $          | 40,472,000 |   |

 

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(1)                        The consolidated balance sheet as of December 31,2009 has been prepared using information from the audited financial statementsat that date.

 

The accompanying notesare an integral part of these consolidated financial statements.

 

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### **ConsolidatedIncome Statements (Unaudited)**

 
| ** **                                                   | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|--------------------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                                   | ** ** | **2010**                                       | ** ** | **2009** | ** ** |
| Net  sales                                                   |       | $                                              | 11,629,000 |   | $ | 9,326,000 |   |
|                                                         |       |                                           |       |   |   |
| Cost  of goods sold, excluding depreciation and amortization |       | 6,641,000                                      |       | 5,207,000 |   |
|                                                         |       |                                           |       |   |   |
| Gross  margin                                                |       | 4,988,000                                      |       | 4,119,000 |   |
|                                                         |       |                                           |       |   |   |
| Expenses:                                                    |       |                                           |       |   |   |
| Selling,  general and administrative                         |       | 3,784,000                                      |       | 3,240,000 |   |
| Depreciation  and amortization                               |       | 207,000                                        |       | 161,000 |   |
|                                                         |       |                                           |       |   |   |
| Income  from operations                                      |       | 997,000                                        |       | 718,000 |   |
|                                                         |       |                                           |       |   |   |
| Other  income:                                               |       |                                           |       |   |   |
| Equity  in income of unconsolidated affiliates               |       | 73,000                                         |       | 98,000 |   |
| Interest,  net                                               |       | 10,000                                         |       | 1,000 |   |
|                                                         |       |                                           |       |   |   |
| Income  before provision for income taxes                    |       | 1,080,000                                      |       | 817,000 |   |
|                                                         |       |                                           |       |   |   |
| Provision  for income taxes                                  |       | 393,000                                        |       | 303,000 |   |
|                                                         |       |                                           |       |   |   |
| Net  income                                                  |       | $                                              | 687,000    |   | $ | 514,000 |   |
|                                                         |       |                                           |       |   |   |
| Basic  net income per share                                  |       | $                                              | 0.03       |   | $ | 0.02 |   |
|                                                         |       |                                           |       |   |   |
| Diluted  net income per share                                |       | $                                              | 0.03       |   | $ | 0.02 |   |
|                                                         |       |                                           |       |   |   |
| Basic  weighted average shares outstanding                   |       | 22,423,229                                     |       | 23,700,601 |   |
|                                                         |       |                                           |       |   |   |
| Diluted weighted average shares outstanding                  |       | 23,114,613                                     |       | 23,700,601 |   |

 

The accompanying notes are an integral part of theseconsolidated financial statements.

 

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### **Tableof Contents**

 

### **ConsolidatedStatement of Shareholders’ Equity (Unaudited)**

 
| ** **                        | ** ** | **Common Stock** | ** ** | **Additional  Paid-in** | ** ** | **Retained** | ** ** | ** **   | ** ** |
|-----------------------------------|------------|------------------|------------|-------------------------|------------|--------------|------------|--------------|------------|
| ** **                        | ** ** | **Shares**       | ** ** | **Amount**              | ** ** | **Capital**  | ** ** | **Earnings** | ** ** | **Total** | ** ** |
| Balance at December 31, 2009 |       | 22,419,285       |       | $                       | 224,000    |         | $          | 23,164,000   |       | $ | 10,483,000 |   | $ | 33,871,000 |   |
| Share-based compensation expense  |       | —           |       | —                  |       | 34,000       |       | —       |       | 34,000 |   |
| Stock options exercised           |       | 5,000            |       | —                  |       | 6,000        |       | —       |       | 6,000 |   |
| Net income                        |       | —           |       | —                  |       | —       |       | 687,000      |       | 687,000 |   |
| Balance at March  31, 2010   |       | 22,424,285       |       | $                       | 224,000    |         | $          | 23,204,000   |       | $ | 11,170,000 |   | $ | 34,598,000 |   |

 

The accompanying notes are an integral part of theseconsolidated financial statements.

 

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### **Tableof Contents**

 

### **ConsolidatedStatements of Cash Flows (Unaudited)**

 
| ** **                                                                     | ** ** | **For the Three Months  Ended  March 31,** | ** ** |
|--------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2010**                                        | ** ** | **2009** | ** ** |
| **Cash Flows From Operating Activities:**                                      |       |                                            |       |   |   |
| Net income                                                                     |       | $                                               | 687,000    |   | $ | 514,000 |   |
| Adjustments to reconcile net income to net cash used  in operating activities: |       |                                            |       |   |   |
| Share-based compensation expense                                               |       | 34,000                                          |       | 58,000 |   |
| Depreciation and amortization                                                  |       | 207,000                                         |       | 161,000 |   |
| Equity in income of unconsolidated affiliates                                  |       | (73,000                                         | )          | (98,000 | ) |
| Changes in assets and liabilities:                                             |       |                                            |       |   |   |
| Accounts receivable, net                                                       |       | 2,233,000                                       |       | (1,009,000 | ) |
| Inventories, net                                                               |       | (2,939,000                                      | )          | 1,113,000 |   |
| Prepaid expenses and other current assets                                      |       | (313,000                                        | )          | (82,000 | ) |
| Accounts payable and accrued liabilities                                       |       | (3,874,000                                      | )          | (229,000 | ) |
|                                                                           |       |                                            |       |   |   |
| Net cash (used in) provided by operating activities                            |       | (4,038,000                                      | )          | 428,000 |   |
|                                                                           |       |                                            |       |   |   |
| **Cash Flows From Investing Activities:**                                      |       |                                            |       |   |   |
| ** **                                                                     |       |                                            |       |   |   |
| Purchase of property and equipment                                             |       | (367,000                                        | )          | (86,000 | ) |
| Proceeds from dividends from equity investments in  unconsolidated affiliates  |       | 77,000                                          |       | — |   |
| Purchase of intangible assets                                                  |       | (3,000                                          | )          | (4,000 | ) |
|                                                                           |       |                                            |       |   |   |
| Net cash used in investing activities                                          |       | (293,000                                        | )          | (90,000 | ) |
|                                                                           |       |                                            |       |   |   |
| **Cash Flows From Financing Activities:**                                      |       |                                            |       |   |   |
| Payments for the repurchase and retirement of common  stock                    |       | —                                          |       | (285,000 | ) |
|                                                                           |       |                                            |       |   |   |
| Proceeds from the exercise of stock options                                    |       | 6,000                                           |       | — |   |
|                                                                           |       |                                            |       |   |   |
| Net cash provided by (used in) financing activities                            |       | 6,000                                           |       | (285,000 | ) |
|                                                                           |       |                                            |       |   |   |
| (Decrease) Increase in cash during the period                                  |       | (4,325,000                                      | )          | 53,000 |   |
|                                                                           |       |                                            |       |   |   |
| Cash and cash equivalents, beginning of period                                 |       | 9,753,000                                       |       | 4,578,000 |   |
| Cash and cash equivalents, end of period                                       |       | $                                               | 5,428,000  |   | $ | 4,631,000 |   |

 

The accompanying notesare an integral part of these consolidated financial statements.

 

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**Notes to Consolidated Financial Statements(Unaudited)**

 

**1.****                                     ****The Company**

 

Alpha Pro Tech, Ltd. (“Alpha Pro Tech” or the “Company”) is in thebusiness of protecting people, products and environments.  The Company accomplishes this by developing,manufacturing and marketing a line of disposable protective apparel for thecleanroom, industrial and pharmaceutical markets, a line of building supplyproducts for the new home and re-roofing markets and a line of infectioncontrol products for the medical and dental markets.

 

The Disposable Protective Apparel segment consists of a complete line ofshoecovers, bouffant caps, coveralls, gowns, frocks and lab coats.

 

The Building Supply segment (formerly known as the Engineered Productssegment) consists of construction weatherization products such as housewrap andsynthetic roof underlayment.

