Table of Contents

 

 

 

**SECURITIESAND EXCHANGE COMMISSION**

** **

**WASHINGTON,D.C. 20549**

** **

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** **

**FORM 10-Q**

** **

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** **

**QuarterlyReport pursuant to Section 13 or 15(d)**

**of theSecurities Exchange Act of 1934**

** **

**For theQuarter Ended June 30, 2008**

** **

**CommissionFile No. 01-15725**

** **

**Alpha ProTech, Ltd.**

(exact name ofregistrant 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 telephonenumber, including area code:  **(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 for thepast 90 days.

 

Yes x   No o

 

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

 

Largeaccelerated filer o    Accelerated filer o   Non-acceleratedfiler x  SmallerReporting Company o

 

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 August 52008.

 

24,753,753 shares ofcommon stock,     $.01 par value

 

 

 

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Table of Contents

 

**Alpha Pro Tech, Ltd.**

 

Table of Contents

 
| ** **                                                                                                | ** **                                                   | ** **                                                                                                | ** ** | **Page No.** |
|-----------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|------------|--------------|
| PART  I. FINANCIAL INFORMATION                                                                            |                                                         |
|                                                                                                      |                                                         |
| ITEM  1 Consolidated 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 | 12                                                           |
|                                                                                                      |                                                         |
|                                                                                                      | Cautionary Statements Regarding Forward-Looking  Information | 12                                                                                                        |
|                                                                                                      |                                                         |                                                                                                      |
|                                                                                                      | New  Accounting Standards                                    | 20                                                                                                        |
|                                                                                                      |                                                         |                                                                                                      |
| ITEM 3 Quantitative and Qualitative Disclosures About  Market Risk                                        | 20                                                           |
|                                                                                                      |                                                         |
| ITEM 4 Controls and Procedures                                                                            | 20                                                           |
|                                                                                                      |                                                         |
| 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                                       | 21                                                           |
|                                                                                                      |                                                         |
| ITEM 3 Defaults upon senior securities                                                                    | 21                                                           |
|                                                                                                      |                                                         |
| ITEM 4 Submission of Matters to a Vote Security  Holders                                                  | 22                                                           |
|                                                                                                      |                                                         |
| ITEM  5 Other Information                                                                                 | 22                                                           |
|                                                                                                      |                                                         |
| ITEM 6 Exhibits and Reports on Form 8-K                                                                   |                                                         |
|                                                                                                      |                                                         |
| SIGNATURES                                                                                                | 23                                                           |
|                                                                                                      |                                                         |
| EXHIBITS                                                                                                  |                                                         |
|                                                                                                      |                                                         |
|                                                                                                      | Exhibit 31.1:                                                | Certification by CEO pursuant  to Rule 13a-14(b) and Rule 15d-14(b) of the Exchange Act (filed herewith)  |       |
|                                                                                                      |                                                         |                                                                                                      |       |
|                                                                                                      | Exhibit 31.2:                                                | Certification by CFO  pursuant to Rule 13a-14(b) and Rule 15d-14(b) of the Exchange Act (filed  herewith) |       |
|                                                                                                      |                                                         |                                                                                                      |       |
|                                                                                                      | Exhibit 32.1:                                                | Certification by CEO  pursuant to Section 906 of the Sarbanes-Oxley Act (filed herewith)                  |       |
|                                                                                                      |                                                         |                                                                                                      |       |
|                                                                                                      | Exhibit 32.2:                                                | Certification by CFO  pursuant to Section 906 of the Sarbanes-Oxley Act (filed herewith)                  |       |
|                                                                                                           |                                                              |                                                                                                           |            |              |  |  |  |  |  |

 

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Table of Contents

 

**AlphaPro Tech, Ltd.**

 

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

##### *** ***

#### **ITEM1.  FINANCIAL STATEMENTS**

 

Alpha Pro Tech, Ltd.(Alpha Pro Tech, the Company) prepared the following unaudited interimconsolidated financial statements pursuant to the rules and regulations ofthe Securities and Exchange Commission. Certain information and footnotedisclosures normally included in financial statements prepared in accordancewith accounting principles generally accepted in the United States of Americahave been condensed or omitted pursuant to these rules and regulations.

 

You should read thefollowing unaudited interim consolidated financial statements and theaccompanying notes together with the Company’s current year 10-Q’s and 8-K’s aswell as the Annual Report on Form 10-K for the year ended December 31,2007.  The Company’s 2007 Annual Reportcontains information that may be helpful in analyzing the financial informationcontained in this report and in comparing its results of operations for thethree and six months ended June 30, 2008 with the same period in 2007.

 

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**Alpha Pro Tech, Ltd.**

 

### **Consolidated Balance Sheets (Unaudited)**

 
| ** **                                                                                                                                                                     | ** ** | **June 30,  2008** | ** ** | **December 31,  2007 (1)** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|--------------------------------------|------------|
|                                                                                                                                                                           |       |                    |       |                                 |       |
| **Assets**                                                                                                                                                                     |       |                    |       |                                 |       |
| Current  assets:                                                                                                                                                               |       |                    |       |                                 |       |
| Cash  and cash equivalents                                                                                                                                                     |       | $                       | 2,605,000  |                                 | $          | 4,064,000 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $62,000 at  June 30, 2008 and $65,000 at December 31, 2007                                           |       | 5,327,000               |       | 4,422,000                            |       |
| Inventories,  net                                                                                                                                                              |       | 13,892,000              |       | 14,111,000                           |       |
| Prepaid  expenses and other current assets                                                                                                                                     |       | 1,921,000               |       | 1,588,000                            |       |
| Deferred  income taxes                                                                                                                                                         |       | 509,000                 |       | 419,000                              |       |
| Total  current assets                                                                                                                                                          |       | 24,254,000              |       | 24,604,000                           |       |
|                                                                                                                                                                           |       |                    |       |                                 |       |
| Property  and equipment, net                                                                                                                                                   |       | 3,214,000               |       | 3,439,000                            |       |
| Goodwill,  net                                                                                                                                                                 |       | 55,000                  |       | 55,000                               |       |
| Intangible  assets, net                                                                                                                                                        |       | 202,000                 |       | 180,000                              |       |
| Equity  investments in and advances to unconsolidated affiliates                                                                                                               |       | 1,246,000               |       | 1,208,000                            |       |
| Total  assets                                                                                                                                                                  |       | $                       | 28,971,000 |                                 | $          | 29,486,000 |   |
|                                                                                                                                                                           |       |                    |       |                                 |       |
| **Liabilities and Shareholders’ Equity**                                                                                                                                  |       |                    |       |                                 |       |
| Current  liabilities:                                                                                                                                                          |       |                    |       |                                 |       |
| Accounts  payable                                                                                                                                                              |       | $                       | 943,000    |                                 | $          | 457,000 |   |
| Accrued  liabilities                                                                                                                                                           |       | 823,000                 |       | 1,478,000                            |       |
| Total  current liabilities                                                                                                                                                     |       | 1,766,000               |       | 1,935,000                            |       |
|                                                                                                                                                                           |       |                    |       |                                 |       |
| Deferred  income taxes                                                                                                                                                         |       | 752,000                 |       | 747,000                              |       |
| Total  liabilities                                                                                                                                                             |       | 2,518,000               |       | 2,682,000                            |       |
|                                                                                                                                                                           |       |                    |       |                                 |       |
| Shareholders’  equity                                                                                                                                                     |       |                    |       |                                 |       |
| Common  stock, $.01 par value, 50,000,000 shares authorized, 24,878,555 and  25,583,655 issued and outstanding at June 30, 2008 and December 31,  2007, respectively |       | 249,000                 |       | 256,000                              |       |
| Additional  paid-in capital                                                                                                                                                    |       | 25,802,000              |       | 26,670,000                           |       |
| Retained  earnings (accumulated deficit)                                                                                                                                       |       | 402,000                 |       | (122,000                             | )          |
| Total  shareholders’ equity                                                                                                                                               |       | 26,453,000              |       | 26,804,000                           |       |
| Total  liabilities and shareholders’ equity                                                                                                                               |       | $                       | 28,971,000 |                                 | $          | 29,486,000 |   |

 

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(1)                                  Thecondensed consolidated balance sheet as of December 31, 2007 has beenprepared using information from the audited financial statements at that date.

