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The Company believes that it is in material compliance with all applicable regulations that are material to its business operations.

Quality Assurance & Environmental Compliance

The Company utilizes in-house quality and regulatory compliance control procedures. Hudson maintains its own analytical testing laboratories, which are AHRI certified, to assure that reclaimed refrigerants comply with AHRI purity standards and employs portable testing equipment when performing on-site services to verify certain quality specifications. The Company employs twelve persons engaged full-time in quality control and to monitor the Company'sCompany’s operations for regulatory compliance.

Employees

Human Capital Resources

On December 31, 2017,February 1, 2024, the Company had 262237 full time employees including air conditioning and refrigeration technicians, chemists, engineers, sales and administrative personnel. None of the Company'sCompany’s employees are represented by a union. The Company believes it has good relations with its employees.

Patents and Proprietary Information

The Company holds several U.S. and foreign patents, as well as pending patent applications, related to certain RefrigerantSide® Services and supporting systems developed by the Company for systems and processes for measuring and improving the efficiency of refrigeration systems, and for certain refrigerant recycling and reclamation technologies. These patents will expire between August 2019December 2024 and April 2031.December 2036.

The Company believes that patent protection is important to its business. There can be no assurance as to the breadth or degree of protection that patents may afford the Company, that any patent applications will result in issued patents or that patents will not be circumvented or invalidated. Technological development in the refrigerant industry may result in extensive patent filings and a rapid rate of issuance of new patents. Although the Company believes that its existing patents and the Company'sCompany’s equipment do not and will not infringe upon existing patents or violate proprietary rights of others, it is possible that the Company'sCompany’s existing patent rights may not be valid or that infringement of existing or future patents or violations of proprietary rights of others may occur. In the event the Company'sCompany’s equipment or processes infringe, or are alleged to infringe, patents or other proprietary rights of others, the Company may be required to modify the design of its equipment or processes, obtain a license or defend a possible patent infringement action. There can be no assurance that the Company will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action or that the Company will not become liable for damages.

The Company also relies on trade secrets and proprietary know-how, and employs various methods to protect its technology. However, such methods may not afford complete protection and there can be no assurance that others will not independently develop such know-how or obtain access to the Company'sCompany’s know-how, concepts, ideas and documentation. Failure to protect its trade secrets could have a material adverse effect on the Company.

SEC Filings

The Company makes available on its internet website copies of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments thereto, as soon as reasonably practicable after they are filed with the Securities and Exchange Commission.

Item 1A. Risk Factors

There are many important factors, including those discussed below (and above as described under “Patents“Business-Patents and Proprietary Information”), that have affected, and in the future could affect Hudson’s business including, but not limited to, the factors discussed below, which should be reviewed carefully together with the other information contained in this report. Some of the factors are beyond Hudson’s control and future trends are difficult to predict.

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Risks Related to Business Strategy and Operations

Our existing and future debt obligations could impair our liquidity and financial condition.

Our existing credit facilities,facility, consisting of an asset-based lending facility of up to $150$75 million from PNCWells Fargo Bank, National Association (“Wells Fargo Bank”) and a term loan of $105 million from funds advised by FS Investments and sub-advised by GSO Capital Partners LP., areother lenders, is secured by substantially all of our assets and the PNC Bank facility contains formulas that limit the amount of our future borrowings under that facility. Moreover, the terms of our credit facilitiesfacility also includeincludes financial and negative covenants that, among other things, may limit our ability to incur additional indebtedness. If we violate any loan covenants and do not obtain a waiver from our lenders, our indebtedness under the credit facilities would become immediately due and payable, and the lenders could foreclose on their security, which could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations.

We may not successfully integrate ARI into our operations.

Our revenues, results of operations and cash flows could be materially and adversely affected by changes in commodity prices.

Our recent acquisitionrevenues, results of ARI substantially increasedoperations and cash flows are affected by market prices for refrigerant gases. Commodity prices generally are affected by a wide range of factors beyond our control, including weather, seasonality, the sizeavailability and complexityadequacy of supply, government regulation and policies and general political and economic conditions. We are exposed to fluctuating commodity prices as the result of our companyinventory of various refrigerant gases. At any time, our inventory levels may be substantial. We have processes in place to monitor exposures to these risks and its operations. We mayengage in strategies to manage these risks. If these controls and strategies are not successful in mitigating our exposure to these fluctuations, we could be able to successfully integrate the assets, liabilities, customers, systems or management personnel of ARI into our operationsmaterially and we may not be able to realize related revenue synergies and cost savings within expected time frames. We do not have prior experience integrating an acquisition of this size and complexity and therefore there can be no assurance that we will be able to successfully integrate ARI.adversely affected.

We may need additional financing to satisfy our future capital requirements, which may not be readily available to us.