 

TheInfection Control segment includes a line of face masks, eye shields andmedical bed pads, as well as a line of pet beds. Previously, the line ofmedical bed pads and pet beds were reported as a separate segment under thename Extended Care. Because management is now looking at the Extended Caresegment in conjunction with the Infection Control segment, and since themajority of the Extended Care segment revenue is now generated from the medicalbed pads, it is now appropriate for these segments to be consolidated in theInfection Control segment.  All numbershave been updated to reflect the updated segmentation.

 

TheCompany’s products are sold both under the “Alpha Pro Tech” brand name, as wellas under private label, and are predominantly sold in the United States ofAmerica (“U.S.”).

 

**2.****                                     ****Basis of Presentation**

 

The interim financial information included herein is unaudited;however, the information reflects all adjustments (consisting of normalrecurring adjustments) that are, in the opinion of management, necessary forthe fair presentation of the consolidated financial position, results ofoperations and cash flows for the interim periods. These consolidated financialstatements have been prepared in accordance with the rules and regulationsof the Securities and Exchange Commission (the “SEC”) and, therefore, omitcertain information and footnote disclosures necessary to present thestatements in accordance with GAAP.  Theconsolidated financial statements should be read in conjunction with theCompany’s current year filings on Form 10-Q and Form 8-K filed withthe SEC, as well as the consolidated financial statements for the year ended December 31,2009, which are included in the Company’s Annual Report on Form 10-K (the “200910-K”), which was filed with the SEC on March 10, 2010. The results ofoperations for the three months ended March 31, 2010 are not necessarilyindicative of the results to be expected for the full year. The consolidatedbalance sheet at December 31, 2009 was extracted from the auditedconsolidated financial statements contained in the 2009 10-K and does not includeall disclosures required by GAAP for annual consolidated financial statements.

 

**3.****                                     ****Stock Based Compensation**

 

The Company maintains a stock option plan under which the Company maygrant incentive stock options and non-qualified stock options to employees andnon-employee directors.  Stock optionshave been granted with exercise prices at or above the fair market value of theunderlying shares of common stock on the date of grant.  Options vest and expire according to termsestablished at the grant date.

 

The Company adopted the Financial Accounting Standards Board (“FASB”) *Accounting Standards Codification* (the “FASBASC”, the “ASC” or the “Codification”) 718, *StockCompensation*(“ASC 718” andformerly referred to as SFAS No.123(R)), effective January 1, 2006,using the modified prospective application method.  ASC 718 requires companies to record 

 

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**Notes toConsolidated Financial Statements (Unaudited)**

 

compensation expense for the value of all outstanding and unvestedshare-based payments, including employee stock options and similar awards.  During the first three months of 2010 and2009, there were no stock options granted under the stock option plan.  The Company recognized $34,000 and $58,000 inshare-based compensation expense in its consolidated financial statements forthe three months ended March 31, 2010 and 2009, respectively, related topreviously issued options.

 

Stock options topurchase 1,567,000 and 1,795,000 shares of common stock were outstanding at March 31,2010 and 2009, respectively.  As of March 31,2010, 691,384 incremental shares were included in the computation of dilutedearnings per share because the exercise prices of all of the stock options wereless than the average share price of the Company’s common stock for the 2010first quarter, and, therefore, the effect was dilutive.  As of March 31, 2009, none of the1,795,000 outstanding stock options were included in the computation of dilutedearnings per share because the exercise prices of these options were greaterthan the average share price of the Company’s common stock for the 2009 firstquarter, and, therefore, there was no dilutive effect.

 

The Company usedthe Black-Scholes-Merton option pricing model to value the options.  Prior to 2008, the Company used thesimplified method as discussed in Staff Accounting Bulletin (“SAB”) No. 107,*Share-Based Payment,* for estimating theexpected life of the options.  Foroptions granted during a quarter or fiscal period, the Company would usehistorical data to estimate the expected life of the options.  The risk-free interest rate for periodswithin the contractual life of the award is based on the U.S. Treasury yieldcurve in effect at the time of grant. The expected volatility is based onhistorical volatility of the expected life in years.  The Company uses an estimated dividend payoutratio of zero, as the Company has not paid dividends in the past and does notexpect to in the future.

 

Thefollowing table summarizes stock option activity during the three months ended March 31,2010:

 
| ** **                                     | ** ** | **Options** | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term (in years)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|------------------------------------------------|------------|-------------|------------|-----------------------------------------|------------|-----------------------------------------------------------------|------------|---------------------------------|------------|
| Options outstanding at  December 31, 2009 |       | 1,572,000   |       | $                                       | 1.56       |                                                            | 3.24       |                            | —     |   |
| Exercised                                      |       | (5,000      | )          | $                                       | 1.23       |                                                            | —     |                            | —     |   |
| Granted                                        |       | —      |       | —                                  |       | —                                                          |       | —                          |       |
| Forfeited or expired                           |       | —      |       | —                                  |       | —                                                          |       | —                          |       |
|                                           |       |        |       |                                    |       |                                                            |       |                            |       |   |   |
| Options outstanding at  March 31, 2010    |       | 1,567,000   |       | $                                       | 1.56       |                                                            | 2.99       |                            | $          | 1,242,000 |   |
|                                           |       |        |       |                                    |       |                                                            |       |                            |       |   |   |
| Options exercisable at  March 31, 2010    |       | 1,088,000   |       | $                                       | 1.67       |                                                            | 2.91       |                            | $          | 738,000 |   |

 

As of March 31,2010, $138,000 of total unrecognized compensation cost related to stock optionsis expected to be recognized over a weighted average period of 1.26 years.

 

**4.****                                     ****New****Accounting Standards**

 

In the thirdquarter of 2009, the Company adopted the FASB ASC.  The ASC is the single official source ofauthoritative, nongovernmental GAAP, other than guidance issued by theSEC.  The

 

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**Notes toConsolidated Financial Statements (Unaudited)**

 

adoption of theASC did not have any impact on the consolidated financial statements includedherein.  For further discussion of theCodification, see the Critical Accounting Policies in Management’s Discussionand Analysis of Financial Condition and Results of Operations elsewhere in thisreport.

 

FASB ASC 810,*Consolidation,*(“ASC810”**and formerly referred to asSFAS No. 167)*,* eliminates a required quantitativeapproach to determine whether a variable interest gives an entity a controllingfinancial interest in a variable interest entity in favor of a qualitativelyfocused analysis.  This guidance iseffective for the Company beginning in the first quarter of fiscal year 2010.The application of ASC 810 did not have a significant impact on theconsolidated earnings nor the consolidated financial position for the periodspresented.

 

In August 2009,the FASB issued Accounting Standards Update No. 2009-05 (“ASU No. 2009-05”),*Fair Value Measurements and Disclosures(Topic 820): Measuring Liabilities at Fair Value.*  This update provides amendments to reducepotential ambiguity in financial reporting when measuring the fair value ofliabilities.  Among other provisions,this update provides clarification that in circumstances, in which a quotedprice in an active market for the identical liability is not available, areporting entity is required to measure fair value using one or more of thevaluation techniques described in ASU No. 2009-05.  ASU No. 2009-05 is effective for theCompany’s annual consolidated financial statements for the year ended December 31,2009.  The application of ASU No. 2009-05did not have a significant impact on the consolidated earnings nor theconsolidated financial position for the periods presented.

 

In October 2009,the FASB issued Accounting Standards Update No. 2009-13, *Revenue Recognition (Topic 605)*: *Multiple-Deliverable Revenue Arrangements — a consensus of the FASBEmerging Issues Task Force. *Thisupdate provides application guidance on whether multiple deliverables exist,how the deliverables should be separated and how the consideration should beallocated to one or more units of accounting. This update establishes a selling price hierarchy for determining theselling price of a deliverable.  Theselling price used for each deliverable will be based on vendor-specificobjective evidence, if available, third-party evidence if vendor-specificobjective evidence is not available, or estimated selling price if neithervendor-specific or third-party evidence is available.  The Company will be required to apply thisguidance prospectively for revenue arrangements entered into or materiallymodified after January 1, 2011; however, earlier application is permitted.The Company has not determined the impact that this update may have on itsconsolidated financial statements.