 

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

 

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**Alpha ProTech, Ltd.**

 

### **Consolidated IncomeStatements (Unaudited)**

 
| ** **                                                   | ** ** | **For the Three Months Ended  June 30,** | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                   | ** ** | **2008**                                                          | ** ** | **2007**                                                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Net  sales                                                   |       | $                                                                 | 8,913,000  |                                                            | $          | 9,149,000 |   | $ | 16,437,000 |   | $ | 18,193,000 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Cost  of goods sold, excluding depreciation and amortization |       | 4,995,000                                                         |       | 4,880,000                                                       |       | 9,069,000 |   | 9,759,000 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Gross  margin                                                |       | 3,918,000                                                         |       | 4,269,000                                                       |       | 7,368,000 |   | 8,434,000 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Expenses:                                                    |       |                                                              |       |                                                            |       |   |   |   |   |
| Selling,  general and administrative                         |       | 3,194,000                                                         |       | 3,385,000                                                       |       | 6,335,000 |   | 6,608,000 |   |
| Depreciation  and amortization                               |       | 141,000                                                           |       | 119,000                                                         |       | 282,000 |   | 234,000 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Income  from operations                                      |       | 583,000                                                           |       | 765,000                                                         |       | 751,000 |   | 1,592,000 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Other  income                                                |       |                                                              |       |                                                            |       |   |   |   |   |
| Equity  in income of unconsolidated affiliates               |       | 17,000                                                            |       | 41,000                                                          |       | 38,000 |   | 66,000 |   |
| Interest,  net                                               |       | 17,000                                                            |       | 13,000                                                          |       | 51,000 |   | 29,000 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Income  before provision for income taxes                    |       | 617,000                                                           |       | 819,000                                                         |       | 840,000 |   | 1,687,000 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Provision  for income taxes                                  |       | 232,000                                                           |       | 312,000                                                         |       | 316,000 |   | 644,000 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Net  income                                                  |       | $                                                                 | 385,000    |                                                            | $          | 507,000 |   | $ | 524,000 |   | $ | 1,043,000 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Basic  net income per share                                  |       | $                                                                 | 0.02       |                                                            | $          | 0.02 |   | $ | 0.02 |   | $ | 0.04 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Diluted  net income per share                                |       | $                                                                 | 0.02       |                                                            | $          | 0.02 |   | $ | 0.02 |   | $ | 0.04 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Basic  weighted average shares outstanding                   |       | 24,979,571                                                        |       | 25,251,724                                                      |       | 25,094,775 |   | 25,044,019 |   |
|                                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Diluted  weighted average shares outstanding                 |       | 24,979,571                                                        |       | 25,819,663                                                      |       | 25,094,775 |   | 25,624,061 |   |

 

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

 

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**AlphaPro Tech, Ltd.**

 

### **Consolidated Statement ofShareholders’ Equity (Unaudited)**

 
| ** **                                   | ** ** | **Common Stock** | ** ** | **Additional  Paid-in** | ** ** | **(Accumulated  Deficit)  Retained** | ** ** | ** **   | ** ** |
|----------------------------------------------|------------|-----------------------|------------|-------------------------|------------|--------------------------------------|------------|--------------|------------|
| ** **                                   | ** ** | **Shares**            | ** ** | **Amount**              | ** ** | **Capital**                          | ** ** | **Earnings** | ** ** | **Total** | ** ** |
| ** **                                   | ** ** | ** **            | ** ** | ** **              | ** ** | ** **                           | ** ** | ** **   | ** ** | ** ** | ** ** |
| Balance  at December 31, 2007           |       | 25,583,655            |       | $                       | 256,000    |                                 | $          | 26,670,000   |       | $ | (122,000 | ) | $ | 26,804,000 |   |
|                                         |       |                  |       |                    |       |                                 |       |         |       |   |   |   |   |   |   |
| Share-  based compensation expense           |       | —                |       | —                  |       | 97,000                               |       | —       |       | 97,000 |   |
|                                         |       |                  |       |                    |       |                                 |       |         |       |   |   |
| Common  Stock repurchased & retired |       | (705,100              | )          | (7,000                  | )          | (965,000                             | )          | —       |       | (972,000 | ) |
|                                         |       |                  |       |                    |       |                                 |       |         |       |   |   |
| Net  income                                  |       | —                |       | —                  |       | —                               |       | 524,000      |       | 524,000 |   |
|                                         |       |                  |       |                    |       |                                 |       |         |       |   |   |
| Balance  at June 30, 2008               |       | 24,878,555            |       | $                       | 249,000    |                                 | $          | 25,802,000   |       | $ | 402,000 |   | $ | 26,453,000 |   |

 

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

 

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**AlphaPro Tech, Ltd.**

 

### **Consolidated Statements of Cash Flows (Unaudited)**

 
| ** **                                                                     | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2008**                                                        | ** ** | **2007** | ** ** |
| **Cash Flows From Operating Activities:**                                      |       |                                                            |       |   |   |
| Net  income                                                                    |       | $                                                               | 524,000    |   | $ | 1,043,000 |   |
| Adjustments  to reconcile net income to net cash used in operating activities: |       |                                                            |       |   |   |
| Share-based  compensation expense                                              |       | 97,000                                                          |       | 62,000 |   |
| Depreciation  and amortization                                                 |       | 282,000                                                         |       | 234,000 |   |
| Deferred  income taxes                                                         |       | (85,000                                                         | )          | — |   |
| Equity  in income of unconsolidated affiliates                                 |       | (38,000                                                         | )          | (66,000 | ) |
| Changes  in assets and liabilities:                                            |       |                                                            |       |   |   |
| Accounts  receivable, net                                                      |       | (905,000                                                        | )          | 674,000 |   |
| Inventories,  net                                                              |       | 219,000                                                         |       | (2,206,000 | ) |
| Prepaid  expenses and other current assets                                     |       | (333,000                                                        | )          | (178,000 | ) |
| Accounts  payable and accrued liabilities                                      |       | (169,000                                                        | )          | (790,000 | ) |
|                                                                           |       |                                                            |       |   |   |
| Net  cash used in operating activities:                                        |       | (408,000                                                        | )          | (1,227,000 | ) |
|                                                                           |       |                                                            |       |   |   |
| **Cash Flows From Investing Activities:**                                      |       |                                                            |       |   |   |
| Purchase  of property and equipment                                            |       | (45,000                                                         | )          | (94,000 | ) |
| Purchase  of intangible assets                                                 |       | (34,000                                                         | )          | (37,000 | ) |
|                                                                           |       |                                                            |       |   |   |
| Net  cash used in investing activities                                         |       | (79,000                                                         | )          | (131,000 | ) |
|                                                                           |       |                                                            |       |   |   |
| **Cash Flows From Financing Activities:**                                      |       |                                                            |       |   |   |
| Payments  for the repurchase of common stock                                   |       | (972,000                                                        | )          | — |   |
| Income  tax benefit from stock options exercised                               |       | —                                                          |       | 236,000 |   |
| Proceeds  from the exercise of stock options                                   |       | —                                                          |       | 885,000 |   |
| Net  cash (used in) provided by financing activities                           |       | (972,000                                                        | )          | 1,121,000 |   |
|                                                                           |       |                                                            |       |   |   |
| Decrease  in cash during the period                                            |       | (1,459,000                                                      | )          | (237,000 | ) |
|                                                                           |       |                                                            |       |   |   |
| Cash  and cash equivalents, beginning of period                                |       | 4,064,000                                                       |       | 1,837,000 |   |
| Cash  and cash equivalents, end of period                                      |       | $                                                               | 2,605,000  |   | $ | 1,600,000 |   |

 

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

 

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**AlphaPro Tech, Ltd.**

 

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

 

**1.****                                      TheCompany**

 

Alpha Pro Tech, Ltd. (“AlphaPro Tech”, “the Company”) is in the business of protecting people, products andenvironments.  The Company accomplishesthis by developing, manufacturing and marketing a line of disposable protectiveapparel for the cleanroom, industrial and pharmaceutical markets, a line ofinfection control products for the medical and dental markets and a line ofconstruction weatherization products. The disposable protective apparel consists of a complete line ofshoecovers, bouffant caps, coveralls, gowns, frocks and lab coats. Theinfection control line of products includes a line of face masks and eyeshields.  The line of construction supplyweatherization products consists of house wrap and synthetic roofunderlayment.  The Company also manufacturesand distributes a line of medical bed pads and accessories as well as a line ofpet beds.  The Company’s products aresold both under the “Alpha Pro Tech” brand name as well as under private labeland are predominantly sold in the United States of America.

 

**2.****                                      Basisof Presentation**

 

The interim financialinformation included herein is unaudited; however, the information reflects alladjustments (consisting of normal recurring adjustments) that are, in theopinion of management, necessary for the fair presentation of the consolidatedfinancial position, results of operations and cash flows for the interimperiods. The consolidated financial statements should be read in conjunctionwith the current year 10-Q’s and 8-K’s, as well as the consolidated financialstatements for the year ended December 31, 2007, which are included in theCompany’s Annual Report on Form 10-K (“2007 10-K”). The results ofoperations for the three and six months ended June 30, 2008 are notnecessarily indicative of the results to be expected for the full year. Theconsolidated balance sheet at December 31, 2007 was extracted from theaudited consolidated financial statements contained in the 2007 10-K and doesnot include all disclosures required by accounting principles generallyaccepted in the United States of America for annual consolidated financialstatements.