Our capital requirements may be significant in the future. In the future, weWe may incur additional expenses in the development and implementation of our operations. Due to fluctuations in the price, demand and availability of new refrigerants, our existing credit facility with PNCled by Wells Fargo Bank that expires in October 2022March 2027 may not in the future be sufficient to provide all of the capital that we need to acquire and manage our inventories of new refrigerant. As a result, we may be required to seek additional equity or debt financing in order to develop our RefrigerantSide® Services business, our refrigerant sales business and our other businesses. We have no current arrangements with respect to, or sources of, additional financing other than our existing credit facility and term loan.facility. There can be no assurance that we will be able to obtain any additional financing on terms acceptable to us or at all. Our inability to obtain financing, if and when needed, could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations.

Adverse weather or economic downturn could adversely impact our financial results.

Our business could be negatively impacted by adverse weather or economic downturns. Weather is a significant factor in determining market demand for the refrigerants sold by us, and to a lesser extent, our RefrigerantSide® Services. Unusually cool temperatures in the spring and summer tend to depress demand for, and price of, refrigerants we sell. Protracted periods of cooler than normal spring and summer weather could result in a substantial reduction in our sales which could adversely affect our financial position as well as our results of operations. An economic downturn could cause customers to postpone or cancel purchases of the Company’s products or services. Either or both of these conditions could have severe negative implications to our business that may exacerbate many of the risk factors we identified in this report but not limited, to the following:

Liquidity

These conditions could reduce our liquidity, which could have a negative impact on our financial condition and results of operations.

Demand

These conditions could lower the demand and/or price for our product and services, which would have a negative impact on our results of operations.

Financial Covenants

These conditions could impact our ability to meet our loan covenants which, if we are unable to obtain a waiver from our lenders, could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations.

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Our business is impacted by customer concentration.

The natureIn July 2016, we were awarded, as prime contractor, a five-year contract, including a five-year renewal option (which has been exercised), by the United States Defense Logistics Agency (“DLA”) for the management and supply of refrigerants, compressed gases, cylinders and related items to US Military commands and installations, Federal civilian agencies and foreign militaries. Our contract with DLA expires in July 2026. For the years ended December 31, 2023, 2022 and 2021, the DLA accounted for 18%, 8% and 10% of our business exposes us to potential liability.

revenues. The refrigerant recovery and reclamation industry involves potentially significant risksloss of statutory and common law liability for environmental damage and personal injury. We, and in certain instances, our officers, directors and employees, may be subject to claims arising from our on-site or off-site services, including the improper release, spillage, misuse or mishandling of refrigerants classifiedDLA as hazardous or non-hazardous substances or materials. We may be strictly liable for damages, whicha customer could be substantial, regardless of whether we exercised due care and complied with all relevant laws and regulations. Our current insurance coverage may not be sufficient to cover potential claims, and adequate levels of insurance coverage may not be available in the future at a reasonable cost. A partially or completely uninsured claim against us, if successful and of sufficient magnitude would have a material adverse effect on our business and financial condition.

Our business and financial condition is substantially dependent on the sale and continued environmental regulation of refrigerants.

Our business and prospects are largely dependent upon continued regulation of the use and disposition of refrigerants. Changes in government regulations relating to the emission of refrigerants into the atmosphere could have a material adverse effect on us. Failure by government authorities to otherwise continue to enforce existing regulations or significant relaxation of regulatory requirements could also adversely affect demand for our services and products.

Our business is subject to significant regulatory compliance burdens.

The refrigerant reclamation and management business is subject to extensive, stringent and frequently changing federal, state and local laws and substantial regulation under these laws by governmental agencies, including the EPA, the OSHA and DOT. Although we believe that we are in material compliance with all applicable regulations material to our business operations, amendments to existing statutes and regulations or adoption of new statutes and regulations that affect the marketing and sale of refrigerant could require us to continually alter our methods of operation and/or discontinue the sale of certain of our products resulting in costs to us that could be substantial. We may not be able, for financial or other reasons, to comply with applicable laws, regulations and permit requirements, particularly as we seek to enter into new geographic markets. Our failure to comply with applicable laws, rules or regulations or permit requirements could subject us to civil remedies, including substantial fines, penalties and injunctions, as well as possible criminal sanctions, which would, if of significant magnitude, materially adversely impact our operations and future financial condition.

A number of factors could negatively impact the price and/or availability of refrigerants, which would, in turn, adversely affect our business and financial condition.

Refrigerant sales continue to represent a significant majority of our revenues. Therefore, our business is substantially dependent on the availability of both new and used refrigerants in large quantities, which may be affected by several factors including, without limitation: (i) commercial production and consumption limitations imposed by the Act and legislative limitations and ban on HCFC refrigerants; (ii) the amendment to the Montreal Protocol, if ratified, and any legislation and regulation enacted to implement the amendment, could impose limitations on production and consumption of HFC refrigerants; (iii) introduction of new refrigerants and air conditioning and refrigeration equipment; (iv) price competition resulting from additional market entrants; (v) changes in government regulation on the use and production of refrigerants; and (vi) reduction in price and/or demand for refrigerants. We do not maintain firm agreements with any of our suppliers of refrigerants and we do not hold allowances permitting us to purchase and import HCFC refrigerants from abroad. Sufficient amounts of new and/or used refrigerants may not be available to us in the future, particularly as a result of the further phase down of HCFC production, or may not be available on commercially reasonable terms. Additionally, we may be subject to price fluctuations, periodic delays or shortages of new and/or used refrigerants. Our failure to obtain and resell sufficient quantities of virgin refrigerants on commercially reasonable terms, or at all, or to obtain, reclaim and resell sufficient quantities of used refrigerants would have a material adverse effect on our operating marginsposition and results of operations.