 

In December 2009,the FASB issued Accounting Standards Update No. 2009-17 (“ASU No. 2009-17”),*Consolidations (Topic 810): Improvements toFinancial Reporting by Enterprises Involved with Variable Interest Entities*.  The amendments in ASU No. 2009-17replace the quantitative-based risks and rewards calculation for determiningwhich reporting entity, if any, has a controlling financial interest in avariable interest entity with an approach focused on identifying whichreporting entity has the power to direct the activities of a variable interestentity that most significantly impact the entity’s economic performance and (1) theobligation to absorb losses of the entity or (2) the right to receivebenefits from the entity.  An approachthat is expected to be primarily qualitative will be more effective foridentifying which reporting entity has a controlling financial interest in avariable interest entity.  The amendmentsin ASU No. 2009-17 also require additional disclosures about an reportingentity’s involvement in variable interest entities, which will enhance theinformation provided to users of financial statements.  The application of ASU No. 2009-17 didnot have a significant impact on the consolidated earnings nor the consolidatedfinancial position for the periods presented.

 

In February 2010,the FASB issued Accounting Standards Update No. 2010-09 (“ASU No. 2010-09”),*Subsequent Events (Topic 855): Amendments toCertain Recognition and Disclosure Requirements,*effective February 24,2010.  The amendments in ASU No. 2010-09remove the requirement for an SEC filer to disclose a date through whichsubsequent events have been evaluated in both issued and revised financialstatements.

 

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**Notes to Consolidated Financial Statements(Unaudited)**

 

In April 2010,the FASB issued Accounting Standards Update No. 2010-13 (“ASU No. 2010-13”),*Compensation (Topic 718): Effect of Denominatingthe Exercise Price of a Share-Based Payment Award in the Currency of the Marketin Which the Underlying Equity Security Trades — a consensus of the FASBEmerging Issues Task Force*. The amendments in ASU No. 2010-13 address the classification of ashare-based payment award with an exercise price denominated in the currency ofa market in which the underlying equity security trades.  Topic 718 is amended to clarify that ashare-based payment award with an exercise price denominated in the currency ofa market in which a substantial portion of the entity’s equity securitiestrades shall not be considered to contain a market, performance, or servicecondition.  Therefore, such an award isnot to be classified as a liability if it otherwise qualifies as equityclassification.  The application of ASU No. 2010-13did not have a significant impact on the consolidated earnings nor theconsolidated financial position for the periods presented.

 

**5.****                                     ****Inventories**

 

Inventoriesconsist of the following:

 
| ** **                                                     | ** ** | **March 31,  2010** | ** ** | **December 31,  2009** | ** ** |
|----------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Raw materials                                                  |       | $                        | 10,172,000 |                        | $          | 9,831,000 |   |
| Work in process                                                |       | 827,000                  |       | 586,000                     |       |
| Finished goods                                                 |       | 5,426,000                |       | 3,104,000                   |       |
|                                                           |       | 16,425,000               |       | 13,521,000                  |       |
| Less: reserve for slow-moving, obsolete or unusable  inventory |       | (392,000                 | )          | (427,000                    | )          |
|                                                           |       | $                        | 16,033,000 |                        | $          | 13,094,000 |   |

 

**6.****                                     ****Investment in and Advances toUnconsolidated Affiliates**

 

Alpha ProTechEngineered Products, Inc. entered into a joint venture with a manufacturerin India for the production of building products in 2005.  Under terms of the joint venture agreement, aprivate company, Harmony Plastics Private Limited (“Harmony”) was created withownership interests of 41.66% by Alpha ProTech Engineered Products, Inc.and 58.34% by Maple Industries and Associates. Alpha ProTech Engineered Products, Inc. contributed $508,000 forshare capital, and Maple Industries and Associates contributed $708,000.

 

This joint venturepositions Alpha ProTech Engineered Products, Inc. to respond to currentand expected increased product demand for housewrap and synthetic roofingunderlayment and provides future capacity for sales of specialty roofingcomponent products and custom products for industrial applications requiringhigh quality extrusion coated fabrics. In addition, the joint venture now supplies products for the DisposableProtective Apparel segment.

 

The capital from the initial funding, along with abank loan, which is guaranteed exclusively by Maple Industries and Associatesand the assets of Harmony, were utilized to purchase an existing 33,000 squarefoot manufacturing facility in India; this facility includes manufacturingequipment necessary to produce synthetic roof underlayment.  In addition, Harmony built a 60,000 squarefoot facility in India for the manufacturing of housewrap and other buildingproducts.  In late 2009, Harmony financed a 20,000 square footaddition to their existing 60,000 square foot manufacturing facility, for atotal of 80,000 square feet.

 

The Company is subject to the provisions of FASB ASC810, *Consolidation*, (“ASC 810” and formerlyreferred to as SFAS No.167), which defines the criteria by which the Companydetermines the proper accounting for its investments in related entities.  Specifically, ASC 810 

 

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**Notes to Consolidated Financial Statements(Unaudited)**

 

requires the Company to assess whether or not relatedentities are variable interest entities (“VIEs”), as defined.  For those related entities that qualify asVIEs, ASC 810 requires the Company to determine whether or not the Company isthe primary beneficiary of the VIE, and, if so, to consolidate the VIE.

 

The Company has determined that Harmony is not a VIEand is, therefore, considered to be an unconsolidated affiliate.

 

The Company records its investment in Harmony as “Equityinvestments in and advances to unconsolidated affiliates” on the accompanyingConsolidated Balance Sheets.  The Companyrecords its equity interest in Harmony’s results of operations as “Equity inincome of unconsolidated affiliates” on the accompanying Consolidated IncomeStatements.

 

The Company reviews annually its investment in Harmonyfor impairment in accordance with FASB ASC 323, *Investments —Equity Method and Joint Ventures*, (“ASC 323” and formerly referredto as APB No. 18). ASC 323 requires recognition of a loss when the declinein an investment is other-than-temporary. In determining whether the decline is other-than-temporary, the Companyconsiders the nature of the industry in which Harmony operates, its historicalperformance, its performance in relation to its peers and the current economicenvironment.  The Company has concludedthat no impairment was required.

 

Alpha ProTech Engineered Products, Inc. initiallyinvested $1,450,000 in the joint venture; $508,000 for share capital and$942,000 as a long term advance for materials. Fifty percent of the $942,000 long term advance for materials is to berepaid over a six year term that commenced in July 2006, and the balanceis to be paid in the seventh year.  As ofMarch 31, 2010, Harmony has repaid a total of $525,000, leaving a balanceof $417,000.  Interest of 3.5% is to bepaid annually on this advance, and the Company has an interest receivable of $13,000as of March 31, 2010 and $15,000 as of December 31, 2009 related tothe agreement.

 

For the three months ended March 31, 2010 and2009, Alpha Pro Tech purchased $2,706,000 and $224,000 of inventory,respectively, from Harmony.  For thethree months ended March 31, 2010 and 2009, the Company recorded equityincome in unconsolidated affiliates of $73,000 and $98,000, respectively.  As of March 31, 2010, the Company’sinvestment in Harmony is $1,697,000, which consists of its original $1,450,000investment and cumulative equity in income of unconsolidated affiliates of$849,000, less $525,000 in repayments of the advance and payment of $77,000 individends.