 

**3.****                                      StockBased Compensation**

 

The Company maintains astock option plan under which the Company may grant incentive stock options andnon-qualified stock options to employees and non-employee directors.  Stock options have been granted with exerciseprices at or above the fair market value of the underlying shares of commonstock on the date of grant.  Options vestand expire according to terms established at the grant date.

 

The Company adoptedStatement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-BasedPayment (“SFAS 123R”)” effective January 1, 2006, using the modifiedprospective application method. SFAS 123R requires companies to recordcompensation expense for the value of all outstanding and unvested share-basedpayments, including employee stock options and similar awards.  During the first six months 2008 and 2007there were no stock options granted under the option plan.  The Company recognized $97,000 and $62,000 inshare-based compensation expense in its consolidated financial statements forthe six months ended June 30, 2008 and 2007, respectively related to previously issued options.

 

Stock options to purchase1,320,000 and 1,510,000 shares of common stock were outstanding at June 30,2008 and 2007, respectively. Of the June 30, 2008 outstanding stockoptions totaling 1,320,000, none were included in the computation of dilutedearnings per share because the exercise prices of all stock options weregreater than the average share price of the Company’s common stock and,therefore, there was no dilutive effect. Of the June 30, 2007 outstanding stock options totaling 1,510,000,all of the options to purchase common stock were included in the computation ofdiluted earnings per share because the exercise prices of the stock optionswere less than the average share price of the Company’s common stock and,therefore, the effect was dilutive.

 

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**AlphaPro Tech, Ltd.**

 

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

 

The Company used theBlack-Scholes-Merton option pricing model to value the options.  The table below presents the weighted averageexpected life in years.  Prior to 2008,The Company used the simplified method as discussed in Staff AccountingBulletin (“SAB”) No.107, “Share- Based Payment (“SAB 107”) for estimating theexpected life of the options.  For futuregrants, the Company will use historical data to estimate the expected life ofoptions.  The risk-free interest rate forperiods within the contractual life of the award is based on the US Treasuryyield curve 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 we have not paid dividends in the past and do not expect to inthe future.

 

The following table summarizes stock option activityduring the six months ended June 30, 2008:

 
| ** **                                     | ** ** | **Options** | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted–  Average  Remaining  Contractual  Term (in  years)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|------------------------------------------------|------------|-------------|------------|-----------------------------------------|------------|----------------------------------------------------------------------------|------------|---------------------------------|------------|
| Options  outstanding at December 31, 2007 |       | 1,320,000   |       | $                                       | 1.71       |                                                                       | 5.02       |                            | $          | (71,000 | ) |
| Exercised                                      |       | —      |       | —                                  |       |                                                                       |       |                            |       |
| Granted                                        |       | —      |       | —                                  |       |                                                                       |       |                            |       |
| Forfeited  or expired                          |       | —      |       | —                                  |       |                                                                       |       |                            |       |
| Options  outstanding at June 30, 2008     |       | 1,320,000   |       | $                                       | 1.71       |                                                                       | 4.52       |                            | $          | (984,000 | ) |
| Options  exercisable at June 30, 2008     |       | 445,000     |       | $                                       | 1.63       |                                                                       | 6.22       |                            | $          | (300,000 | ) |

 

As of June 30, 2008, $300,000 of totalunrecognized compensation cost related to stock options is expected to berecognized over a weighted average period of 2.1 years.

 

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

 

In September 2006,the FASB issued SFAS No. 157, “Fair Value Measurements (“SFAS 157”)”,which defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles, and expands disclosures about fairvalue measurements.  This statementaddresses how to calculate fair value measurements required or permitted underother accounting pronouncements. Accordingly, this statement does not require any new fair valuemeasurements.  However, for someentities, the application of this statement will change current practice.  SFAS 157 was adopted by the Company on January 1,2008.  In February 2008, the FASBdeferred for one year the effective date of SFAS 157 only with respect tononfinancial assets and nonfinancial liabilities that are recognized ordisclosed at fair value in the financial statements on a nonrecurring basis,and removed certain leasing transactions from the scope of SFAS 157. Theadoption of SFAS 157 did not have a material impact on the Company’sconsolidated financial statements.

 

In December 2007,the FASB issued SFAS No. 160, “Noncontrolling Interests in ConsolidatedFinancial Statements (“SFAS 160”),” which changes the accounting and reportingstandards for the noncontrolling interests in a subsidiary in consolidatedfinancial statements.  SFAS 160 recharacterizes minority interests asnoncontrolling interests and requires noncontrolling interests to be classifiedas a component of shareholders’ equity.  SFAS 160 is effective January 1,2009 and requires retroactive adoption of the presentation and disclosurerequirements for existing minority interests.  We are currently evaluatingthe impact of SFAS 160 on our consolidated financial statements.

 

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**AlphaPro Tech, Ltd.**

 

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

 

**5.****                                      Inventories**

 

Inventories consist of the following:

 
| ** **                                                    | ** ** | **June 30,  2007** | ** ** | **December 31,  2007** | ** ** |
|---------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Raw  materials                                                |       | $                       | 10,339,000 |                        | $          | 10,175,000 |   |
| Work  in process                                              |       | 220,000                 |       | 535,000                     |       |
| Finished  goods                                               |       | 3,695,000               |       | 3,728,000                   |       |
|                                                          |       | 14,254,000              |       | 14,438,000                  |       |
| Less  reserve for slow-moving, obsolete or unusable inventory |       | (362,000                | )          | (327,000                    | )          |
|                                                          |       | $                       | 13,892,000 |                        | $          | 14,111,000 |   |

 

**6.****                                      Investmentin and Advances to Unconsolidated Affiliates**

 

On June 14, 2005,Alpha ProTech Engineered Products, Inc. entered into a joint venture witha manufacturer in India for the production of building products.  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 to respond to current and expectedincreased product demand for house wrap and synthetic roofing underlayment, andfuture capacity for sales of specialty roofing component products and customproducts for industrial applications requiring high quality extrusion coatedfabrics.

 

The capital from theinitial funding along with a bank loan, which is guaranteed exclusively byMaple Industries and Associates and the assets of Harmony Plastics PrivateLimited, was utilized to purchase an existing 33,000 square-foot manufacturingfacility in India; this facility includes manufacturing equipment necessary toproduce synthetic roof underlayment. Harmony has also built a new 60,000 square-foot facility for themanufacturing of house wrap and other building products.

 

The Company is subject tothe provisions of FASB Interpretation (“FIN”) No. 46R, “Consolidation ofVariable Interest Entities an Interpretation of ARB No. 51 (“FIN 46R”)”which defines the criteria by which the Company determines the properaccounting for its investments in related entities.  Specifically, FIN 46R requires the Company toassess whether or not related entities are variable interest entities (VIEs),as defined.  For those related entitiesthat qualify as variable interest entities, FIN 46R requires the Company todetermine whether or not the Company is the primary beneficiary of the VIE, andif so, to consolidate the VIE.

 

The Company hasdetermined that Harmony is not a VIE and is therefore considered to be anunconsolidated affiliate.

 

The Company records itsinvestment in Harmony as “Equity investments in and advances to unconsolidatedaffiliates” on the accompanying Consolidated Balance Sheets (unaudited).  The Company records its equity interest inHarmony’s results of operations as “Equity in income of unconsolidatedaffiliates” on the accompanying Consolidated Income Statements (unaudited).

 

The Company reviews itsinvestment in Harmony for impairment in accordance with APB No. 18, “TheEquity Method of Accounting for Investments in Common Stock(“APB 18”)”. APB 18requires 

 

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**AlphaPro Tech, Ltd.**

 

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

 

recognition of a losswhen the decline in an investment is other-than-temporary.  In determining whether the decline isother-than-temporary, the Company considers the nature of the industry in whichHarmony operates, their historical performance, their performance in relationto their peers and the current economic environment.  The Company has concluded that no impairmentwas identified.

 

Alpha ProTech EngineeredProducts initially invested $1,450,000 in the joint venture; $508,000 for sharecapital and $942,000 as a long term advance. Fifty percent of the $942,000 long term advance for materials was to berepaid over a six year term commencing in July 2006 and the balance is tobe paid in the seventh year.  During2006, Harmony repaid $39,000 in scheduled payments and $461,000 in additionalpayments for a total of $500,000, leaving a balance of $442,000.  Harmony has not made any further payments todate.  Effective April 2006,interest of 3.5% is to be paid annually on this advance.  The Company has an interest receivable of$23,000 as of June 30, 2008 related to this agreement.