As a result of competition, and the strength of some of our competitors in the market, we may not be able to compete effectively.

The markets for our services and products are highly competitive. We compete with numerous regional and national companies which provide refrigerant recovery and reclamation services, as well as companies which market and deal in new and reclaimed alternative refrigerants, including certain of our suppliers, some of which possess greater financial, marketing, distribution and other resources than us. We also compete with numerous manufacturers of refrigerant recovery and reclamation equipment. Certain of these competitors have established reputations for success in the service of air conditioning and refrigeration systems. We may not be able to compete successfully, particularly as we seek to enter into new markets.

Issues relating to potential global warming and climate change could have an impact on our business.

Refrigerants are considered to be strong greenhouse gases that are believed to contribute to global warming and climate change and are now subject to various state and federal regulations relating to the sale, use and emissions of refrigerants. Current and future global warming and climate change or related legislation and/or regulations may impose additional compliance burdens on us and on our customers and suppliers which could potentially result in increased administrative costs, decreased demand in the marketplace for our products, and/or increased costs for our supplies and products. In addition, an amendment to the Montreal Protocol has established timetables for all developed and developing countries to freeze and then reduce production and use of HFCs by 85% between now and 2047, with the first reductions by developed countries starting in 2019. The amendment becomes effective January 1, 2019. To date, the amendment has not been ratified by the United States. It is unclear if the United States will ratify the amendment and, if it does ratify the amendment, it is unclear what legislation and/or regulations will be enacted to implement the amendment.

The loss of key management personnel would adversely impact our business.

Our success is largely dependent upon the efforts of our Chief Executive Officer and Chairman. The loss of his services would have a material adverse effect on our business and prospects.

We have the ability to designate and issue preferred stock, which may have rights, preferences and privileges greater than Hudson’s common stock and which could impede a subsequent change in control of us.

Our Certificate of Incorporation authorizes our Board of Directors to issue up to 5,000,000 shares of “blank check” preferred stock and to fix the rights, preferences, privileges and restrictions, including voting rights, of these shares, without further shareholder approval. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of holders of any additional preferred stock that may be issued by us in the future. Our ability to issue preferred stock without shareholder approval could have the effect of making it more difficult for a third party to acquire a majority of our voting stock, thereby delaying, deferring or preventing a change in control of us.

If our common stock were delisted from NASDAQ it could be subject to “penny stock” rules which would negatively impact its liquidity and our shareholders’ ability to sell their shares.

Our common stock is currently listed on the NASDAQ Capital Market. We must comply with numerous NASDAQ Marketplace rules in order to continue the listing of our common stock on NASDAQ. There can be no assurance that we can continue to meet the rules required to maintain the NASDAQ listing of our common stock. If we are unable to maintain our listing on NASDAQ, the market liquidity of our common stock may be severely limited.

Our management has significant control over our affairs.

Currently, our officers and directors collectively own approximately 14% of our outstanding common stock. Accordingly, our officers and directors are in a position to significantly affect major corporate transactions and the election of our directors. There is no provision for cumulative voting for our directors.

We may fail to successfully integrate any additional acquisitions made by us into our operations.

As part of our business strategy, we may look for opportunities to grow by acquiring other product lines, technologies or facilities that complement or expand our existing business. We may be unable to identify additional suitable acquisition candidates or negotiate acceptable terms. In addition, we may not be able to successfully integrate any assets, liabilities, customers, systems or management personnel we may acquire into our operations and we may not be able to realize related revenue synergies and cost savings within expected time frames. There can be no assurance that we will be able to successfully integrate any prior or future acquisition.

Our information technology systems, processes, and sites may suffer interruptions, failures, or attacks which could affect our ability to conduct business.

Our information technology systems provide critical data connectivity, information and services for internal and external users. These include, among other things, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, storing project information and other processes necessary to manage the business. Our systems and technologies, or those of third parties on which we rely, could fail or become unreliable due to equipment failures, software viruses, cyber threats, terrorist acts, natural disasters, power failures or other causes. Cybersecurity threats are evolving and include, but are not limited to, malicious software, cyber espionage, attempts to gain unauthorized access to our sensitive information, including that of our customers, suppliers, and subcontractors, and other electronic security breaches that could lead to disruptions in mission critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data. Although we utilize various procedures and controls to monitor and mitigate these threats, there can be no assurance that these procedures and controls will be sufficient to prevent security threats from materializing. If any of these events were to materialize, the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified and could have a material adverse effect on our reputation, operating results, and financial condition.

