ALPHA PRO TECH LTD

PART I. FINANCIAL INFORMATION

Condensed Consolidated Balance Sheets (Unaudited)

The condensed consolidated balance sheet as of December 31, 2025, has been prepared using information from the audited consolidated balance sheet as of that date.

Condensed Consolidated Statements of Income (Unaudited)

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Condensed Consolidated Statements of Shareholders’** Equity (Unaudited)**

Condensed Consolidated Statements of Cash Flows (Unaudited)

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

The Building Supply segment consists of construction weatherization products, such as housewrap, housewrap accessories including window and door flashing, seam tape, synthetic roof underlayment and synthetic roof underlayment accessories, as well as other woven materials.

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

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

The interim financial information included in this report is unaudited; however, the information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for the fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods reflected herein. These interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, therefore, omit certain information and note disclosures that would be necessary to present the statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The interim condensed consolidated financial statements should be read in conjunction with the Company’s current year SEC filings, as well as the Company’s consolidated financial statements for the year ended December 31, 2025, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”), filed with the SEC on March 11, 2026. The results of operations for the three and six months ended June 30, 2026, in this Quarterly Report on Form 10-Q are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet as of December 31, 2025 was prepared using information from the audited consolidated balance sheet contained in the 2025 Form 10-K; however, it does not include all disclosures required by U.S. GAAP for annual consolidated financial statements.

Net sales include revenue from products and shipping and handling charges, net of estimates for product returns and any related sales incentives. Our customer contracts have a single performance obligation: transfer control of products to customers. Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring control of products. All revenue is recognized when we satisfy our performance obligations under the applicable contract. We recognize revenue in connection with transferring control of the promised products to the customer, with revenue being recognized at the point in time when the customer obtains control of the products, which is generally when title passes to the customer upon delivery to a third-party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements, at which time a receivable is created for the invoice sent to the customer. Shipping and handling activities are performed prior to the customer obtaining control of the goods and are accounted for as fulfillment activities and are not a promised good or service. Shipping and handling charges billed to customers are included in revenue. Shipping and handling costs, associated with the distribution of the Company’s product to the customers, are recorded in cost of goods sold and are recognized when control of the product is transferred to the customer, which is generally when title passes to the customer upon delivery to a third-party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements. We estimate product returns based on historical return rates and estimate rebates based on contractual agreements. Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract. Sales taxes and value added taxes in foreign and domestic jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from net sales. The Company manufactures certain private label goods for customers and has determined that control does not pass to the customer at the time of manufacture, based upon the nature of the private labeling. The Company has determined as of June 30, 2026, that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. See Note 10 and Note 11 of these Notes to Condensed Consolidated Financial Statements (Unaudited) for information on revenue disaggregated by type and by geographic region.

Repurchase Program

During the three months ended June 30, 2026, the Company repurchased and retired 21,800 shares of its common stock for $99,000. During the three months ended June 30, 2025, the Company repurchased and retired 181,100 shares of its common stock for $830,000. During the six months ended June 30, 2026, the Company repurchased and retired 21,800 shares of its common stock for $99,000. During the six months ended June 30, 2025, the Company repurchased and retired 402,513 shares of its common stock for $2,008,000. As of June 30, 2026, the Company had $1,298,000 available to repurchase common shares under the repurchase program. The excess of repurchase price over par value is allocated between additional paid-in capital and retained earnings.

Option Activity

The Company previously granted stock options to eligible individuals under the 2004 Stock Option Plan (the “ 2004 Option Plan ”). Grants made under the 2004 Option Plan were intended to recognize the contributions made to the Company by key employees, provide key employees with additional incentive to devote themselves to the future success of the Company and improve the ability of the Company to attract, retain and motivate individuals. Grants made under the 2004 Option Plan also were intended as an incentive to certain members of the Board of Directors of the Company to continue to serve on the Board of Directors and to devote themselves to the future success of the Company. The 2004 Option Plan provided for a total of 5,000,000 common shares eligible for issuance. Under the 2004 Option Plan, approximately 5,009,750 options (taking into account cancelled, forfeited and expired options that were added back to the plan reserve) had been granted as of December 31, 2020. Under the 2004 Option Plan, option grants had athree-year vesting period and, since 2005, expired no later than thefifth anniversary from the date of grant. The exercise price of the options was determined based on the fair market value of the stock on the date of grant.