 

Harmony commencedoperations in August of 2005.  Forthe six months ended June 30, 2008 and 2007, the Engineered Productssegment purchased $1,342,000 and $1,735,000, respectively from Harmony.  For the six months ended June 30, 2008and 2007, the Disposable Protective Apparel segment purchased $265,000 and $0,respectively from Harmony.  For the sixmonths ended June 30, 2008 and 2007, the Company recorded equity income inunconsolidated affiliates of $38,000 and $66,000, respectively.  As of June 30, 2008, the Company’sinvestment in Harmony is $1,246,000 which comprises its original $1,450,000investment and cumulative equity in income of unconsolidated affiliates of$296,000 less $500,000 in repayments of the advance.

 

**7.****                                      AccruedLiabilities**

 

Accrued liabilities consist of the following:

 
| ** **                    | ** ** | **June 30, 2008** | ** ** | **December 31, 2007** | ** ** |
|-------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Payroll  expenses             |       | $                           | 240,000    |                            | $          | 229,000 |   |
| Commission  and bonus accrual |       | 210,000                     |       | 706,000                         |       |
| Accrued  professional fees    |       | 146,000                     |       | 200,000                         |       |
| Accrued  rebates and other    |       | 227,000                     |       | 343,000                         |       |
|                          |       | $                           | 823,000    |                            | $          | 1,478,000 |   |

 

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**AlphaPro Tech, Ltd.**

 

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

 

**8.****                                      Basicand Diluted Net Income Per Share**

 

The following tableprovides a reconciliation of both net income and the number of shares used inthe computation of “basic” earnings per share (EPS), which utilizes theweighted average number of shares outstanding without regard to potentialshares, and “diluted” EPS, which includes all such dilutive shares:

 
| ** **                                   | ** ** | **For the Three Months Ended  June 30,** | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|----------------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                   | ** ** | **2008**                                                          | ** ** | **2007**                                                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                         |       |                                                              |       |                                                            |       |   |   |   |   |   |   |   |   |
| Net  income (Numerator)                      |       | $                                                                 | 385,000    |                                                            | $          | 507,000 |   | $ | 524,000 |   | $ | 1,043,000 |   |
|                                         |       |                                                              |       |                                                            |       |   |   |   |   |   |   |   |   |
| Shares  (Denominator):                       |       |                                                              |       |                                                            |       |   |   |   |   |
|                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Basic  weighted average shares outstanding   |       | 24,979,571                                                        |       | 25,251,724                                                      |       | 25,094,775 |   | 25,044,019 |   |
|                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Add:  Dilutive effect of stock options       |       | —                                                            |       | 567,939                                                         |       | — |   | 580,042 |   |
|                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Diluted  weighted average shares outstanding |       | 24,979,571                                                        |       | 25,819,663                                                      |       | 25,094,775 |   | 25,624,061 |   |
|                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Net  income per share:                       |       |                                                              |       |                                                            |       |   |   |   |   |
|                                         |       |                                                              |       |                                                            |       |   |   |   |   |
| Basic                                        |       | $                                                                 | 0.02       |                                                            | $          | 0.02 |   | $ | 0.02 |   | $ | 0.04 |   |
|                                         |       |                                                              |       |                                                            |       |   |   |   |   |   |   |   |   |
| Diluted                                      |       | $                                                                 | 0.02       |                                                            | $          | 0.02 |   | $ | 0.02 |   | $ | 0.04 |   |

 

**9.****                                      Activityof Business Segments**

 

The Company operates through four segments:

 

Disposable ProtectiveApparel Products: consisting of a complete line of disposable protectiveclothing such as shoecovers (including the Aqua Trak® and spunbond shoecovers),bouffant caps, coveralls, frocks, lab coats and hoods, for the pharmaceutical,cleanroom, industrial and medical markets.

 

Engineered Products:consisting of a line of construction supply weatherization.  The construction supply weatherizationproducts consist of house wrap and synthetic roof underlayment.  The Company’s equity in income (loss) ofunconsolidated affiliates (Harmony) is included in the total segment income forEngineered Products in the table below.

 

Infection ControlProducts: consisting of a line of face masks and eye shields principally forthe medical, dental and industrial markets.

 

Extended Care Products:consisting of a line of medical bed pads using Unreal Lambskin® (syntheticlambskin). The Unreal Lambskin® is used to produce medical bed pads, whichprevent decubitus ulcers or bedsores on long term care patients.  The Unreal Lambskin® is also used to 

 

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**AlphaPro Tech, Ltd.**

 

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

 

manufacture bedrail pads,knee and elbow protectors, as well as wheelchair accessories. The Company alsomanufactures a line of pet beds with this material.

 

The accounting policiesof the segments excludes charges allocated to corporate office expenses,professional fees, public company expenses, executive and management bonusesand income taxes.  The Company evaluatesthe performance of its segments and allocates resources to them based primarilyon net sales.

 

The following table showsnet sales for each segment for the three and six months ended June 30,2008 and 2007:

 
| ** **                     | ** ** | **For the Three Months Ended  June 30,** | ** ** | **For the Six Month Ended  June 30,** | ** ** |
|--------------------------------|------------|-------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                     | ** ** | **2008**                                                          | ** ** | **2007**                                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                     | ** ** | ** **                                                        | ** ** | ** **                                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Disposable  Protective Apparel |       | $                                                                 | 5,333,000  |                                                           | $          | 5,838,000 |   | $ | 9,787,000 |   | $ | 11,214,000 |   |
| Engineered  Products           |       | 1,924,000                                                         |       | 1,530,000                                                      |       | 3,284,000 |   | 2,846,000 |   |
| Infection  Control             |       | 1,483,000                                                         |       | 1,553,000                                                      |       | 2,927,000 |   | 3,564,000 |   |
| Extended  Care                 |       | 173,000                                                           |       | 228,000                                                        |       | 439,000 |   | 569,000 |   |
|                           |       |                                                              |       |                                                           |       |   |   |   |   |
| Consolidated  total net sales  |       | $                                                                 | 8,913,000  |                                                           | $          | 9,149,000 |   | $ | 16,437,000 |   | $ | 18,193,000 |   |

 

The following table showsthe reconciliation of total segment income to total consolidated net income forthe three and six months ended June 30, 2008 and 2007:

 
| ** **                      | ** ** | **For the Three Months Ended  June 30,** | ** ** | **For the Six Month Ended  June 30,** | ** ** |
|---------------------------------|------------|--------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                      | ** ** | **2008**                                                     | ** ** | **2007**                                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
| Disposable  Protective Apparel  |       | $                                                            | 1,251,000  |                                                           | $          | 1,692,000 |   | $ | 2,315,000 |   | $ | 3,065,000 |   |
| Engineered  Products            |       | 116,000                                                      |       | (111,000                                                       | )          | (192,000 | ) | (434,000 | ) |
| Infection  Control              |       | 546,000                                                      |       | 665,000                                                        |       | 1,088,000 |   | 1,511,000 |   |
| Extended  Care                  |       | (28,000                                                      | )          | (15,000                                                        | )          | (48,000 | ) | (3,000 | ) |
|                            |       |                                                         |       |                                                           |       |   |   |   |   |
| Total  segment income           |       | 1,885,000                                                    |       | 2,231,000                                                      |       | 3,163,000 |   | 4,139,000 |   |
| Unallocated  corporate expenses |       | (1,268,000                                                   | )          | (1,412,000                                                     | )          | (2,323,000 | ) | (2,452,000 | ) |
| Provision  for income taxes     |       | (232,000                                                     | )          | (312,000                                                       | )          | (316,000 | ) | (644,000 | ) |
|                            |       |                                                         |       |                                                           |       |   |   |   |   |
| Consolidated  net income        |       | $                                                            | 385,000    |                                                           | $          | 507,000 |   | $ | 524,000 |   | $ | 1,043,000 |   |

 

**10.****                               SubsequentEvents**

 

During the period of July 1,2008 through July 31, 2008, the Company purchased 107,900 shares of itsown common stock at a cost of $110,000. These shares will be retired.

 

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**ITEM 2****                                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

You should read thefollowing discussion and analysis together with our consolidated financialstatements (unaudited) and the notes to our consolidated financial statements(unaudited), which appear elsewhere in this report.

 

**CAUTIONARYSTATEMENTS REGARDING FORWARD-LOOKING INFORMATION**

 

This report on Form 10-Q contains “forward-lookingstatements” that are made pursuant to the safe-harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. Forward-looking statements includestatements concerning plans, objectives, goals, strategies, future events,future revenues or performance, capital expenditures and other information thatis not historical information. When used in this report, the words “estimates,”“expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes” andvariations of such words or similar expressions are intended to identifyforward-looking statements. Additional forward-looking statements may be madeby us from time to time. All such subsequent forward-looking statements,whether written or oral and whether made by or on behalf of us, are alsoexpressly qualified by these cautionary statements.