Risks Related to Regulatory and Environmental Matters

The nature of our business exposes us to potential liability.

The refrigerant recovery and reclamation industry involves potentially significant risks of statutory and common law liability for environmental damage and personal injury. We, and in certain instances, our officers, directors and employees, may be subject to claims arising from our on-site or off-site services, including the improper release, spillage, misuse or mishandling of refrigerants classified as hazardous or non-hazardous substances or materials. We may be strictly liable for damages, which could be substantial, regardless of whether we exercised due care and complied with all relevant laws and regulations. Our current insurance coverage may not be sufficient to cover potential claims, and adequate levels of insurance coverage may not be available in the future at a reasonable cost. A partially or completely uninsured claim against us, if successful and of sufficient magnitude would have a material adverse effect on our business and financial condition.

Our business and financial condition is substantially dependent on the sale and continued environmental regulation of refrigerants.

Our business and prospects are largely dependent upon continued regulation of the use and disposition of refrigerants. Changes in government regulations relating to the emission of refrigerants into the atmosphere could have a material adverse effect on us. Failure by government authorities to otherwise continue to enforce existing regulations or significant relaxation of regulatory requirements could also adversely affect demand for our services and products.

Our business is subject to significant regulatory compliance burdens.

The refrigerant reclamation and management business is subject to extensive, stringent and frequently changing federal, state and local laws and substantial regulation under these laws by governmental agencies, including the EPA, the OSHA and DOT. Although we believe that we are in material compliance with all applicable regulations material to our business operations, amendments to existing statutes and regulations or adoption of new statutes and regulations that affect the marketing and sale of refrigerant could require us to continually alter our methods of operation and/or discontinue the sale of certain of our products resulting in costs to us that could be substantial. We may not be able, for financial or other reasons, to comply with applicable laws, regulations and permit requirements, particularly as we seek to enter into new geographic markets. Our failure to comply with applicable laws, rules or regulations or permit requirements could subject us to civil remedies, including substantial fines, penalties and injunctions, as well as possible criminal sanctions, which would, if of significant magnitude, materially adversely impact our operations and future financial condition.

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A number of factors could negatively impact the price and/or availability of refrigerants, which would, in turn, adversely affect our business and financial condition.

Refrigerant sales continue to represent a significant majority of our revenues. Therefore, our business is substantially dependent on the availability of both new and used refrigerants in large quantities, which may be affected by several factors including, without limitation: (i) commercial production and consumption limitations imposed by the Act and legislative limitations and ban on HCFC refrigerants; (ii) the amendment to the Montreal Protocol, the AIM Act, and any legislation and regulation enacted to implement the amendment, imposes limitations on production and consumption of HFC refrigerants; (iii) introduction of new refrigerants and air conditioning and refrigeration equipment; (iv) price competition resulting from additional market entrants; (v) changes in government regulation on the use and production of refrigerants; and (vi) reduction in price and/or demand for refrigerants. Sufficient amounts of new and/or used refrigerants may not be available to us in the future, particularly as a result of the further phase down of HFC production, or may not be available on commercially reasonable terms. Additionally, we may be subject to price fluctuations, periodic delays or shortages of new and/or used refrigerants. Our failure to obtain and resell sufficient quantities of virgin refrigerants on commercially reasonable terms, or at all, or to obtain, reclaim and resell sufficient quantities of used refrigerants would have a material adverse effect on our operating margins and results of operations.

Issues relating to potential global warming and climate change could have an impact on our business.

Refrigerants are considered to be strong greenhouse gases that are believed to contribute to global warming and climate change and are now subject to various state and federal regulations relating to the sale, use and emissions of refrigerants. Current and future global warming and climate change or related legislation and/or regulations may impose additional compliance burdens on us and on our customers and suppliers which could potentially result in increased administrative costs, decreased demand in the marketplace for our products, and/or increased costs for our supplies and products. In addition, an amendment to the Montreal Protocol has established timetables for all developed and developing countries to freeze and then reduce production and use of HFCs by 85% by 2047, with the first reductions by developed countries in 2019. The amendment became effective January 1, 2019. In December 2020, AIM Act legislation was enacted in the United States that requires the phasedown of virgin production of HFCs.

Risks Related to Our Common Stock and Other General Risks

As a result of competition, and the strength of some of our competitors in the market, we may not be able to compete effectively.

The markets for our services and products are highly competitive. We compete with numerous regional and national companies which provide refrigerant recovery and reclamation services, as well as companies which market and deal in new and reclaimed alternative refrigerants, including certain of our suppliers, some of which possess greater financial, marketing, distribution and other resources than us. We also compete with numerous manufacturers of refrigerant recovery and reclamation equipment. Certain of these competitors have established reputations for success in the service of air conditioning and refrigeration systems. We may not be able to compete successfully, particularly as we seek to enter into new markets.