At the Company’s 2020 Annual Meeting of Shareholders held on June 9, 2020, the Company’s shareholders approved the Alpha Pro Tech, Ltd. 2020 Omnibus Incentive Plan (the “2020 Incentive Plan”). The 2020 Incentive Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, awards of restricted stock and restricted stock units (“RSU”), performance share awards, cash awards and other equity-based awards to employees (including officers), consultants and non-employee directors of the Company and its affiliates. A total of 1,800,000 shares of the Company’s common stock were reserved for issuance under the 2020 Incentive Plan, plus the number of shares underlying any award granted under the 2004 Option Plan that expires, terminates or is cancelled or forfeited under the terms of the 2004 Option Plan. As a result of the approval of the 2020 Incentive Plan, no future equity awards will be made pursuant to the 2004 Option Plan. Although no new awards may be granted under the 2004 Option Plan, all previously granted awards will continue to be governed by the terms of the 2004 Option Plan.

The following table summarizes restricted stock unit (“RSU”) awards activity for the six months ended June 30, 2026:

During the six months ended June 30, 2026 and 2025,12,425 and 9,870 RSU awards were granted under the 2020 Incentive Plan, respectively. The Company recognized $236,000 and $243,000 in stock-based compensation expense associated with outstanding RSU awards for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, $128,000 of total unrecognized compensation cost related to the RSU awards was expected to be recognized over a weighted average remainder period of 0.31 years.

The Company uses the Black-Scholes option-pricing model to value the stock options. The Company uses historical data to estimate the expected life of the options. The risk-free interest rate for periods within the contractual life of an award is based on the US Treasury yield curve in effect at the time of grant. The estimated volatility is based on historical volatility and management’s expectations of future volatility. The Company uses an estimated dividend payout ofzero, as the Company has not paid dividends in the past and, at this time, does not expect to do so in the future. The Company accounts for option forfeitures as they occur.

The following table summarizes stock option activity for the six months ended June 30, 2026:

The Company recognized $23,000 and $29,000 in stock-based compensation expense associated with the outstanding stock option awards for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, $11,000 of total unrecognized compensation expense related to the stock options was expected to be recognized over a weighted average remainder period of 0.25 years.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments are expected to impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, derivatives, and transfers of financial assets. The amendments will become effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (“Subtopic 220-40”): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact of this pronouncement on its related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (“Topic 326”): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient to assume that conditions as of the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASU Topic 606 (Revenue from Contracts with Customers). The amendment is effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The amendment in this update should be applied on a prospective basis. The Company adopted this ASU effective January 1, 2026. The adoption of this pronouncement did not have a significant impact on the Company's consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow Scope Improvements,” which provides additional guidance on what disclosures should be provided in interim reporting periods including disclosure of events since the end of the last annual reporting period that have a material impact on the entity. The amendments in this ASU will be effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is in the process of evaluating the impact of the new guidance and determining the transition method and the timing of adoption.

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

As of June 30, 2026 and December 31, 2025, inventories net of reserves consisted of the following:

In 2005, Alpha ProTech Engineered Products, Inc. (a subsidiary of Alpha Pro Tech, Ltd.) entered into a joint venture with a manufacturer in India, Maple Industries and associates, for the production of building products. Under the terms of the joint venture agreement, a private company, Harmony Plastics Private Limited (“Harmony”), was created with ownership interests of 41.7% owned by Alpha ProTech Engineered Products, Inc. and 58.3% owned by Maple Industries and associates.

This joint venture positions Alpha ProTech Engineered Products, Inc. to respond to current and expected increased product demand for housewrap and synthetic roof underlayment and provides future capacity for sales of specialty roofing component products and custom products for industrial applications requiring high quality extrusion coated fabrics. In addition, the joint venture now supplies products for the Company’s Disposable Protective Apparel segment.

The capital from the initial funding and a bank loan, which is guaranteed exclusively by the individual shareholders of Maple Industries and associates and collateralized by the assets of Harmony, was utilized to purchase the original manufacturing facility in India. Harmony currently hasfour facilities in India (three owned andone rented), consisting of: (1) a 139,000 square foot building for manufacturing building products; (2) a 121,000 square foot building for manufacturing coated material and sewing proprietary disposable protective apparel; (3) a 23,000 square foot facility for sewing proprietary disposable protective apparel; and (4) a 159,000 square foot facility (rented) for manufacturing Building Supply segment products. All additions have been financed by Harmony with no guarantees from the Company.

In accordance with ASC 810, Consolidation, the Company assesses whether or not related entities are variable interest entities (“VIEs”). For those related entities that qualify as VIEs, ASC 810 requires the Company to determine whether the Company is the primary beneficiary of the VIE, and, if so, to consolidate the VIE. The Company has determined that Harmony is not a VIE and is, therefore, considered to be an unconsolidated affiliate.

The Company records its investment in Harmony as “equity investment in unconsolidated affiliate” in the accompanying consolidated balance sheets. The Company records its equity interest in Harmony’s results of operations as “equity in income of unconsolidated affiliate” in the accompanying consolidated statements of income. The Company periodically reviews its investment in Harmony for impairment. Management has determined thatno impairment was required as of June 30, 2026, or December 31, 2025. Under the equity method, since the Company’s reporting currency is different from Harmony’s reporting currency, the Company is required to translate our proportionate share of equity for the effects of translations in foreign currency and adjust the investment accordingly and accrue the adjustment as a component of accumulated other comprehensive loss (“AOCL”).