 

Our forward-looking statements are based upon ourcurrent expectations and various assumptions. Our expectations, beliefs andprojections are expressed in good faith and we believe there is a reasonablebasis for them, including without limitation, management’s examination ofhistorical operating trends, data contained in our records and other dataavailable from third parties. However, we cannot assure you that management’sexpectations; beliefs and projections will result or be achieved oraccomplished. Our forward-looking statements apply only as of the date made.Except as required by law, we undertake no obligation to publicly update orrevise forward-looking statements which may be made to reflect events or circumstancesafter the date made or to reflect the occurrence of unanticipated events.

 

**Whereto find more information about us.** We make available free of charge on our Internet website(http://www.alphaprotech.com) our most recent Annual Report on Form 10-K,our most recent Quarterly Report on Form 10-Q, any current reports on Form 8-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 SEC. In addition, we provideelectronic or paper copies of our filings free of charge upon request.

 

**Critical Accounting Policies**

 

The preparation of ourfinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires us to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure 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 accounting policies on a consistent basis enables us toprovide timely and reliable financial information.  Our critical accounting polices include thefollowing:

 

Inventories: Inventoriesinclude freight-in, materials, labor and overhead costs and are stated at thelower of cost (computed on a standard cost basis, which approximates averagecost) or market.  Provision is made forslow-moving, obsolete or unusable inventory. We assess our inventory forestimated obsolescence or unmarketable inventory and, if necessary, write downthe difference between the cost of inventory and the estimated market valueless cost to sell based upon assumptions about future sales and supply on-hand.If actual market conditions are less favorable than those projected bymanagement, additional inventory write-downs may be required.

 

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Revenue Recognition: Forsales transactions, we comply with the provisions of the SEC’s Staff AccountingBulletin (“SAB”) No. 104, “Revenue Recognition,” which states that revenueshould be recognized when the following revenue recognition criteria are met: (1) persuasiveevidence of an arrangement exists; (2) the product has been shipped andthe customer takes ownership and assumes the risk of loss; (3) the sellingprice is fixed or determinable; and (4) collection of the resultingreceivable is reasonably assured. These criteria are satisfied upon shipment ofproduct and revenues are recognized accordingly.

 

Sales are reduced for anyanticipated sales returns, rebates and allowances based on historicalexperience.  Since our return policy isonly 90 days and our products are not generally susceptible to external factorssuch as technological obsolescence or significant changes in demand, we areable to make a reasonable estimate for returns. We offer end-user productspecific and sales volume rebates to select distributors.  Our rebates are based on actual sales andaccrued monthly.

 

Stock BasedCompensation:  We adopted Statement ofFinancial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment (“SFAS123R”)” effective January 1, 2006, using the modified prospectiveapplication method. SFAS 123R requires companies to record compensation expensefor the value of all outstanding and unvested share-based payments, includingemployee stock options and similar awards. For the three months ended June 30, 2008 and June 30, 2007 nooptions were granted.  We recognized$47,000 and $97,000 in share-based compensation expense in our consolidatedfinancial statements for the three and six months ended June 30, 2008related to options issued in prior periods. We recognized $38,000 and $62,000 in share-based compensation expense inour consolidated financial statements for the three and six months ended June 30,2007 related to options issued in prior periods.

 

The Company uses theBlack-Scholes-Merton option pricing model, which was developed for use inestimatiing the fair value of traded options that have no vesting restrictionsand that are fully transferable.  Option valuation models require theinput of highly subjective assumptions including expected stock pricevolatiliy.  Our stock options have characteristics significantly differentfrom those of traded options and changes in the subjective input assumptionscan materially affect their fair value.  Prior to 2008, we used thesimplified method as discussed in Staff Accounting Bulletin (“SAB”) No. 107,“Share-Based Payment (“SAB 107”) for estimating the expected life of options. For future grants, we will use historical data to estimate the expectedlife of options.  The risk-free interest rate for periods within thecontractual life of the award is based on the US Treasury yield curve in effectat the time of grant.  The expected volatility is based on historical volatilityof the expected life in years.  We use an estimated dividend payout ratioof zero as we have not paid dividends in the past and do not expect to in thefuture.

 

**OVERVIEW**

 

Alpha Pro Tech is in thebusiness of protecting people, products and environments. We accomplish this bydeveloping, manufacturing and marketing a line of high-value, disposableprotective apparel and infection control products for the clean room,industrial, pharmaceutical, medical and dental markets. We also manufacture aline of construction weatherization products and a line of medical bed pads andaccessories as well as a line of pet beds. Our products are sold both under the “Alpha Pro Tech” brand name as wellas under private label.

 

Our products are groupedinto four business segments.  TheDisposable Protective Apparel segment, consisting of disposable protectiveapparel; the Infection Control segment, consisting of face masks and eyeshields; the Extended Care segment, consisting of extended care products,namely medical bed pads and pet beds; and the Engineered Products segment,consisting of construction weatherization products such as house wrap andsynthetic roof underlayment.

 

Our target markets arepharmaceutical manufacturing, bio-pharmaceutical manufacturing and medicaldevice manufacturing, lab animal research, high technology electronicsmanufacturing which includes the semi-conductor market, medical and dentaldistributors, pet stores and pet distributors and construction supply androofing distributors.

 

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Our products are usedprimarily in clean rooms, industrial safety manufacturing environments, healthcare facilities such as hospitals, laboratories and dental offices, as well asconstruction supply sites. Our pet beds are used by pet owners andveterinarians.  Our products aredistributed principally in the United States through a network consisting ofpurchasing groups, national distributors, local distributors, independent salesrepresentatives and our own sales and marketing force.

 

# **RESULTS OF OPERATIONS**

# ** **

The following table setsforth certain operational data as a percentage of sales for the periodsindicated:

 
| ** **                                | ** ** | **For the Three Months Ended  June 30,** | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|-------------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                | ** ** | **2008**                                                          | ** ** | **2007**                                                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| Sales                                     |       | 100.0                                                             | %          | 100.0                                                           | %          | 100.0 | % | 100.0 | % |
|                                      |       |                                                              |       |                                                            |       |   |   |   |   |
| Gross  profit                             |       | 44.0                                                              | %          | 46.7                                                            | %          | 44.8 | % | 46.4 | % |
|                                      |       |                                                              |       |                                                            |       |   |   |   |   |
| Selling,  general and administrative      |       | 35.8                                                              | %          | 37.0                                                            | %          | 38.5 | % | 36.3 | % |
|                                      |       |                                                              |       |                                                            |       |   |   |   |   |
| Income  from operations                   |       | 6.5                                                               | %          | 8.4                                                             | %          | 4.6 | % | 8.6 | % |
|                                      |       |                                                              |       |                                                            |       |   |   |   |   |
| Income  before provision for income taxes |       | 6.9                                                               | %          | 9.0                                                             | %          | 5.1 | % | 9.3 | % |
|                                      |       |                                                              |       |                                                            |       |   |   |   |   |
| Net  income                               |       | 4.3                                                               | %          | 5.5                                                             | %          | 3.2 | % | 5.7 | % |

##  

## **Three and six monthsended June 30, 2008, compared to the three and six months ended June 30,2007**

##  

**Sales**  Consolidated sales for the three months endedJune 30, 2008 decreased to $8,913,000 from $9,149,000 for the three monthsended June 30, 2007, representing a decrease of $236,000 or 2.6%.  This decrease consists of decreased sales ofDisposable Protective Apparel products of $505,000, decreased Infection Controlsegment sales of $70,000, and decreased sales from our Extended Care productssegment of $55,000, partially offset by increased sales of Engineered Productssegment of $394,000.  Although sales aredown 2.6% for the quarter, they are up $1,389,000 or 18.5% from the priorquarter, with Disposable Protective Apparel up $879,000 or 19.7% and EngineeredProducts up $564,000 or 41.5%.

 

Sales for the DisposableProtective Apparel segment for the three months ended June 30, 2008decreased by $505,000 or 8.7% to $5,333,000 compared to $5,838,000 for the sameperiod of 2007.  The decrease isprimarily related to decreased sales to our largest distributor as well aslower sales to other clean room and industrial distributors, partially offsetby increased sales to a major national distributor in which we receivedpreferred vendor status during the first quarter of 2008.  Although shipments to our largest distributorwere down compared to second quarter 2007, they were up 16.7% compared to thefirst quarter 2008.  Although sales forthis segment for the three months ended June 30, 2008 are down compared tothe second quarter of last year, they are up $879,000 or 19.7% compared to thefirst quarter of 2008.