We have the ability to designate and issue preferred stock, which may have rights, preferences and privileges greater than Hudson’s common stock and which could impede a subsequent change in control of us.

Our Certificate of Incorporation authorizes our Board of Directors to issue up to 5,000,000 shares of “blank check” preferred stock and to fix the rights, preferences, privileges and restrictions, including voting rights, of these shares, without further shareholder approval. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of holders of any additional preferred stock that may be issued by us in the future. Our ability to issue preferred stock without shareholder approval could have the effect of making it more difficult for a third party to acquire a majority of our voting stock, thereby delaying, deferring or preventing a change in control of us.

If our common stock were delisted from NASDAQ it could be subject to “penny stock” rules which would negatively impact its liquidity and our shareholders’ ability to sell their shares.

Our common stock is currently listed on the NASDAQ Capital Market. We must comply with numerous NASDAQ Marketplace rules in order to continue the listing of our common stock on NASDAQ. There can be no assurance that we can continue to meet the rules required to maintain the NASDAQ listing of our common stock. If we are unable to maintain our listing on NASDAQ, the market liquidity of our common stock may be severely limited.

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Our management has significant control over our affairs.

Currently, our officers and directors collectively beneficially own approximately 7.8% of our outstanding common stock. Accordingly, our officers and directors are in a position to significantly affect major corporate transactions and the election of our directors. There is no provision for cumulative voting for our directors.

We may fail to successfully integrate any additional acquisitions made by us into our operations.

As part of our business strategy, we may look for opportunities to grow by acquiring other product lines, technologies or facilities that complement or expand our existing business. We may be unable to identify additional suitable acquisition candidates or negotiate acceptable terms. In addition, we may not be able to successfully integrate any assets, liabilities, customers, systems or management personnel we may acquire into our operations and we may not be able to realize related revenue synergies and cost savings within expected time frames. There can be no assurance that we will be able to successfully integrate any prior or future acquisition.

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We are not aware of any risks from cybersecurity threats, including as a result of any cybersecurity incidents, which have materially affected or are reasonably likely to materially affect our Company, including our business strategy, results of operations, or financial condition.

Governance

Our full Board oversees the Company’s enterprise risk management process, including the management of risks arising from cybersecurity threats. The Board receives regular presentations and reports from management who are responsible for managing and assessing cybersecurity risks, which address a wide range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations. The Board also receives prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed.

Management plays a crucial role in assessing and managing material risks from cybersecurity threats.  At the management level, the Company’s cybersecurity risk management and strategy is led by its Director of IT, who reports to the CFO. The qualifications of the Director of IT include over 25 years of IT management, cybersecurity, and information governance experience. The Director of IT is regularly informed about the latest developments in cybersecurity, including emerging threats and technologies to adapt security measures accordingly. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents.  Management’s role includes:

The Director of IT is promptly informed of potential cybersecurity risks, threats, and vulnerabilities by the Company’s IT Helpdesk.  Once an incident has been identified, the Director of IT and the IT network security team assess the criticality and impact of the incident on the Company’s business operations. The Director of IT then formulates and oversees a response to contain, eradicate and resolve incidents in accordance with the Company’s incident response plan. Management is responsible for reporting incidents to the appropriate authorities as necessary and engaging the senior leadership on all material incidents.

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Hudson’s key operational facilities are as follows:

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Table of operations for each of the five fiscal years in the period ended December 31, 2017, set forth below, has been derived from, should be read in conjunction with and is qualified in its entirety by reference to, our consolidated financial statements and notes thereto, included either elsewhere in this report or in reports we have filed previously with the SEC. The selected financial data presented below should also be read in conjunction with ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.Contents

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An impairment charge is recorded based on the excess of a reporting unit’s carrying amount over its fair value. An impairment charge would be recognized when the carrying amount exceeds the estimated useful livesfair value of a reporting unit. These impairment evaluations use many assumptions and estimates in determining an impairment loss, including certain assumptions and estimates related to future earnings. If the Company does not achieve its earnings objectives, the assumptions and estimates underlying these impairment evaluations could be adversely affected, which could result in an asset impairment charge that would negatively impact operating results.

There were no goodwill impairment losses recognized in any of the assets currently ranging from 2 to 13 years. three years ended December 31, 2023, 2022 and 2021.

Overview

The Company reviews these useful lives annuallyis a leading provider of sustainable refrigerant products and services to determine that they reflect future realizable value. The Company utilizes both internalthe Heating Ventilation Air Conditioning and external sourcesRefrigeration (“HVACR”) industry. For nearly three decades, we have demonstrated our commitment to evaluate potential currentour customers and future liabilities for various commitments and contingencies. In the event thatenvironment by becoming one of the assumptions or conditions changeUnited States’ largest refrigerant reclaimers through multimillion dollar investments in the future, the estimates could differ from the original estimates.plants and advanced separation technology required to recover a wide variety of refrigerants and restoring them to Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”) standard for reuse as certified EMERALD Refrigerants™.