 

**7.****                                     ****Accrued Liabilities**

 

Accrued liabilitiesconsist of the following:

 
| ** **                   | ** ** | **March 31,  2010** | ** ** | **December 31,  2009** | ** ** |
|------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Payroll                      |       | $                        | 194,000    |                        | $          | 131,000 |   |
| Commission and bonus accrual |       | 195,000                  |       | 2,178,000                   |       |
| Accrued professional fees    |       | 86,000                   |       | 150,000                     |       |
| Accrued rebates and other    |       | 54,000                   |       | 273,000                     |       |
|                         |       | $                        | 529,000    |                        | $          | 2,732,000 |   |

 

**8.****                                     ****Basic and Diluted Net Income PerShare**

 

The following table provides a reconciliation of bothnet income and the number of shares used in the computation of “basic” earningsper share (“EPS”), which utilizes the weighted average 

 

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**Notes to Consolidated Financial Statements(Unaudited)**

 

number of shares outstanding without regard topotential shares, and “diluted” EPS, which includes all such dilutive sharesfor the three months ended March 31, 2010 and 2009, respectively:

 
| ** **                                        | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|---------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                        | ** ** | **2010**                                       | ** ** | **2009** | ** ** |
| Net income (Numerator)                            |       | $                                              | 687,000    |   | $ | 514,000 |   |
| Shares (Denominator):                             |       |                                           |       |   |   |
| Basic weighted average shares outstanding         |       | 22,423,229                                     |       | 23,700,601 |   |
| Add: Dilutive effect of outstanding stock options |       | 691,384                                        |       | — |   |
| Diluted weighted average shares outstanding       |       | 23,114,613                                     |       | 23,700,601 |   |
| Net income per share:                             |       |                                           |       |   |   |
| Basic                                             |       | $                                              | 0.03       |   | $ | 0.02 |   |
| Diluted                                           |       | $                                              | 0.03       |   | $ | 0.02 |   |

 

**9.****                                     ****Activity of Business Segments**

 

The Companyoperates through three segments:

 

**DisposableProtective Apparel:**consisting of a complete line of disposable protective clothing such asshoecovers (including the Aqua Trak® and spunbond shoecovers), bouffant caps,coveralls, frocks, lab coats, gowns and hoods for the pharmaceutical,cleanroom, industrial and medical markets.

 

**BuildingSupply****(formerly known as Engineered Products):** consisting of aline of construction supply weatherization products.  The construction supply weatherization productsconsist of housewrap and synthetic roof underlayment.  Of note, the Company’s equity in income ofunconsolidated affiliates (Harmony) is included in the total segment income forBuilding Supply in the table below.

 

**InfectionControl:**consisting of a line of face masks and eye shields principally for the medical,dental and industrial markets, as well as medical bed pads and a line of petbeds.  Previously, the line of medicalbed pads and pet beds were reported as a separate segment under the name ofExtended Care. Because management is now looking at the Extended Care segmentin conjunction with the Infection Control segment, and since the majority ofthe Extended Care revenue is now generated from the sale of medical bed pads,as of the first quarter of 2009, these products are consolidated into theInfection Control segment.  All numbershave been updated to reflect the updated segmentation.

 

Segment dataexcludes charges allocated to head office and corporate sales/marketingdepartments and income taxes.  TheCompany evaluates the performance of its segments and 

 

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**Notes to Consolidated Financial Statements(Unaudited)**

 

allocatesresources to them based primarily on net sales.

 

The following table shows consolidated net sales foreach segment for the three months ended March 31, 2010 and 2009,respectively:

 
| ** **                    | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|-------------------------------|------------|------------------------------------------------|------------|
| ** **                    | ** ** | **2010**                                       | ** ** | **2009** | ** ** |
|                          | ** ** | ** **                                     | ** ** | ** ** | ** ** |
| Disposable Protective Apparel |       | $                                              | 5,084,000  |   | $ | 4,834,000 |   |
| Building Supply               |       | 4,722,000                                      |       | 2,255,000 |   |
| Infection Control             |       | 1,823,000                                      |       | 2,237,000 |   |
|                          |       |                                           |       |   |   |
| Consolidated total net sales  |       | $                                              | 11,629,000 |   | $ | 9,326,000 |   |

 

The following table shows the reconciliation of totalsegment income to total consolidated net income for the three months ended March 31,2010 and 2009, respectively:

 
| ** **                              | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------|------------|
| ** **                              | ** ** | **2010**                                       | ** ** | **2009** | ** ** |
| Disposable Protective Apparel           |       | $                                              | 1,200,000  |   | $ | 1,250,000 |   |
| Building Supply                         |       | 661,000                                        |       | 91,000 |   |
| Infection Control                       |       | 522,000                                        |       | 804,000 |   |
|                                    |       |                                           |       |   |   |
| Total segment income                    |       | 2,383,000                                      |       | 2,145,000 |   |
| Unallocated corporate overhead expenses |       | (1,303,000                                     | )          | (1,328,000 | ) |
| Provision for income taxes              |       | (393,000                                       | )          | (303,000 | ) |
|                                    |       |                                           |       |   |   |
| Consolidated net income                 |       | $                                              | 687,000    |   | $ | 514,000 |   |

 

**10.****                              ****Subsequent Events**

 

There were no subsequent events since March 31,2010. Also, the Company has reviewed and evaluated material subsequent eventsfrom the consolidated balance sheet date of March 31, 2010 through the consolidatedfinancial statements filing date.  All appropriate subsequent eventdisclosures, if any, have been made in the Notes to Consolidated FinancialStatements.

 

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**ITEM 2****   .  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**

 

You should readthe following discussion and analysis together with our consolidated financialstatements (unaudited) and the notes to our consolidated financial statements(unaudited), which are included elsewhere in this report, and our auditedfinancial statements and the notes thereto, which appear in our  Form 10-K for the year ended December 31,2009.

 

**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

Certain information set forth in this Form 10-Qcontains “forward-looking statements” within the meaning of federal securitieslaws.  Forward-looking statements includestatements concerning our plans, objectives, goals, strategies, future events,future revenues or performance, capital expenditures, financing needs, plans orintentions relating to potential acquisitions, and other information that isnot historical information. When used in this report, the words “estimates”, “expects”,“anticipates”, “forecasts”, “plans”, “intends”, “believes” and variations ofsuch words or similar expressions are intended to identify forward-lookingstatements. We may make additional forward-looking statements from time totime.  All forward-looking statements,whether written or oral and whether made by us or on our behalf, also areexpressly qualified by this special note.

 

Ourforward-looking statements are based upon our current expectations and variousassumptions.  Our expectations, beliefsand projections are expressed in good faith, and we believe that there is areasonable basis for them, including, without limitation, management’sexamination of historical operating trends, data contained in our records andother data available from third parties. However, we cannot assure you that management’s expectations, beliefsand projections will result or be achieved or accomplished.  Our forward-looking statements apply only asof the date made.  Except as required bylaw, we undertake no obligation to publicly update or revise forward-lookingstatements that may be made to reflect events or circumstances after the datemade or to reflect the occurrence of unanticipated events.

 

Any expectations based on these forward-lookingstatements are subject to risks and uncertainties and other important factors,including those discussed in the section entitled “Item 1A.  Risk Factors”, which appear in our Form 10-Kfor the year ended December 31, 2009. These and many other factors could affect Alpha Pro Tech Ltd.’s futureoperating results and financial condition and could cause actual results todiffer materially from expectations based on forward-looking statements made inthis document or elsewhere by Alpha Pro Tech, Ltd. or on its behalf.

 

**Where to find more information about us.**We make available, free of charge, on our Internetwebsite (http://www.alphaprotech.com) our most recent Annual Report on Form 10-K,our most recent Quarterly Report on Form 10-Q, any current reports on Form 8-Kfurnished or filed since our most recent Annual Report on Form 10-K andany amendments to such reports as soon as reasonably practicable following theelectronic filing of such report with the Securities and Exchange Commission(the “SEC”). In addition, we provide electronic or paper copies of our filingsfree of charge upon request.

