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Note 3 - Shareholders' Equity

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Shareholders' Equity and Share-Based Payments [Text Block]

3.	Shareholder’s Equity

Repurchase Program

During the three months ended September 30, 2024, the Company repurchased and retired 180,000 shares of its common stock for $1,030,000. During the three months ended September 30, 2023, the Company repurchased and retired 249,110 shares of its common stock for $1,049,000. During the nine months ended September 30, 2024, the Company repurchased and retired 695,000 shares of its common stock for $3,731,000. During the nine months ended September 30, 2023, the Company repurchased and retired 724,110 shares of its common stock for $2,979,000. As of September 30, 2024, the Company had $1,463,000 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 employees and non-employee directors under the 2004 Stock Option Plan (the “2004 Plan”). Options vest and expire according to terms established at the grant date. The 2004 Plan provided for a total of 5,000,000 common shares eligible for issuance. Under the 2004 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.

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

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

The following table summarizes restricted stock awards activity for the nine months ended September 30, 2024:

						Weighted Average
						Grant Date Price
		Shares				Restricted stock awards

Outstanding, December 31, 2023			235,172			$	4.21
Granted to employees and non-employee directors			29,675				1.92
Vested			(8,172	)			4.02
Outstanding, September 30, 2024			256,675				3.96

Notes to Condensed Consolidated Financial Statements (Unaudited)

During the nine months ended September 30, 2024 and 2023, 29,675 and 227,600 restricted stock awards were granted under the 2020 Incentive Plan, respectively. The Company recognized $283,000 and $58,000 in stock-based compensation expense associated with outstanding restricted stock awards for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, $760,000 of total unrecognized compensation cost related to the restricted stock grants was expected to be recognized over a weighted average remainder period of 1.96 years.

For the nine months ended September 30, 2024 and 2023, 0 and 46,400 stock options were granted under the 2020 Incentive Plan, respectively. The Company recognized $44,000 and $10,000 in stock-based compensation expense for the nine months ended September 30, 2024 and 2023, respectively, related to outstanding options previously granted under the 2004 Option Plan.

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

The following table summarizes option activity for the nine months ended September 30, 2024:

						Weighted Average
						Exercise Price
		Options				Per Option

Options outstanding, December 31, 2023			292,766			$	3.71
Exercised			(231,666	)			3.59
Options outstanding, September 30, 2024			61,100				4.17
Options exercisable, September 30, 2024			25,264				4.14

As of September 30, 2024, $103,000 of total unrecognized compensation cost related to the stock option grants was expected to be recognized over a weighted average remainder period of 1.82 years.