Overview

The Company’s products and services are primarily used in commercial air conditioning, industrial processing and refrigeration systems, and include refrigerant and industrial gas sales, refrigerant management services consisting primarily of reclamation of refrigerants and RefrigerantSide® Services performed at a customer’s site, consisting of system decontamination to remove moisture, oils and other contaminants.

Sales of refrigerants continue to represent a significant majority of the Company’s revenues. The Company’s refrigerant sales are primarily HCFC and HFC based refrigerants and to a lesser extent CFC based refrigerants that are no longer manufactured. Currently the Company purchases virgin HCFC and HFC refrigerants and reclaimable HCFC, HFC and CFC refrigerants from suppliers and its customers. Effective January 1, 1996, the Clean Air Act (the “Act”) prohibited the production of virgin CFC refrigerants and limited the production of virgin HCFC refrigerants, which production was further limited in January 2004. Federal regulations enacted in January 2004 established production and consumption allowances for HCFCs and imposed limitations on the importation of certain virgin HCFC refrigerants. Under the Act, production of certain virgin HCFC refrigerants is scheduled to be phased out during the period 2010 through 2020, and production of all virgin HCFC refrigerants is scheduled to be phased out by 2030. In October 2014, the EPA published the Final Rule providing further reductions in the production and consumption allowances for virgin HCFC refrigerants for the years 2015 through 2019. In the Final Rule, the EPA has established a linear annual phase down schedule for the production or importation of virgin HCFC-22 that started at approximately 22 million pounds in 2015 and is being reduced by approximately 4.5 million pounds each year and ends at zero in 2020.

The Company has created and developedalso sells industrial gases to a service offering known as RefrigerantSide® Services. RefrigerantSide® Services are soldvariety of industry customers, predominantly to contractors and end-users whose refrigeration systems are usedusers in, commercial air conditioning and industrial processing. These services are offered in addition to refrigerant sales andor involved with, the Company's traditional refrigerant management services, which consist primarily of reclamation of refrigerants. The Company has created a network of service depots that provide a full range of the Company's RefrigerantSide® Services to facilitate the growth and development of its service offerings.

The Company focuses its sales and marketing efforts for its RefrigerantSide® Services on customers who the Company believes most readily appreciate and understand the value that is provided by its RefrigerantSide® Services offering. In pursuing its sales and marketing strategy, the Company offers its RefrigerantSide® Services to customers in the following industries: petrochemical, pharmaceutical, industrial power, manufacturing, commercial facility and property management and maritime. The Company may incur additional expenses as it further develops and markets its RefrigerantSide® Services offering.

US Military. In July 2016, the Company was awarded, as prime contractor, a five-year fixed price contract, including a five-year renewal option which has been exercised, awarded to it by the DLAUnited States Defense Logistics Agency (“DLA”) for the management supply, and salesupply of refrigerants, compressed gases, cylinders and related terms.items to US Military commands and installations, Federal civilian agencies and foreign militaries. Primary users include the US Army, Navy, Air Force, Marine Corps and Coast Guard. Our contract with DLA expires in July 2026.

Recent Acquisition

On October 10, 2017, the Company and its wholly-owned subsidiary, Holdings, completed the Acquisition of ARI and effective October 11, 2017, ARI’s name was changed to Aspen Refrigerants, Inc. At closing, Holdings paid net cash consideration to Airgas of approximately $209 million, which includes preliminary post-closing adjustments relating to: (i) changes in the net working capital of ARI as of the closing relative to a net working capital target, (ii) the actual amount of specified types of R-22 refrigerant inventory on hand at closing relative to a target amount thereof, and (iii) other consideration pursuant to the stock purchase agreement.

The cash consideration paid by Holdings at closing was financed with available cash balances, plus $80 million of borrowings under an enhanced asset-based lending facility of $150 million from PNC Bank and a new term loan of $105 million from funds advised by FS Investments and sub-advised by GSO Capital Partners LP.

Results of Operations

Year ended December 31, 20172023 as compared to the year ended December 31, 2016

2022

Revenues for the year ended December 31, 20172023 were $140.4$289.0 million, an increasea decrease of $34.9$36.2 million or 33.1%11% from the $105.5$325.2 million reported during the comparable 20162022 period. Included in the increase in revenues of $34.9 million is $14.8 million from ARI revenue subsequentThe decrease was mainly attributable to the acquisition date of October 10, 2017. The remaining increase in revenues of $20.1 million results from an increase in Hudson’s historical businesses. The increase in Hudson’s historical refrigerant and related revenue is primarily related to an increase in thelower selling price per poundprices of certain refrigerants sold, which accounted for anpartially offset by increase in revenues of $16.2 million, as well as an increase in the number of pounds of certain refrigerants sold, which accounted for an increase in revenues of $3.9 million.

from our DLA and carbon credit programs.