 

**CriticalAccounting Policies**

 

The FinancialAccounting Standards Board (“FASB”) recognized the complexity of itsstandard-setting process and embarked on a revised process in 2004 thatculminated in the release on July 1, 2009 of the FASB Accounting StandardsCodification TM (the “FASB ASC”), which is also sometimes referred to as the “Codification”or the “ASC”.  The Codification does notchange how the Company accounts for its transactions or the nature of relateddisclosures made.  To the Company, thismeans instead of following the rules in Statement of Financial AccountingStandard No. 123(R) (“SFAS No. 123(R)”), *Share-BasedPayment*, we will follow the guidance in ASC 718, *Stock Compensation*. References to generally accepted accounting principles generallyaccepted in the United States of America (“GAAP”) issued by the FASB, withinManagement’s Discussion and Analysis of Financial Condition and Results of 

 

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Operations and inthe Notes to Consolidated Financial Statements (Unaudited) included elsewherein this report are to the Codification. The FASB finalized the Codification effective for periods ending on orafter September 15, 2009.  PriorFASB standards like SFAS No. 123(R), *Share-Based Payment*,are no longer being issued by the FASB.

 

The preparation ofour financial statements in conformity with GAAP requires us to make estimatesand assumptions that affect the reported amounts of assets and liabilities, thedisclosure of contingent assets and liabilities at the dates of the financialstatements and the reported amounts of net sales and expenses during thereported periods.  We base estimates onpast experience and on various other assumptions that are believed to bereasonable under the circumstances.  Theapplication of these critical accounting policies on a consistent basis enablesus to provide timely and reliable financial information.  Our critical accounting polices include thefollowing:

 

**I****nventories:**  Inventories include freight-in, materials,labor and overhead costs and are stated at the lower of cost (computed on astandard cost basis, which approximates average cost) or market.  Provision is made for slow-moving, obsoleteor unusable inventory. We assess our inventory for estimated obsolescence orunmarketable inventory and write down the difference between the cost ofinventory and the estimated market value based upon assumptions about futuresales and supply on-hand, if necessary. If actual market conditions are less favorable than those projected bymanagement, additional inventory write-downs may be required.

 

**RevenueRecognition:**  For salestransactions, we comply with the provisions of SEC Staff Accounting Bulletin No. 104,*RevenueRecognition*, which states that revenue should be recognizedwhen the following revenue recognition criteria are met: (1) persuasiveevidence of an arrangement exists; (2) title transfers, and the customerassumes 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 ofproduct, and revenues are recognized accordingly.

 

**SalesReturns, Rebates and Allowances:**  Sales are reduced for any anticipated salesreturns, rebates and allowances based on historical experience.  Since our return policy is only 90 days, andour products are not generally susceptible to external factors, such astechnological obsolescence or significant changes in demand, we are able tomake a reasonable estimate for returns. We offer end-user product specific and sales volume rebates to selectdistributors.  Our rebates are based onactual sales and accrued monthly.

 

**StockBased Compensation:**  Alpha Pro Tech, Ltd. (“Alpha Pro Tech” or“the Company”) adopted FASB ASC 718, *Stock Compensation*,(“ASC 718” and formerly referred to as SFAS No. 123(R)), effective January 1,2006, using the modified prospective application method.  ASC 718 requires companies to recordcompensation expense for the value of all outstanding and unvested share-basedpayments, including employee stock options and similar awards.

 

The fair values of stock option grants are determined using theBlack-Scholes-Merton option pricing model and are based on the followingassumptions: expected stock price volatility based on historical and management’sexpectations of future volatility, risk-free interest rates from publishedsources, years to maturity based on historical data and no dividend yield, asmanagement currently does not intend to pay dividends in the near future.  The Black-Scholes-Merton option valuationmodel was developed for use in estimating the fair value of traded options thathave no vesting restrictions and that are fully transferable.  In addition, the option valuation modelrequires the input of highly subjective assumptions, including expected stockprice volatility.  Our stock options havecharacteristics significantly different from those of traded options, andchanges in the subjective input assumptions can materially affect their fairvalue.

 

**OVERVIEW**

 

Alpha Pro Tech isin the business of protecting people, products and environments. We accomplishthis by developing, manufacturing and marketing a line of high-value,disposable protective apparel and

 

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infection controlproducts for the cleanroom, industrial, pharmaceutical, medical and dentalmarkets. We also manufacture a line of building supply construction weatherizationproducts.  Our products are sold bothunder the “Alpha Pro Tech” brand name, as well as under private label.

 

Our products aregrouped into three business segments: the Disposable Protective Apparel segment, consisting of disposableprotective apparel; the Building Supply segment (formerly known as theEngineered Products segment), consisting of construction weatherizationproducts, such as housewrap and synthetic roof underlayment; and the InfectionControl segment, consisting of face masks, eye shields and medical bed pads, aswell as a line of pet beds.  Previously,the line of medical bed pads and pet beds were reported as a separate segmentunder the name of Extended Care. Because management is now looking at theExtended Care segment in conjunction with the Infection Control segment, andsince the majority of the former Extended Care segment revenue is now generatedfrom the medical bed pads, as of the first quarter of 2009, these products havebeen consolidated into the Infection Control segment.  All financial information has been updated toreflect the updated segmentation.

 

Our target marketsinclude pharmaceutical manufacturing, bio-pharmaceutical manufacturing andmedical device manufacturing, lab animal research, high technology electronicsmanufacturing (which includes the semi-conductor market), medical and dentaldistributors, pet distributors, and construction, building supply and roofingdistributors.

 

Our products areused primarily in cleanrooms, industrial safety manufacturing environments,health care facilities, such as hospitals, laboratories and dental offices, aswell as building and re-roofing sites. Our products are distributed principally in the United States through anetwork consisting of purchasing groups, national distributors, localdistributors, independent sales representatives and our own sales and marketingforce.

 

# **RESULTS OF OPERATIONS**

# ** **

The followingtable sets forth certain operational data as a percentage of sales for theperiods indicated:

 
| ** **                               | ** ** | **For the Three Months Ended  March 31,** | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|
| ** **                               | ** ** | **2010**                                       | ** ** | **2009** | ** ** |
| Net sales                                |       | 100.0                                          | %          | 100.0 | % |
|                                     |       |                                           |       |   |   |
| Gross profit                             |       | 42.9                                           | %          | 44.2 | % |
|                                     |       |                                           |       |   |   |
| Selling, general and administrative      |       | 32.5                                           | %          | 34.7 | % |
|                                     |       |                                           |       |   |   |
| Income from operations                   |       | 8.6                                            | %          | 7.7 | % |
|                                     |       |                                           |       |   |   |
| Income before provision for income taxes |       | 9.3                                            | %          | 8.8 | % |
|                                     |       |                                           |       |   |   |
| Net income                               |       | 5.9                                            | %          | 5.5 | % |

## ** **

## **Three Months ended March 31,2010 compared to Three Months ended March 31, 2009**

## ** **

**Sales.**  Consolidated sales for the three months endedMarch 31, 2010 increased to $11,629,000 from $9,326,000 for the threemonths ended March 31, 2009, representing an increase of $2,303,000, or24.7%.  This increase consisted ofincreased sales of Building Supply segment sales of $2,467,000 and 

 

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increased Disposable ProtectiveApparel segment sales of $250,000, offset primarily by decreased sales ofInfection Control products of $414,000.

 

Sales for theDisposable Protective Apparel segment for the three months ended March 31,2010 increased by $250,000, or 5.2%, to $5,084,000, compared to $4,834,000 forthe same period of 2009.  The increase isprimarily due to improved sales of disposable shoecovers.  The segment increase was related primarily toincreased sales to a broad base of our distribution network and in particularto a major national distributor with which we have preferred vendor status andfrom which we received the Outstanding Performance Controlled Environmentsvendor award for 2009.  This waspartially offset by decreased sales to our largest distributor.  Sales in the first quarter of 2010 continuedto be adversely affected by a supply chain delay of goods from Asia.  This delay is expected to be resolved in thesecond quarter of 2010.