For the three months ended June 30, 2026 and 2025, the Company purchased $374,000 and $5,159,000 of inventories, respectively, from Harmony. For the six months ended June 30, 2026 and 2025, the Company purchased $3,468,000 and $9,914,000 of inventories, respectively, from Harmony. For the three months ended June 30, 2026 and 2025, the Company sold $203,000 and $415,000 of inventories, respectively, to Harmony. For the six months ended June 30, 2026 and 2025, the Company sold $437,000 and $415,000 of inventories, respectively, to Harmony. For the three months ended June 30, 2026 and 2025, the Company recorded equity in income of unconsolidated affiliate of $209,000 and $137,000, respectively, related to Harmony. For the six months ended June 30, 2026 and 2025, the Company recorded equity in income of unconsolidated affiliate of $364,000 and $278,000, respectively, related to Harmony.

As of June 30, 2026, the Company’s investment in Harmony was $5,620,000, which consisted of its original $1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $7,428,000, less $942,000 in repayments of an advance, $77,000 in payments of dividends, and $2,239,000 in AOCL on foreign currency translations.

As of June 30, 2026 and December 31, 2025, accrued liabilities consisted of the following:

The following table provides a reconciliation of both net income and the number of shares used in the computation of “basic” earnings per common share (“EPS”), which utilizes the weighted average number of common shares outstanding without regard to dilutive shares, and “diluted” EPS, which includes all such dilutive shares, for the three and six months ended June 30, 2026 and 2025:

AOCL, a component of shareholders' equity, consists of foreign currency translation adjustments related to foreign currency gains or losses on our unconsolidated affiliate as its functional currency is other than the U.S. dollar. The resulting foreign currency translation gains or losses are deferred as AOCL and reclassified to earnings only upon sale or liquidation of that business. The AOCL on equity in unconsolidated affiliate was $2,239,000 and $1,947,000 as of June 30, 2026 and December 31, 2025, respectively.

The Company has determined that it hastwo reporting segments, which are also operating segments:

(1)Building Supply: consisting of construction weatherization products, such as housewrap, housewrap accessories including window and door flashing, seam tape, synthetic roof underlayment and synthetic roof underlayment accessories, as well as other woven materials. The majority of the Company’s equity in income of unconsolidated affiliate (Harmony) is included in the total segment income for the Building Supply segment.

(2)Disposable Protective Apparel: consisting of a complete line of disposable protective garments, including shoecovers (including the Aqua Trak® and spunbond shoecovers), bouffant caps, coveralls, frocks, lab coats, gowns and hoods, as well as face masks and face shields for the pharmaceutical, cleanroom, industrial, medical and dental markets. A portion of the Company’s equity in income of unconsolidated affiliate (Harmony) is included in the total segment income for the Disposable Protective Apparel segment.

The chief operating decision maker (“CODM”) of the Company is the Company’schief executive officer. The CODM assesses performance and decides how to allocate resources, including employees and financial and capital resources, based on segment net sales.

Segment data excludes charges allocated to the principal executive office and other unallocated corporate overhead expenses and income tax. The Company evaluates the performance of its segments and allocates resources to them based primarily on net sales.

The accounting policies of the segments are the same as those described previously under Summary of Significant Accounting Policies (see Note 2 in the notes to our consolidated financial statements in Item 8 of the 2025 Form 10-K).

The following provides segment information as described below:

The following table presents net sales for each segment for the three and six months ended June 30, 2026 and 2025:

The following table presents the reconciliation of total segment income to consolidated net income for the three and six months ended June 30, 2026 and 2025:

The following table presents the net property and equipment, goodwill and definite-lived intangible assets (“total assets”) by segment as of June 30, 2026 and December 31, 2025:

The following table summarizes the Company’s net sales by geographic region for the three and six months ended June 30, 2026 and 2025:

Net sales by geographic region are based on the countries in which our customers are located. For the three and six months ended June 30, 2026 and 2025, the Company did not generate sales from any single country, other than the United States, that were significant to the Company’s consolidated net sales.

The following table summarizes the locations of the Company’s long-lived assets by geographic region as of June 30, 2026 and December 31, 2025:

As of June 30, 2026, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony. See Note 6 of these Notes to Condensed Consolidated Financial Statements (Unaudited).

The Company has operating leases for the Company’s corporate office and manufacturing facilities, which expire at various dates through 2034. The Company’s primary operating lease commitments as of June 30, 2026, related to the Company’s manufacturing facilities in Valdosta, Georgia and Nogales, Arizona, as well as the Company’s corporate headquarters in Aurora, Ontario, Canada.