 

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Engineered Productssegment sales for the three months ended June 30, 2008 increased by$394,000 or 25.8% to $1,924,000 as compared to $1,530,000 for the same periodof 2007.  Sales for the month of June 2008were a record at $965,000.  The twohighest months in the past year were May and June 2008.  The increase for the quarter is primarily dueto a 40.4% or $274,000 increase in sales of REXTM Wrap house wrap and a 13.1% or$116,000 increase in sales of REXTM Synfelt synthetic roof underlayment.  This is the highest revenue quarter for REXTMSynfelt synthetic roof underlayment since the inception of this product line,as well as the highest revenue quarter for REXTM Wrap house wrap since the firstquarter of 2007.  The sales mix of theEngineered Products sales for second quarter 2008 was: 51% synthetic roofunderlayment and 49% house wrap, compared to 52% synthetic roof underlaymentand 48% house wrap for second quarter 2007. This segment had growth of 41.5% when compared to the first quarter of2008 with house wrap sales increasing by 50.2% and with synthetic roofunderlayment sales increasing by 33.0%.

 

Our change indistribution channel strategy is starting to gain momentum as evidencedabove.  Our synthetic roof underlaymentrevenue is being positively affected by the increase in crude oil which hasincreased the price of felt paper such that the felt paper is equivalent to orin some markets more expensive than synthetic roof underlayment.  Our recent ICC-ES approval for our REXTM Wraphouse wrap significantly expands our market opportunities as many constructionsupply companies, builders and architects require this certification to sellthe product.  Although our house wrapsales are growing and we expect will continue to grow, the downturn in thehousing market continues to affect our house wrap sales as fewer houses arebeing built and distributors continue to keep inventories low.

 

We continue to beoptimistic that the new distribution channel strategy will broaden our abilityto take advantage of market opportunities for house wrap and synthetic roofunderlayment in 2008 and in the future. We are currently working on opportunities with existing and newdistributors and expect that this segment will significantly increase in thecoming quarters.

 

Infection Control segmentsales for the three months ended June 30, 2008 decreased by $70,000 or4.5% to $1,483,000 compared to $1,553,000 for the same period of 2007.  Mask sales were down and shield sales werebasically flat when compared to last year’s second quarter.  Mask sales decreased during the secondquarter 2008 due to a decrease in N-95 respirator mask sales.  Medical mask sales also decreased but werepartially offset by higher dental mask sales. Sales in this segment for the balance of 2008 are expected to be similarto that of 2007.

 

Sales from our ExtendedCare segment decreased by $55,000 or 24.1% to $173,000 for the three monthsended June 30, 2008 from $228,000 for the three months ended June 30,2007.  The decrease in sales is primarilythe result of both lower medical pad and pet bed sales.  This line of products is not expected to be agrowth segment for the Company.

 

Consolidated sales for the six months ended June 30,2008 decreased to $16,437,000 from $18,193,000 for the six months ended June 30,2007, representing a decrease of $1,756,000 or 9.7%.  This decrease consists of decreased sales ofDisposable Protective Apparel products of $1,427,000, decreased InfectionControl segment sales of $637,000, and decreased sales from our Extended Careproducts segment of $130,000, partially offset by increased sales of EngineeredProducts segment of $438,000.

 

Sales for the DisposableProtective Apparel segment for the six months ended June 30, 2008decreased by $1,427,000 or 12.7% to $9,787,000 compared to $11,214,000 for thesame period of 2007.  The decrease isprimarily related to decreased sales to our largest distributor as well aslower sales to other clean room and industrial distributors, partially offsetby increased sales to a major national distributor in which we receivedpreferred vendor status during the first quarter of 2008.  We expect sales in the second half of 2008 tobe improved from the first half of 2008 but still expect a single digit declinefor the year.

 

Engineered Productssegment sales for the six months ended June 30, 2008 increased by $438,000or 15.4% to $3,284,000 as compared to $2,846,000 for the same period of2007.  The increase for the six monthsended June 30, 2008 is primarily due to a 45.2% or $545,000 increase insales of REXTM Synfelt 

 

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synthetic roofunderlayment, partially offset by a 4.9% or $82,000 decrease in sales of REXTMWrap house wrap.  The sales mix of theEngineered Products sales for the six months ended June 30, 2008: 53%synthetic roof underlayment and 47% house wrap compared to 39% synthetic roofunderlayment and 61% house wrap for the six months ended June 30, 2007.

 

Infection Control segmentsales for the six months ended June 30, 2008 decreased by $637,000 or17.9% to $2,927,000 compared to $3,564,000 for the same period of 2007.  Shield sales in this segment were down by$540,000 and mask sales were down by $97,000. Shield sales were down primarily due to a large non-recurring order inthe first quarter of 2007.  Mask salesdecreased during second quarter 2008 primarily due a decrease in N-95 respiratormask sales.  Medical mask sales alsodecreased but, were partially offset by higher dental mask sales.  Sales in this segment for the balance of 2008are expected to be similar to those of 2007.

 

Sales from our ExtendedCare segment decreased by $130,000 or 22.9% to $439,000 for the six monthsended June 30, 2008 from $569,000 for the six months ended June 30,2007.  The decrease in sales is primarilythe result of lower pet bed sales.  Thisline of products is not expected to be a growth segment for the Company.

 

**Gross Profit**  Gross profit decreased by 8.2% to $3,918,000for the three months ended June 30, 2008 from $4,269,000 for the sameperiod in 2007.  The gross profit marginwas 44.0% for the three months ended June 30, 2008 compared to 46.7% forthe three months ended June 30, 2007.

 

Gross profit margin hasbeen affected primarily by increases in raw material costs principally due tohigher crude oil prices, increased labor costs in China due to inflation andthe strengthening Chinese dollar and to a lesser extent due to product mix.

 

Gross profit decreased by12.6% to $7,368,000 for the six months ended June 30, 2008 from $8,434,000for the same period in 2007.  The grossprofit margin was 44.8% for the six months ended June 30, 2008 compared to46.4% for the three months ended June 30, 2007.

 

**Selling, General andAdministrative Expenses.** Selling, general and administrative expenses decreased by $191,000 or5.6% to $3,194,000 for the three months ended June 30, 2008 from$3,385,000 for the three months ended June 30, 2007.  As a percentage of net sales, selling,general and administrative expenses decreased to 35.8% for the three monthended June 30, 2008 from 37.0 % for the same period in 2007.  The decrease is primarily due to decreasedexpenses for the Engineered Products segment of $149,000, decreased travel of$62,000 and a severance agreement of $320,000 in April 2007, partiallyoffset by increased public company related expenses of $55,000, increasedinsurance of $33,000, increased employee compensation of $96,000, increasedoption expense of $27,000, increased trade show expense of $43,000, increasedmarketing expense of $33,000, increased professional fees of $28,000 andincreased loss on foreign exchange of $19,000.

 

Selling, general andadministrative expenses decreased by $273,000 or 4.1% to $6,335,000 for the sixmonths ended June 30, 2008 from $6,608,000 for the six months ended June 30,2007.  As a percentage of net sales,selling, general and administrative expenses increased to 38.5% for the sixmonth ended June 30, 2008 from 36.3 % for the same period in 2007.  The decrease is primarily due to decreasedexpenses for the Engineered Products segment of $202,000, decreased travel of$143,000 and a severance agreement of $320,000 in April 2007, partiallyoffset by increased public company expenses of $70,000, increased insurance of$37,000, increased employee compensation of $77,000, increased option expenseof $35,000, increased trade show expense of $55,000, increased marketing expenseof $43,000, increased professional fees of $43,000 and increased loss onforeign exchange of $43,000.

 

The chief executiveofficer and president are each entitled to a bonus equal to 5% of the pre-taxprofits of the Company.  Bonuses of$68,000 were accrued for the three months ended June 30, 2008 as comparedto $92,000 in the same period of 2007. Total bonuses of $93,000 were accrued for the six months ended June 30,2008 as compared to $188,000 in the same period of 2007.

 

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**Depreciation and Amortization.**  Depreciation and amortization expenseincreased by $22,000 or 18.5% to $141,000 for the three months ended June 30,2008 from $119,000 for the same period in 2007. Depreciation and amortization expense increased by $48,000 or 20.5% to$282,000 for the six months ended June 30, 2008 from $234,000 for the sameperiod in 2007.

 

The increase is primarilyattributable to increased depreciation for Engineered Products.

 

**Income from Operations.**  Income from operations decreased by $182,000or 23.8%, to $583,000 for the three months ended June 30, 2008 as comparedto income from operations of $765,000 for the three months ended June 30,2007.  The decrease in income fromoperations is due to a decrease in gross profit of $351,000, an increase indepreciation and amortization of $22,000, partially offset by a decrease inselling, general and administrative expenses of $191,000.