 

The CriticalCover® disposable protective apparel brand and its associated trade names,SureGripTM, AquaTrak®, ComforTech® and MicrobreatheTM, are trademarks owned byAlpha Pro Tech and have been manufactured by Alpha Pro Tech exclusively for ourlargest distributor since the early 1990s. Alpha Pro Tech has recently been informed that this distributor hasdecided to launch their own private label line of disposable protectiveapparel, and has made a business decision to transition away from selling AlphaPro Tech’s disposable garments to their own brand of apparel.  Conversely, we have decided to shift awayfrom our largest distributor as the sole distributor of our Critical Cover®protective apparel product line and to utilize a more diversified, broader,global distribution strategy.  The changein our relationship with our largest disposable protective apparel distributorcould adversely affect sales in the short term but, could be beneficial in thelong term as we develop a broader base of distribution.

 

Building Supplysegment sales for the three months ended March 31, 2010 increased by$2,467,000, or 109.4%, to $4,722,000, as compared to $2,255,000 for the sameperiod of 2009.  The segment increase of109.4% was primarily due to a 135.9% increase in sales of REXTM SynFelt syntheticroof underlayment and a 73.6% increase in sales of REXTM Wrap housewrap.  The sales mix of the Building Supply segmentfor the three months ended March 31, 2010 was 70% for synthetic roofunderlayment and 30% for housewrap.  Thiscompared to 64% for synthetic roof underlayment and 36% for housewrap for thefirst quarter of 2009.

 

Our REXTM SynFeltsynthetic roof underlayment is perceived as a superior product in the industryand as the market evolves from felt paper to synthetic roof underlayment webelieve that we are in a very good position to increase market share.  Additionally, we believe that ourhigh-quality, multi-color printed housewrap gives us a distinct competitiveadvantage in the marketplace and that our market share is growing even during thisweak building market and economic downturn. We are currently working on opportunities with existing and newdistributors, and we are optimistic about the future of this segment.

 

Infection Controlsegment sales for the three months ended March 31, 2010 decreased by$414,000, or 18.5%, to $1,823,000, compared to $2,237,000 for the same periodof 2009.  Shield sales were down by61.6%, or $652,000, to $406,000, mask sales were up by 22.3%, or $233,000, to$1,280,000 and medical bed pad and pet beds were up by 3.8%, or $5,000, to$137,000, compared to the three months ended March 31, 2009.

 

Shield sales weredown in the first quarter of 2010 due to a $1.7 million non-recurring shieldorder received in the fourth quarter of 2008. That order was shipped out over a period of three quarters and commencedshipping in the fourth quarter of 2008. The increase in mask sales for the three months ended March 31,2010 was primarily attributable to an increase in our general purpose line offacemasks.  Our N-95 respirator masksales were up slightly in the first quarter of 2010 and are expected to returnto pre-H1N1 levels in 2010 unless concerns relating to the global H1N1Influenza A pandemic resume.

 

**GrossProfit.**  Gross profit increased by $869,000, or 21.1%,to $4,988,000 for the three months ended March 31, 2010 from $4,119,000for the same period in 2009.  The grossprofit margin was 42.9% for 

 

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the three monthsended March 31, 2010, compared to 44.2% for the three months ended March 31,2009.

 

Gross profitmargin for the three months ended March 31, 2010 was negatively affectedby the change in product mix in which Building Supply segment sales, which havelower margins, increased as a percentage of total sales.  Of total sales, Building Supply sales were40.6% in the three months ended March 31, 2010 as compared to 24.2% forthe same period of 2009.  Building Supplysegment sales are expected to continue to grow as a percentage of total salesin the coming quarters.  Gross profitmargin in the Disposable Protective Apparel segment, although up slightly thisquarter as compared to the same quarter of 2009, is expected to soften for theremainder of 2010.

 

**Selling,General and Administrative Expenses.**  Selling,general and administrative expenses increased by $544,000, or 16.8%, to$3,784,000 for the three months ended March 31, 2010 from $3,240,000 forthe three months ended March 31, 2009. As a percentage of net sales, selling, general and administrativeexpenses decreased to 32.5% for the three months ended March 31, 2010from   34.7% for the same period in2009.  The increase of $544,000 inexpenses was primarily due to increased employee compensation of $327,000,increased marketing expenses of $127,000, increased travel expenses of $85,000,increased insurance of $75,000, increased general office, factory andmiscellaneous expenses of $81,000, increased commissions of $59,000 andincreased professional fees of $15,000, offset primarily by a $225,000severance agreement for our previous Senior Vice President of Marketing, whichwas expensed during the first quarter of 2009.

 

The ChiefExecutive Officer and President are each entitled to a bonus equal to 5% of thepre-tax profits of the Company, excluding bonus expense.  Bonuses of $120,000 were accrued for thethree months ended March 31, 2010, as compared to $91,000 in the sameperiod of 2009.

 

**Depreciationand Amortization.**  Depreciation and amortization expenseincreased by $46,000, or 28.6%, to $207,000 for the three months ended March 31,2010 from $161,000 for the same period in 2009. The increase was primarily attributable to increased depreciation forthe Building Supply segment.

 

**Incomefrom Operations.**  Income from operations increased by $279,000,or 38.9%, to $997,000 for the three months ended March 31, 2010, ascompared to income from operations of $718,000 for the three months ended March 31,2009.  The increase in income fromoperations was due to an increase in gross profit of $869,000, partially offsetby an increase in selling, general and administrative expenses of $544,000 andan increase in depreciation and amortization of $46,000.

 

**Equity inIncome of Unconsolidated Affiliates.** For the three months ended March 31, 2010, werecorded equity in income of unconsolidated affiliates of $73,000, as comparedto $98,000 for the same period of 2009.

 

**NetInterest.**  For the three months ended March 31,2010, net interest income was $10,000, compared to net interest income of$1,000 for the three months ended March 31, 2009.  Interest income increased to $10,000 for thethree months ended March 31, 2010, compared to $3,000 for the same periodof 2009.  Interest expense decreased to$0 for the three months ended March 31, 2010, compared to $2,000 for thesame period of 2009.

 

**Incomebefore Provision for Income Taxes.**  Income beforeprovision for income taxes for the three months ended March 31, 2010 was$1,080,000, compared to $817,000 for the three months ended March 31,2009, representing an increase of $263,000, or 32.2%.  The increase in income before provision forincome taxes was due primarily to an increase in income from operations of$279,000 and an increase in net interest income of $9,000, partially offset bya decrease of $25,000 in equity in income of unconsolidated affiliates.

 

**Provisionfor Income Taxes.**  The provision for income taxes for the threemonths ended March 31, 2010 was $393,000, compared to $303,000 for thesame period of 2009.  The estimatedeffective tax 

 

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rate was 36.4% forthe three months ended March 31, 2010, compared to 37.1% for the sameperiod in 2009.  Management expects theeffective tax rate to be approximately 36% going forward.

 

**NetIncome.**  Net income for the three months ended March 31,2010 was $687,000, compared to net income of $514,000 for the three monthsended March 31, 2009, an increase of $173,000, or 33.7%.  The net income increase was primarily due toan increase in income before provision for income taxes of $263,000, partiallyoffset by an increase in income taxes of $90,000.  Net income as a percentage of sales for thethree months ended March 31, 2010 and 2009 was 5.9% and 5.5%,respectively.  Basic income per share forthe three months ended March 31, 2010 and 2009 was $0.03 and $0.02,respectively.  Diluted income per sharefor the three months ended March 31, 2010 and 2009 was $0.03 and $0.02,respectively.

 

### **LIQUIDITY AND CAPITAL RESOURCES**

### ** **

As of March 31,2010, we had cash and cash equivalents of $5,428,000 and working capital of$29,562,000, representing an increase in working capital of 2.0%, or $568,000,since December 31, 2009.  As of March 31,2010, our current ratio was 17:1, compared to 6:1 as of December 31,2009.  Cash and cash equivalentsdecreased by 44.3%, or $4,325,000, to $5,428,000 as of March 31, 2010,compared to $9,753,000 as of December 31, 2009.  The decrease in cash and cash equivalents wasdue to cash used in operating activities of $4,038,000 and cash used ininvesting activities of $293,000 for the aggregate purchase of property andequipment and intangible assets, offset by proceeds from dividends from equityinvestments in unconsolidated affiliates of $77,000, partially offset by cashproceeds from stock options exercised of $6,000.