As of June 30, 2026, the Company had operating lease right-of-use assets of $7,504,000 and operating lease liabilities of $7,621,000. As of June 30, 2026, we didnot have any finance leases recorded on the Company’s consolidated balance sheet. Operating lease expense was approximately $762,000 during the six months ended June 30, 2026.

The aggregate future minimum lease payments and reconciliation to total lease liabilities as of June 30, 2026 were as follows:

As of June 30, 2026, the weighted average remaining lease term of the Company’s operating leases was 9.01 years. During the six months ended June 30, 2026, the weighted average discount rate with respect to these leases was 7.0%.

The Company accounts for income taxes using the asset and liability method. A valuation allowance is recorded to reduce the carrying amounts of deferred income tax assets unless it is more likely than not that such assets will be realized. The Company’s policy is to record any interest and penalties assessed by the Internal Revenue Service as a component of the provision for income taxes. The Company provides allowances for uncertain income tax positions when it is more likely than not that the position will not be sustained upon examination by the tax authority.

Alpha Pro Tech, Ltd. and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted. Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of domestic research and development expenditures under Internal Revenue Code (IRC) Section 174 (reinstating full expensing beginning in 2025), extension of bonus depreciation, and revisions to international tax regimes. The Company recognized the income tax effects of the OBBBA in its third quarter 2025 financial statements.

An employer generally does not claim a corporate income tax deduction (which would be in an amount equal to the amount of income recognized by the employee) upon the exercise of its employee's incentive stock options (“ISOs”) unless the employee does not meet the holding period requirements and sells early, making a disqualifying disposition, or if the options otherwise do not qualify as ISOs under applicable tax laws. With non-qualified stock options (“NQSOs”), on the other hand, the employer is typically eligible to claim a deduction upon its employee's exercise of the NQSOs.

The Company is subject to income tax examinations in various jurisdictions with respect to fiscal years after 2022. The timing and potential resolution of income tax examinations is highly uncertain and when, and if, the Company is subject to a tax examination it is reasonably possible that a taxing authority may interpret certain tax laws differently resulting in additional taxes due from the Company.

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

Tariff Matter

In February 2026, the U.S. Supreme Court issued a ruling that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") on goods imported into the United States were unauthorized. Following that ruling, the U.S. Court of International Trade ("CIT") issued an order directing U.S. Customs and Border Protection ("CBP") to process refunds of the IEEPA tariffs, although the CIT immediately suspended the order while CBP develops and implements the refund process. The IEEPA tariffs and related refund framework remain subject to ongoing litigation, including potential appeals, as well as regulatory and administrative developments.

As previously disclosed, tariffs imposed under the IEEPA on goods imported into the United States remain subject to ongoing litigation, including appeals of the applicable court rulings, as well as related regulatory and administrative actions. During the six months ended June 30, 2026, the Company received refunds representing a portion of the IEEPA tariffs previously paid. The Company continues to seek recovery of additional IEEPA tariffs; however, the ultimate amount, timing, and final resolution of any additional refunds remain uncertain pending the outcome of the ongoing litigation and related administrative processes.

The Company has elected to use a gain contingency model to account for recoveries of previously paid IEEPA tariffs, in accordance with ASC 450-30 "Gain Contingencies". Under this model, a gain contingency is not recognized in the financial statements until the gain is realized or realizable. As of June 30, 2026, the Company has recognized only those refunds received as of the balance sheet date. Tariff recoveries are reflected as a reduction of cost of goods sold for inventory that has already been sold. Subsequent to June 30, 2026, the Company received refunds for IEEPA tariffs previously paid totaling approximately $3.2 million, including an immaterial amount of interest. As of June 30, 2026 these amounts were not deemed to be realized or realizable and, accordingly, these amounts were not recognized in the condensed consolidated financial statements for the period ending June 30, 2026. As of June 30, 2026, the impact to the Company of these subsequently received IEEPA tariff refunds remains uncertain due to uncertainty around customer and vendor refunds, rebates, as well as the final resolution of pending litigation and appeals.

During the quarter ended June 30, 2026, the Company reassessed the appropriate accounting model for its tariff refund claims. Based on further analysis of the applicable accounting guidance and the nature of the claims, management concluded that the claims represent gain contingencies subject to ASC 450-30. (As previously disclosed in the Company's March 31, 2026 interim financial information, no tariff amounts were recorded as of March 31, 2026.)

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of June 30, 2026 through the filing date of this Quarterly Report on Form 10-Q. Subsequent to June 30, 2026, the Company received approximately $3.2 million in refunds from U.S. Customs and Border Protection related to previously paid IEEPA tariffs. This is in addition to the approximately $300,000 in refunds the Company received (and recorded) during the second quarter of 2026.