3.	S tock - Based Compensation

The Company maintains a stock option plan (the

“2004

Option Plan”) under which the Company

may

grant incentive stock options and non-qualified stock options to employees and non-employee directors. Stock options have been granted with exercise prices at or above the fair market value of the underlying shares of common stock on the date of grant. Options vest and expire according to terms established at the grant date.

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

For the

six

months ended

June 30, 2020

and

2019,

and

310,000

stock options were granted under the Company's option plan, respectively. The Company recognized

$183,000

and

$260,000

in stock-based compensation expense for the

six

months ended

June 30, 2020

and

2019,

respectively.

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 stock option activity for the

six

months ended

June 30, 2020:

				Weighted Average
				Exercise Price
	Options			Per Option

Options outstanding, December 31, 2019		1,326,414		$	2.86
Granted to employees and non-employee directors		-			-
Exercised		(737,674	)		2.61
Canceled/expired/forfeited		-			-
Options outstanding, June 30, 2020		588,740			3.33
Options exercisable, June 30, 2020		157,167			2.76

As of

June 30, 2020,

$406,000

of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of

1.49

years.

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, 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,

future equity awards will be made pursuant to the

2004

Option Plan. Although

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.