 

We have a$3,500,000 credit facility with Wells Fargo Bank, consisting of a line ofcredit with interest at prime plus 0.5%. As of March 31, 2010, the prime interest rate was 3.25%.  This credit line was renewed in May 2009and expires in May 2011.  Ourborrowing capacity on the line of credit was $3,500,000 as of March 31,2010.  The available line of credit isbased on a formula of eligible accounts receivable and inventories.  As of March 31, 2010, we did not haveany borrowings under this credit facility.

 

Net cash used inoperating activities was $4,038,000 for the three months ended March 31,2010, compared to $428,000 net cash provided by operating activities for thethree months ended March 31, 2009. The net cash used in operating activities of $4,038,000 for the threemonths ended March 31, 2010 was due to net income of $687,000, adjusted bythe following: a decrease in amortization of share-based compensation expenseof $34,000, increase of depreciation and amortization of $207,000, increaseequity in income of unconsolidated affiliates of $73,000, a decrease inaccounts receivable of $2,233,000, an increase in inventory of $2,939,000, anincrease in prepaid expenses and other current assets of $313,000 and adecrease in accounts payable and accrued liabilities of $3,874,000.

 

Accountsreceivable decreased by $2,233,000, or 26.0%, to $6,360,000 as of March 31,2010 from $8,593,000 as of December 31, 2009.  The decrease in accounts receivable wasprimarily related to the decrease in sales relative to the fourth quarter of2009.  The number of days of salesoutstanding as of March 31, 2010 was 51 days, compared to 53 days as of December 31,2009.

 

Inventoryincreased by $2,939,000, or 22.4%, to $16,033,000 as of March 31, 2010from $13,094,000 as of December 31, 2009. The increase was primarily due to an increase in inventory for theInfection Control segment of $1,583,000, or 38.7%, to $5,673,000 as of March 31,2010 due to a stockpiling of   N-95particulate respirator masks.  Inventoryfor the Disposable Protective Apparel segment increased by $1,344,000, or24.6%, to $6,812,000.  In addition,inventory for the Building Supply segment increased by $12,000, or 0.3%, to$3,548,000 as of March 31, 2010.

 

Prepaid expensesand other current assets increased by $313,000, or 11.2%, to $3,105,000 as of March 31,2010 from $2,792,000 as of December 31, 2009.  The increase was primarily due to an increasein prepaid insurance.

 

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Accounts payableand accrued liabilities as of March 31, 2010 decreased by $3,874,000, or68.0%, to $1,821,000 from $5,695,000 as of December 31, 2009.  The change was primarily due to a decrease intrade payables of $1,671,000 and a decrease in accrued liabilities of$2,203,000.  Accrued liabilities for theyear ended March 31, 2010 decreased as follows: commission and bonusaccrual decreased by $1,983,000, accrued rebates and other decreased by$219,000 and accrued professional fees decreased by $64,000, partially offsetby an increase in accrued payroll expenses of $63,000.

 

Net cash used ininvesting activities was $293,000 for the three months ended March 31,2010, compared to net cash used in investing activities of $90,000 for the sameperiod of 2009.  Our investing activitiesfor the three months ended March 31, 2010 consisted primarily ofexpenditures for property and equipment of $367,000 and the purchase ofintangible assets of $3,000, compared to $86,000 and $4,000, respectively, forthe same period of 2009.  Also in 2010,we received a payment of dividends from our joint venture of $77,000.  The expenditures for property and equipmentin 2010 were primarily for the Infection Control segment and to a lesser extentfor the Building Supply segment. The expenditures for property and equipment forthe first quarter of 2009 were primarily for the Building Supply segment.  We expect to purchase approximately$1,500,000 to $2,000,000 of equipment in 2010.

 

Net cash providedby financing activities was $6,000 for the three months ended March 31,2010, compared to net cash used in financing activities of $285,000 for thesame period of 2009.  Our financingactivities for the three months ended March 31, 2010 was due to theproceeds for the exercise of stock options and was due to the repurchase ofcommon stock for the same period of 2009.

 

In February 2010,the Company announced an expansion of $2.0 million to its existing stockrepurchase plan.  As of March 31,2010, we had $2,862,000 available for additional stock purchases under ourrepurchase program.  During the threemonths ended March 31, 2010, we did not repurchase any shares of commonstock.  As of March 31, 2010, we hadrepurchased a total of 6,193,800 shares of common stock at a cost of $7,658,000through our repurchase program. We retire all stock repurchases uponrepurchase. Future repurchases are expected to be funded from cash on hand andcash flows from operations.

 

We believe thatcash generated from operations, our current cash balance and the fundsavailable under our credit facility will be sufficient to satisfy our projectedworking capital and planned capital expenditures for the foreseeable future.

 

**New Accounting Standards**

 

In the thirdquarter of 2009, the Company adopted the FASB ASC.  The ASC is the single official source ofauthoritative, nongovernmental GAAP, other than guidance issued by theSEC.  The adoption of the ASC did nothave any impact on the consolidated financial statements included elsewhere inthis report.

 

FASB ASC 810,*Consolidation,*(“ASC810”**and formerly referred to asSFAS No. 167)*,* eliminates a required quantitativeapproach to determine whether a variable interest gives an entity a controllingfinancial interest in a variable interest entity in favor of a qualitativelyfocused analysis.  This guidance is effectivefor the Company beginning in the first quarter of fiscal year 2010. Theapplication of ASC 810 did not have a significant impact on the consolidatedearnings nor the consolidated financial position for the periods presented.

 

In August 2009,the FASB issued Accounting Standards Update No. 2009-05 (“ASU No. 2009-05”),*Fair Value Measurements and Disclosures(Topic 820): Measuring Liabilities at Fair Value.*  This update provides amendments to reducepotential ambiguity in financial reporting when measuring the fair value ofliabilities.  Among other provisions,this update provides clarification that in circumstances, in which a quotedprice in an active market for the identical liability is not available, areporting entity is required to measure fair value using one or more of thevaluation techniques described in ASU No. 2009-05.  ASU No. 2009-05 is effective for theCompany’s annual consolidated financial statements for the year ended December 31,2009.  The application of ASU No. 2009-05did not have a significant impact on the consolidated earnings nor theconsolidated financial position for the periods presented.

 

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In October 2009,the FASB issued Accounting Standards Update No. 2009-13, *Revenue Recognition (Topic 605)*: *Multiple-Deliverable Revenue Arrangements — a consensus of the FASBEmerging Issues Task Force. *Thisupdate provides application guidance on whether multiple deliverables exist,how the deliverables should be separated and how the consideration should beallocated to one or more units of accounting. This update establishes a selling price hierarchy for determining theselling price of a deliverable.  Theselling price used for each deliverable will be based on vendor-specificobjective evidence, if available, third-party evidence if vendor-specificobjective evidence is not available, or estimated selling price if neithervendor-specific or third-party evidence is available.  The Company will be required to apply thisguidance prospectively for revenue arrangements entered into or materiallymodified after January 1, 2011; however, earlier application is permitted.The Company has not determined the impact that this update may have on itsconsolidated financial statements.

 

In December 2009,the FASB issued Accounting Standards Update No. 2009-17 (“ASU No. 2009-17”),*Consolidations (Topic 810): Improvements toFinancial Reporting by Enterprises Involved with Variable Interest Entities*.  The amendments in ASU No. 2009-17replace the quantitative-based risks and rewards calculation for determiningwhich reporting entity, if any, has a controlling financial interest in avariable interest entity with an approach focused on identifying whichreporting entity has the power to direct the activities of a variable interestentity that most significantly impact the entity’s economic performance and (1) theobligation to absorb losses of the entity or (2) the right to receivebenefits from the entity.  An approachthat is expected to be primarily qualitative will be more effective foridentifying which reporting entity has a controlling financial interest in avariable interest entity.  The amendmentsin ASU No. 2009-17 also require additional disclosures about an reportingentity’s involvement in variable interest entities, which will enhance theinformation provided to users of financial statements.  The application of ASU No. 2009-17 didnot have a significant impact on the consolidated earnings nor the consolidatedfinancial position for the periods presented.

