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Management Discussion

• Net sales for the first quarter of 2021 increased by $107,954 (approximately 3%) as compared with the first quarter of 2020. The increase in sales for the first quarter of 2021 was primarily attributable to an increase in sales of the Company’s pharmaceutical products and medical products, which was partially offset by a decrease in sales of the Company’s cosmetic ingredients and industrial products. The changes in the sales of the products in the Company’s different products lines were as follows:
• The decrease in cosmetic ingredient sales to ASI was partially offset by an increase in sales of those products to the Company’s marketing partners in the UK, Italy, and Switzerland, which increased by a total of $100,520 (approximately 107%) compared with the first quarter of 2020. In addition, there was an increase of $14,470 in direct sales to three cosmetic ingredient customers in the United States during the first quarter of 2021.
• Based on information received from ASI, the Company believes that the decrease in sales to ASI was primarily due to the impact of the pandemic on ASI’s customers, particularly in China. The decrease in ASI sales in China was the result of a number of factors, including (a) lower consumer demand in China for many of the products in which the Company’s products are used; (b) manufacturing disruptions in China resulting from the impact of the coronavirus on manufacturing facilities; and (c) excess inventory levels of the Company’s products resulting from overstocking on the part of ASI during 2020 due to the uncertainty of being able to obtain product from the Company during the pandemic. Since the Company’s cosmetic ingredients are marketed globally by its marketing partners in many different countries, and since the virus continues to impact countries at different times and to very different extents, it is difficult to project the future impact of the coronavirus pandemic on the Company’s global cosmetic ingredient sales. Until the global crisis passes it is likely that there will continue to be a negative impact on the Company’s sales of its cosmetic ingredients, as well as, to a lesser extent, its non-pharmaceutical medical products. However, based on sales in the first quarter of 2021, the Company believes that sales of its cosmetic ingredients are improving, and will continue to improve during 2021 as long as the global pandemic situation improves rather than worsens.