Cost of sales for the year ended December 31, 20172023 was $102.4$177.5 million or 73%61% of sales. The costCost of sales for the year ended December 31, 20162022 was $74.4$162.3 million or 71%50% of sales. The increase in the cost of sales percentage from 71% for the year ended December 31, 201661% to 73% for the year ended December 31, 201750% is primarily due to the increase in the cost per poundlower selling prices of certain refrigerants sold, for the twelve month period ended December 31, 2017 compared to the same period in 2016. In addition, subsequent to the acquisition of ARI during the fourth quarter of 2017, the Company recorded approximately $0.8 million of amortization relating to the step-up of basis of newly acquired inventories.

as described above.

Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 20172023 were $21.7$30.5 million, an increase of $10.0$1.9 million from the $11.7$28.6 million reported during the comparable 20162022 period. The increase in SG&A iswas primarily due to $6.3an increased number of employees and stock compensation.

Amortization expense was $2.8 million during 2023 and 2022, respectively.

Other expense for 2023 was $8.4 million, compared to the $14.3 million of nonrecurring acquisition and related fees relating toother expense reported during the acquisitioncomparable 2022 period. During the third quarter of ARI, which was consummated on October 10, 2017; and $4.02023, the Company repaid in full the remaining $32.5 million principal balance outstanding under its Term Loan Facility. In conjunction with this payoff, the Company recorded a non-cash write off of $3.4 million of additional operating expense relating todeferred financing costs. Similarly, during the ARI operations.

Amortizationfirst quarter of 2022, the Company recorded a non-cash write off of $4.7 million of deferred financing cost. Excluding these write offs, total interest expense for the year ended December 31, 2017 was $1.1 million, an increase of $0.62023 decreased by $4.7 million from the $0.5 million reported during the comparable 20162022 period. The variance is almost entirely due to increased amortization expense

Table of other intangible assets, such as customer relationships, relating to the ARI acquisition during the fourth quarter of 2017.Contents

Other expense for the year ended December 31, 2017 was $3.1 million, compared to the $1.7 million reported during the comparable 2016 period. The $1.4 million difference is mainly due to a $2.0 million increase in interest expense relating to additional borrowings as a result of the ARI acquisition, offset by the $0.6 million reduction in Other expense, namely the absence of any 2017 earnout-related expense from prior acquisitions, which existed in 2016.

Income tax expense for the year ended December 31, 20172023 was $0.8$17.6 million compared to income tax expense of $13.4 million for the year ended December 31, 2016 of $6.6 million. In 2017, there were two2022. The key drivers of a reduction in income tax expense: (1) approximately $1.4 million from the effect of new federal tax legislation enacted during the fourth quarter of 2017, and (2) approximately $2.4 million of excess tax benefits associated with the exercise of stock options in 2017. For 2017 and 2016,increased income tax expense was reportedare the reversal of valuation allowance during 2022 for federal NOLs that were fully utilized and can no longer reduce taxable income. Income tax expense for federal and state income taxes usingtax purposes was determined by applying statutory income tax rates applied to adjusted pre-tax income.income after adjusting for certain items.

NetThe net income for the year ended December 31, 20172023 was $11.2$52.2 million, an increasea decrease of $0.6$51.6 million from the $10.6$103.8 million of net income reported during the comparable 20162022 period, primarily due to the increase inlower revenues, higher cost of sales and a lower effectivehigher tax rate, partially offset by an increase in operating expenses and other expenses.as described above.

Year ended December 31, 20162022 as compared to the year ended December 31, 20152021

Revenues forManagement’s discussion and analysis of the year ended December 31, 2016 were $105.5 million, an increase of $25.8 million or 32% from the $79.7 million reported during the comparable 2015 period. The increase in revenues was attributable2022 as compared to an increase in refrigerant revenues of $26.2 million, offset by a reduction in services revenues of $0.4 million. The increase in refrigerant revenue is primarily related to an increase in the selling price per pound of certain refrigerants sold, which accounted for an increase in revenues of $17.6 million, as well as an increase in the number of pounds of certain refrigerants sold, which accounted for an increase in revenues of $8.6 million.

Cost of sales for the year ended December 31, 2016 was $74.4 million or 71% of sales. The cost of sales for the year ended December 31, 2015 was $61.2 million or 77% of sales. The decrease2021 is contained in the cost of sales percentage from 77% forCompany’s Annual Report on Form 10-K filed with the year ended December 31, 2015 to 71% for the year ended December 31, 2016 is primarily due to the increase in the selling price per pound of certain refrigerants soldSecurities and to a lesser extent, increases in volume sold for the year ended December 31, 2016 compared to the same period in 2015.Exchange Commission on March 14, 2023.

Operating expenses for the year ended December 31, 2016 were $12.1 million, an increase of $1.8 million from the $10.3 million reported during the comparable 2015 period. The increase in operating expenses is primarily due to an increase in non-cash, non-recurring stock compensation expense and professional fees in 2016 when compared to 2015.

