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Management Discussion

• Total product sales during the three-month period ended March 31, 2021 decreased by 16%, or $803,000, to $4.1 million from $4.9 million during the three-month period ended March 31, 2020, with domestic sales decreasing by 18% and international sales decreasing by 5% in comparison to the three-month period ended March 31, 2020. International sales aggregated 13% and 11% of total sales during the three-month periods ended March 31, 2021 and 2020, respectively. The compound annual growth rate of our total product sales during the ten years ended December 31, 2020 was approximately 13%. The compound annual growth rate of our total product sales during the three years ended December 31, 2020 was approximately 18%. Sales achieved during the first quarter of 2021 were the annualized equivalent of almost 100% of the $16.5 million that we estimate to be our current annual production capacity. As of December 31, 2020, we had depleted our available finished goods inventory and had a backlog of orders worth approximately $1.8 million, compared to backlogs of approximately $1.4 million and $0 as of March 31, 2020 and December 31, 2019, respectively. The backlog increased to approximately $3.1 million as of March 31, 2021 (see further discussion about the valuation of the backlog, and our plan to eliminate it, below). While this is a very positive indication about the strong demand for our First Defense® product line, not being able to meet the needs of our customers presently could result in the loss of some customers that seek alternative scours management products during this period of short supply and may not resume purchasing our product when we have eliminated the backlog. We missed some business during the peak season of 2021. As our product mix shifts in favor of Tri-Shield First Defense®, it has become more difficult to achieve our estimated production capacity. After our increased production capacity comes on-line at the end of the second quarter of 2021, and assuming we produce and sell to plan, we expect sales for the year ending December 31, 2021 to be greater than sales recorded during the year ended December 31, 2020. A precise estimation of the amount of the recovery from the first quarter sales drop to the anticipated year-over-year sales increase is very difficult to make at this point, given the uncertainties related to the impacts of new business opportunities missed due to COVID-related restrictions and customers lost (that may or may not return at or above prior levels of purchasing) and other factors experienced during the period of order backlog.