 

Income from operationsdecreased by $841,000 or 52.8%, to $751,000 for the six months ended June 30,2008 as compared to income from operations of $1,592,000 for the same period of2007.  The decrease in income fromoperations is due to a decrease in gross profit of $1,066,000, an increase indepreciation and amortization of $48,000, partially offset by a decrease inselling, general and administrative expenses of $273,000.

 

**Net Interest.**  For the three months ended June 30,2008, net interest income was $17,000 compared to net interest income of$13,000 for the three months ended June 30, 2007.  For the six months ended June 30, 2008,net interest income was $51,000 compared to net interest income of $29,000 forthe six months ended June 30, 2007.

 

**Income Before Provision forIncome Taxes.**  Incomebefore provision for income taxes for the three months ended June 30, 2008was $617,000 compared to $819,000 for the three months ended June 30,2007, representing a decrease of $202,000 or 24.7%.  The decrease in income before provision forincome taxes is due primarily to a decrease in income from operations of$182,000 and a decrease of $24,000 in equity in income of unconsolidatedaffiliates (Harmony), partially offset by an increase in net interest income of$4,000.  For the three months ended June 30,2008, the Engineered Products segment had income before income taxes for thefirst time since the fourth quarter of 2006.

 

Income before provisionfor income taxes for the six months ended June 30, 2008 was $840,000compared to $1,687,000 for the six months ended June 30, 2007,representing a decrease of $847,000 or 50.2%. The decrease in income before provision for income taxes is dueprimarily to a decrease in income from operations of $841,000 and a decrease of$28,000 in equity in income of unconsolidated affiliates (Harmony), partiallyoffset by an increase in net interest income of $22,000.

 

**Provision for Income Taxes**The provision for income taxes for the three months ended June 30, 2008was $232,000 compared to $312,000 for the same period of 2007.  The effective tax rate was 37.6% for thethree months ended June 30, 2008 as compared to 38.1% for the same periodin 2007.

 

The provision for incometaxes for the six months ended June 30, 2008 was $316,000 compared to$644,000 for the same period of 2007. The effective tax rate was 37.6% for the six months ended June 30,2008 as compared to 38.2% for the same period in 2007.

 

**Net Income.**  Net income for the three months ended June 30,2008 was $385,000 compared to net income of $507,000 for the three months endedJune 30, 2007, a decrease of $122,000 or 24.1%.  The net income decrease was primarily due toa decrease in income before provision for income taxes of $202,000, partiallyoffset by a decrease in income taxes of $80,000.  Net income as a percentage of sales for themonths ended June 30, 2008 and 2007 was 4.3% and 5.5% respectively.  Basic and diluted income per share for thethree months ended June 30, 2008 and 2007 was $0.02.

 

Net income for the sixmonths ended June 30, 2008 was $524,000 compared to net income of$1,043,000 for the six months ended June 30, 2007, a decrease of $519,000or 49.8%.  The net income 

 

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decrease was primarilydue to a decrease in income before provision for income taxes of $847,000,partially offset by a decrease in income taxes of $328,000.  Net income as a percentage of sales for themonths ended June 30, 2008 and 2007 was 3.2% and 5.7%, respectively.  Basic and diluted income per share for thesix months ended June 30, 2008 and 2007 was $0.02 and $0.04, respectively.

 

### **LIQUIDITY AND CAPITAL RESOURCES**

### ** **

As of June 30, 2008,we had cash and cash equivalents of $2,605,000 and working capital of$22,488,000, a decrease in working capital of 0.8% or $181,000 since December 31,2007.  As of June 30, 2008, ourcurrent ratio was 13.7:1 as compared to 12.7:1 as of December 30,2007.  Cash decreased by $1,459,000 to$2,605,000 as of June 30, 2008 as compared to $4,064,000 as of December 31,2007.  The decrease in cash is dueprimarily to cash paid for the repurchase of common stock of $972,000 and cashused in operating activities of $408,000.

 

We have a $3,500,000credit facility with a bank, consisting of a line of credit with interest atprime plus 0.5%.  At June 30, 2008,the prime interest rate was 5.00%.  Theline of credit was renewed in May 2007 and expires in May 2009 and weintend to renew it.  Our borrowingcapacity on the line of credit was $3,500,000 at June 30, 2007.  The available line of credit is based on aformula of eligible accounts receivable and inventories.  As of June 30, 2008, we did not have anydebt.

 

Net cash used inoperating activities was $408,000 for the six months ended June 30, 2008compared to $1,227,000 net cash used in operating activities for the six monthsended June 30, 2007. The net cash used in operating activities of $408,000for the six months ended June 30, 2008 is due to net income of $524,000,adjusted by the following: an increase in accounts receivable of $905,000, anincrease in prepaid expenses of $333,000, an increase in net deferred tax assetof $85,000, a decrease in accounts payable and accrued liabilities of $169,000,equity in income of unconsolidated affiliates of $38,000, a decrease ininventory of $219,000, amortization of share-based compensation expense of$97,000 and depreciation and amortization of $282,000.

 

The net cash used in operatingactivities of $1,227,000 for the six month ended June 30, 2007 is due tonet income of $1,043,000 adjusted by the following: a decrease in accountspayable and accrued liabilities of $790,000, an increase in inventory of$2,206,000, an increase in prepaid expenses of $178,000, non-cash equity incomein unconsolidated affiliates of $66,000, a decrease in accounts receivable of$674,000, non-cash share-based compensation expense of $62,000 and depreciationand amortization of $234,000.

 

Accounts receivableincreased by $905,000 or 20.5% to $5,327,000 as of June 30, 2008 from$4,422,000 as of December 31, 2007. This increase is primarily due to increased sales in the latter twomonth of the second quarter of 2008 as compared to the latter two months of thefourth quarter of 2007.  The number ofdays of sales outstanding was 54 days as of June 30, 2008 as compared to51 days as of December 31, 2007.

 

Inventory decreased by$219,000 or 1.6% to $13,892,000 as of June 30, 2008 from $14,111,000 as ofDecember 31, 2007.  The decrease isprimarily due to a decrease in inventory for the Engineered Products segment of$176,000 to $7,783,000 as of June 30, 2008 from $7,959,000 as of December 31,2007.  From the end of the first quarter,Engineered Products inventory has decreased by $278,000.  Although we ceased placing new purchaseorders for our current product line with our joint venture partner in April,purchase orders placed prior to April were received in April and May andin June we did not receive any new inventory from our joint venture.  For the month of June, the EngineeredProducts inventory has decreased by $455,000. We expect our inventory to be reduced significantly in the comingquarters to levels that are more in line with our sales volume.

 

Prepaid expenses andother current assets increased by $333,000 to $1,921,000 as of June 30,2008 from $1,588,000 as of December 31, 2007.  The increase of $333,000 is primarily due toan increase in prepaid Disposable Protective Apparel inventory from Asia of$534,000, partially offset by a decrease in prepaid tax of $182,000 and adecrease in prepaid insurance for Engineered Products of $37,000.

 

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Accounts payable andaccrued liabilities as of June 30, 2008 decreased by $169,000 to$1,766,000 from $1,935,000.  The netchange in 2008 was primarily due a decrease in accrued liabilities of $655,000,partially offset by an increase in trade payables of $486,000.  Accrued liabilities are down as follows:commission and bonus accrual $496,000, accrued rebates and other $116,000,accrued professional fees $54,000, partially offset by an increase in payrollexpenses $11,000.

 

Net cash used ininvesting activities was $79,000 for the six months ended June 30, 2008compared to net cash used in investing activities of $131,000 for the sixmonths ended June 30, 2007.  Ourinvesting activity for the six months in 2008 consisted of expenditures forproperty and equipment of $45,000 and the purchase of intangible assets of$34,000, compared to $94,000 and $37,000, respectively, for the same period of2007.

 

For the six months ended June 30,2008, net cash used in financing activities was $972,000 compared to cashprovided by financing activities of $1,121,000 for the same period of2007.  Our financing activities for thesix months ended June 30, 2008 consisted of the repurchase of 705,100shares of common stock at a cost of $972,000. Our financing activities for thesame period of 2007 consisted of cash proceeds of $885,000 from the exercise of1,021,375 stock options and an income tax benefit from stock options exercisedof $236,000.

 

On April 2, 2008,our Board of Directors authorized the repurchase of up to an additional$2,000,000 of our outstanding common stock. As of June 30, 2008 we have $2,124,000 available on our repurchaseprogram.  For the six months ended June 30,2008, we have repurchased and retired 705,100 shares of common stock at a costof $972,000.  As of June 30, 2008,we have repurchased and retired a total of 3,611,200 shares of common stock ata cost of $4,397,000 through our repurchase program.  Future repurchases are expected to be fundedfrom cash on hand and cash-flow from operations.

 

As shown below, at June 30,2008, our contractual cash obligations totaled approximately $798,000.