 

In February 2010,the FASB issued Accounting Standards Update No. 2010-09 (“ASU No. 2010-09”),*Subsequent Events (Topic 855): Amendments toCertain Recognition and Disclosure Requirements,*effective February 24,2010.  The amendments in ASU No. 2010-09remove the requirement for an SEC filer to disclose a date through whichsubsequent events have been evaluated in both issued and revised financial statements.

 

In April 2010,the FASB issued Accounting Standards Update No. 2010-13 (“ASU No. 2010-13”),*Compensation (Topic 718): Effect of Denominatingthe Exercise Price of a Share-Based Payment Award in the Currency of the Marketin Which the Underlying Equity Security Trades — a consensus of the FASBEmerging Issues Task Force*. The amendments in ASU No. 2010-13 address the classification of ashare-based payment award with an exercise price denominated in the currency ofa market in which the underlying equity security trades.  Topic 718 is amended to clarify that ashare-based payment award with an exercise price denominated in the currency ofa market in which a substantial portion of the entity’s equity securitiestrades shall not be considered to contain a market, performance, or servicecondition.  Therefore, such an award isnot to be classified as a liability if it otherwise qualifies as equityclassification.  The application of ASU No. 2010-13did not have a significant impact on the consolidated earnings nor theconsolidated financial position for the periods presented.

 

# **ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK**

# ** **

We subcontract the manufacture of products in China and, to a lesserextent in Mexico, and have a joint venture in India.  In addition, our principal executive office,with 21 employees, is located in Canada. We do not believe that we have a material foreign currency exposure dueto the fact that our purchase agreements with companies in China, India andMexico are settled in United States of America (“U.S.”) dollars.  In addition, all sales transactions are inU.S. dollars.  In Canada, our foreigncurrency exposure is not material due to the fact that we do not conductmanufacturing operations in Canada but is limited to payroll expenses in theCanadian branch office.

 

We do not expect any significant effect on our consolidated results ofoperations from inflation or interest or currency rate fluctuations. We do nothedge our interest rate or foreign exchange risks.

 

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**ITEM 4. CONTROLS AND PROCEDURES**

 

**Evaluation of Disclosure Controls and Procedures**.

 

Under the supervision and with the participation ofour management, including our Chief Executive Officer (principal executiveofficer) and Chief Financial Officer (principal financial officer), weevaluated the effectiveness of the design and operation of our disclosurecontrols and procedures (as such term is defined in Rule 13a-15(e) andRule 15d-15(e) under the Securities Exchange Act of 1934 (the “ExchangeAct”)) Exchange Act as of March 31, 2010 pursuant to the evaluation ofthese controls and procedures required by Rule 13a-15 of the Exchange Act.Disclosure controls and procedures are the controls and other procedures thatwe have designed to ensure that we record, process, summarize and report in atimely manner the information that we must disclose in reports that we filewith or submit to the SEC under the Exchange Act.

 

In designing and evaluating our disclosure controlsand procedures, we recognize that any controls and procedures, no matter howwell designed and operated, can provide only reasonable assurance of achievingthe desired control objectives and that we are required to apply our judgmentin evaluating the cost-benefit relationship of possible controls andprocedures.

 

Based on the evaluation, our principal executive andfinancial officers concluded that our disclosure controls and procedures wereeffective as of the end of the period covered by this report.

 

**Changes in Internal Controls**.

 

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

 

**PART II.  OTHER INFORMATION**

 

**ITEM 1. LEGAL PROCEEDINGS**

 

None.

 

**ITEM 1A. RISK FACTORS**

 

The Company has included in Part I, Item 1A ofits Annual Report on Form 10-K for the year ended December 31, 2009,a description of certain risks and uncertainties that could affect the Company’sbusiness, future performance or financial condition (the “Risk Factors”).  There are no material changes from thedisclosure provided in the Form 10-K for the year ended December 31,2009 with respect to the Risk Factors. Investors should consider the Risk Factors prior to making an investmentdecision with respect to the Company’s stock.

 

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**ITEM 2. UNREGISTERED SALES OFEQUITY SECURITIES AND USE OF PROCEEDS**

 

**ISSUER PURCHASES OF EQUITYSECURITIES**

 

The following table setsforth purchases made by or on behalf of the Company or any “affiliatedpurchaser”, as defined in Rule 10b-18 (a)(3) of the Exchange Act.

 

**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 Plan (1)** | ** ** | **Approximate Dollar  Value of Shares that  May yet be Purchased  Under the Plan (1)** | ** ** |
|---------------------------|------------|----------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|
| January 1-31, 2010   |       | —                                 |       | —                                       |       | —                                                                              |       | $                                                                                           | 2,862,000  |   |
| February 1-28,  2010 |       | —                                 |       | —                                       |       | —                                                                              |       | $                                                                                           | 2,862,000  |   |
| March 1-31, 2010     |       | —                                 |       | —                                       |       | —                                                                              |       | $                                                                                           | 2,862,000  |   |
| Total                     |       | —                                 |       | —                                       |       | —                                                                              |       | $                                                                                           | 2,862,000  |   |

 

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(1)   On February 8, 2010, the Company announced thatthe Board of Directors had authorized a $2.0 million expansion of the Company’sexisting share repurchase program.****Underthe share repurchase program, the Company is authorized to repurchase up to atotal of $10,520,000 of common stock

 

**SECURITIES SOLD**

 

We did not sell any unregistered equity securitiesduring the period covered by this Form 10-Q.

 

**ITEM 3. DEFAULTS UPON SENIORSECURITIES**

 

None.

 

**ITEM 4. RESERVED**

 

**ITEM 5. OTHER INFORMATION**

 

None.

 

**ITEM 6. EXHIBITS**

 
| 3.1.1 |   | 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). |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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| 3.1.2  |   | 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  |   | 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    |   | Bylaws of Alpha Pro Tech, Ltd., incorporated by  reference to Exhibit 3(g) to Form 10-K for the year ended  December 31, 1994, filed on March 31, 1995 (File No. ****000-19893****).                                                      |
|   |   |                                                                                                                                                                                                                                                                    |
| 31.1   |   | Certification Pursuant to  Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act,  signed by Chief Executive Officer (filed herewith)                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                    |
| 31.2   |   | Certification Pursuant to Rule 13a-14(a) and  Rule 15d-14(a) of the Exchange Act, signed by Chief Financial  Officer (filed herewith)                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                    |
| 32.1   |   | Certification Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, signed by Chief Executive Officer (filed  herewith)                                                                                 |
|   |   |                                                                                                                                                                                                                                                                    |
| 32.2   |   | Certification Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, signed by Chief Financial Officer (filed  herewith)                                                                                 |

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

 
|   | ALPHA PRO TECH, LTD. |       |   |                                 |
|--------|----------------------|------------|--------|--------------------------------------|
|   |                 |       |   |                                 |
| DATE:  | **May 7, 2010** | ** ** | BY:    | /s/ **Sheldon Hoffman**              |
|   | ** **           | ** ** |   |                                 |
|   |                 |       |   | Sheldon Hoffman                      |
|   |                 |       |   | Chief Executive Officer and Director |
|   |                 |       |   |                                 |
| DATE:  | **May 7, 2010** | ** ** | BY:    | /s/  **Lloyd Hoffman**               |
|   | ** **           | ** ** |   |                                 |
|   |                 |       |   | Lloyd Hoffman                        |
|   |                 |       |   | Chief Financial Officer              |

 

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