 

ContractualObligations

 
| ** **                          | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | **Total**                                 | ** ** | **1 Year** | ** ** | **2-3 Years** | ** ** |
|                                |       |                                      |       |   |   |   |   |
| Operating leases                    |       | $                                         | 798,000    |   | $ | 317,000 |   | $ | 481,000 |   |
|                                |       |                                      |       |   |   |   |   |
| Total contractual cash  obligations |       | $                                         | 798,000    |   | $ | 317,000 |   | $ | 481,000 |   |

 

We believe that cashgenerated from operations, our current cash balance and the funds available underour credit facility will be sufficient to satisfy our projected working capitaland planned capital expenditures for the foreseeable future.

 

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**NewAccounting Standards**

 

In September 2006,the FASB issued SFAS No. 157, “Fair Value Measurements (“SFAS 157”)”defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles, and expands disclosures about fairvalue measurements.  This statementaddresses how to calculate fair value measurements required or permitted underother accounting pronouncements. Accordingly, this statement does not require any new fair valuemeasurements.  However, for someentities, the application of this statement will change current practice.  SFAS 157 was adopted by the Company on January 1,2008.  In February 2008, the FASBdeferred for one year the effective date of SFAS 157 only with respect tononfinancial assets and nonfinancial liabilities that are recognized ordisclosed at fair value in the financial statements on a nonrecurring basis,and removed certain leasing transactions from the scope of SFAS 157. Theadoption of SFAS 157 did not have a material impact on the Company’sconsolidated financial statements.

 

In December 2007,the FASB issued SFAS No. 160, “Noncontrolling Interests in ConsolidatedFinancial Statements (“SFAS 160”),” which changes the accounting and reportingstandards for the noncontrolling interests in a subsidiary in consolidatedfinancial statements.  SFAS 160 recharacterizes minority interests asnoncontrolling interests and requires noncontrolling interests to be classifiedas a component of shareholders’ equity.  SFAS 160 is effective January 1,2009 and requires retroactive adoption of the presentation and disclosurerequirements for existing minority interests.  We are currently evaluatingthe impact of SFAS 160 on our consolidated financial statements.

 

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

# ** **

We subcontract themanufacture of products in China and Mexico and have a joint venture inIndia.  Our results of operations couldbe negatively affected by factors such as changes in foreign currency exchangerates due to stronger economic conditions in those countries.

 

We do not expect anysignificant effect on our results of operations from inflationary or interestand currency rate fluctuations.  We donot hedge our interest rate or foreign exchange risks.

 

**ITEM 4. CONTROLSAND PROCEDURES**

 

Disclosure Controls andProcedures

 

Our chief executiveofficer and chief financial officer, after evaluating the effectiveness of ourdisclosure controls and procedures as of June 30, 2008, have concludedthat our disclosure controls and procedures were designed to ensure thatinformation required to be disclosed by us in the reports that we file orsubmit under the Securities Exchange Act of 1934 is recorded, processed,summarized and reported, within the time periods specified in the SEC’s rules andforms.  Disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by us in the reports that wefile or submit under the Act is accumulated and communicated to our management,including our chief executive and chief financial officers as appropriate toallow timely decisions regarding required disclosure.

 

Changes in InternalControl Over Financial Reporting.

 

There has been no changein our internal control over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) that occurred during our fiscal quarterended June 30, 2008, that has materially affected, or is reasonably likelyto materially affect, our internal control over financial reporting.

 

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**PART II- OTHER INFORMATION**

 

**Item 1.LEGAL PROCEEDINGS**

 

None.

 

**Item 1A.RISK FACTORS**

 

There have been nomaterial changes in our risk factors from those disclosed in our 2007 Annualreport on Form 10-K.

 

**Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

 
| **Period**                       | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Price  Paid per  Share** | ** ** | **Total Number of  Shares Purchased as  Part of Publicly  Announced Plan** | ** ** | **Approximate Dollar  Value of Shares that  May yet be Purchased  Under the Plan ****(1)** | ** ** |
|----------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------|------------|
| January 1  – 31, 2008  |       | 419,100                                          |       | $                                            | 1.56       |                                                                                                          | 3,325,200  |                                                                                                                                         | $          | 443,000 |   |
| February 1  – 29, 2008 |       | —                                           |       | —                                       |       | 3,325,200                                                                                                     |       | $                                                                                                                                            | 443,000    |   |
| March 1-  31, 2008          |       | 47,400                                           |       | $                                            | 1.15       |                                                                                                          | 3,372,600  |                                                                                                                                         | $          | 388,000 |   |
| April 1  – 30, 2008    |       | 71,200                                           |       | $                                            | 1.17       |                                                                                                          | 3,443,800  |                                                                                                                                         | $          | 2,304,000 |   |
| May 1  – 31, 2008      |       | 110,700                                          |       | $                                            | 1.09       |                                                                                                          | 3,554,500  |                                                                                                                                         | $          | 2,182,000 |   |
| June 1  – 30, 2008     |       | 56,700                                           |       | $                                            | 1.01       |                                                                                                          | 3,611,200  |                                                                                                                                         | $          | 2,124,000 |   |

 

We have and will continueto retire all unregistered equity securities.

 

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(1) On April 2,2008, our Board of Directors authorized the repurchase of up to an additional$2,000,000 of our outstanding common stock.

 

**Item 3.DEFAULTS UPON SENIOR SECURITIES**

 

None.

 

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**Item4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

 

(a)      Registrant held its Annual Meeting ofShareholders June 9, 2008.

 

(b) Thefollowing persons were elected Directors pursuant to the votes indicated:

 

| **NAME**         | ** ** | **FOR**    | ** ** | **WITHHELD** | ** ** |
|------------------|------------|------------|------------|--------------|------------|
| ** **       | ** ** | ** ** | ** ** | ** **   | ** ** |
| Sheldon Hoffman  |       | 17,860,907 |       | 2,657,445    | ** ** |
|             |       |       |       |         | ** ** |
| Alexander Millar |       | 17,883,907 |       | 2,634,445    | ** ** |
|             |       |       |       |         | ** ** |
| Danny Montgomery |       | 18,423,146 |       | 2,095,206    | ** ** |
|             |       |       |       |         | ** ** |
| Robert Isaly     |       | 17,772,730 |       | 2,745,622    | ** ** |
|             |       |       |       |         | ** ** |
| John Ritota      |       | 17,802,666 |       | 2,715,686    | ** ** |
|             |       |       |       |         | ** ** |
| Russell Manock   |       | 17,841,126 |       | 2,677,226    | ** ** |
|             |       |       |       |         | ** ** |
| David Anderson   |       | 17,843,487 |       | 2,674,865    | ** ** |

 

(c)The only other matter to be voted upon was theratification of the appointment of PricewaterhouseCoopers LLP as the Registrant’sindependent registered public accountants as follows:

 

| **For**    | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|------------|------------|-------------|------------|-------------|------------|
|       |       | ** **  |       | ** **  | ** ** |
| 19,944,913 |       | 436,917     |       | 136,521     | ** ** |

 

**ITEM 5.OTHER INFORMATION**

 

None.

 

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**ITEM 6EXHIBITS AND REPORTS ON FORM 8-K**

 

(a) Exhibits

 

31.1 CertificationPursuant to Rule 13a-14(b) and Rule 15d-14(b) of theExchange Act, Signed by Chief Executive Officer (filed herewith)

 

31.2 CertificationPursuant to Rule 13a-14(b) and Rule 15d-14(b) of theExchange Act, Signed by Chief Financial Officer (filed herewith)

 

32.1 CertificationPursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002, Signed by Chief Executive Officer (filedherewith)

 

32.2 CertificationPursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002, Signed by Chief Financial Officer (filedherewith)

 

(b) Reports on Form 8-K

 

A Form 8-K was filedduring the quarter covered by this report, reporting the issuance of a releasedated May 13, announcing registrants’ financial results for the firstquarter ended March 31, 2008.

 

**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15 (d) of the Securities Exchange Actof 1934, the Registrant has fully caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.

 
| ** ** | **ALPHA  PRO TECH, LTD**.           | ** ** |   |
|------------|-------------------------------------|------------|--------|
|       |                                |       |   |
| DATE:      | **  August 7, 2008** | ** ** | BY:    | /s/ **Sheldon Hoffman** |
|       |                                |       |   |   |
|       |                                |       |   |    Sheldon  Hoffman |
|       |                                |       |   |    Chief  Executive Officer and Director |
|       |                                |       |   |   |
| DATE:      | **  August 7, 2008** | ** ** | BY:    | /s/ **Lloyd Hoffman** |
|       |                                |       |   |   |
|       |                                |       |   |    Lloyd  Hoffman |
|       |                                |       |   |    Chief  Financial Officer |
|            |                                     |            |        |  |  |

 

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