Other expense for the year ended December 31, 2016 was $1.7 million, compared to the $0.5 million reported during the comparable 2015 period. The Company recorded $0.6 million of expense relating to a deferred acquisition cost in 2016, compared to $0.3 million of income in 2015. Interest expense included in Other expense increased from $0.8 million in 2015 to $1.1 million in 2016. The increase in interest expense is due to increased borrowings under the PNC Credit Facility. As of December 31, 2016, the Company had paid off its borrowings under the PNC Credit Facility.

Income tax expense for the year ended December 31, 2016 was $6.6 million compared to income tax expense for the year ended December 31, 2015 of $2.9 million. The $3.7 million increase was attributable to higher pre-tax income for 2016 when compared to 2015. For 2016 and 2015, income tax expense was reported for federal and state income taxes using statutory rates applied to adjusted pre-tax income.

Net income for the year ended December 31, 2016 was $10.6 million, an increase of $5.8 million from the $4.8 million net income reported during the comparable 2015 period, primarily due to the increase in revenues, partially offset by an increase in operating expenses and income tax expense.

Liquidity and Capital Resources

At December 31, 2017,2023, the Company had working capital, which represents current assets less current liabilities, of $113.6$146.4 million, an increase of $15.7$22.2 million from the working capital of $97.9$124.2 million at December 31, 2016.2022. The increase in working capital is primarily attributable to continued profitability and the increasedtiming of borrowings, accounts receivable and inventory.

Inventory and trade receivables are principal components of current assets. At December 31, 2023, the Company had inventory of $154.5 million, an increase of $9.1 million from $145.4 million at December 31, 2022. The Company’s ability to sell and replace its inventory on a timely basis and the prices at which it can be sold are subject, among other things, to current market conditions and the nature of supplier or customer arrangements and the Company’s ability to source CFC and HCFC based refrigerants (which are no longer being produced) and HFC refrigerants (virgin production currently in the process of being phased down) and HFO refrigerants.

At December 31, 2023, the Company had trade receivables, net assets acquired throughof credit losses, of $25.2 million, an increase of $4.3 million from $20.9 million at December 31, 2022, mainly due to timing. The Company typically generates its most significant revenue during the ARI acquisitionsecond and higher net incomethird quarters of any given year. The Company’s trade receivables are concentrated with various wholesalers, brokers, contractors and end-users within the refrigeration industry that are primarily located in 2017.

the continental United States. The Company has historically financed its working capital requirements through cash flows from operations, debt, and the issuance of debt and equity securities, and bank borrowings.

securities.

Net cash provided by operating activities for the year ended December 31, 2017,2023 was $18.4$58.5 million, when compared with $9.3 million ofto the net cash provided by operating activities of $62.8 million for the comparable 2016 period2022 period. As discussed above, selling prices of certain refrigerants declined in 2023. Another contributory factor was the timing of accounts receivable and inventory balances.

Net cash used in investing activities for 2023 was $3.6 million when compared to the net cash used in operatinginvesting activities of $10.5$3.7 million for the comparable 20152022 period. Net cash provided by operating activities for the year ended December 31, 2017 was primarily attributable to increased net income and the timing of our accounts payable and receivable. Net cash provided by operating activities for the 2016 period was primarily attributable to net income, offset by increases in accounts receivable and inventory. Net cash used by operating activities for the 2015 period was primarily attributable to an increase in inventory partially offset by net income, the utilization of the deferred tax assets, as well as increases in accounts payable and accrued expenses.

Net cash used by investingin financing activities for the year ended December 31, 2017,2023 was $210.0$47.8 million, compared with net cash used by investing activities of $1.7 million for the comparable 2016 period, and net cash used by investing activities of $3.3 million for the comparable 2015 period. The net cash used by investing activities for the year ended December 31, 2017 was primarily related to the acquisition of ARI for $209.0 million, as previously discussed, and approximately $1.0 million of additions to property, plant and equipment. The net cash used by investing activities for the 2016 period was primarily related to investment in general purpose equipment for the Company’s reclamations operations. The net cash used by investing activities for the 2015 period was primarily related to the acquisition of a refrigerant and compressed gases supplier, as well as investment in general purpose equipment for the Company’s Champaign, Illinois facility.

Net cash provided by financing activities for the year ended December 31, 2017, was $162.7 million compared with net cash provided by financing activities of $25.1$57.4 million for 2022. The Company refinanced its term loan debt during the comparable 2016 period,first quarter of 2022, as described below, and net cash provided by financing activitiespaid off its remaining $32.5 million term loan debt during the third quarter of $14.2 million for the comparable 2015 period. The net cash provided by financing activities for the year ended2023.

At December 31, 2017 was primarily due to the financing of the ARI acquisition during the fourth quarter of 2017. The Company initially borrowed $185 million, consisting of $105 million from a term loan and $80 million of revolving loans under the PNC credit facility, and then subsequently paid $15 million of the revolver to arrive at a balance of $170 million of debt related to the ARI acquisition as of December 31, 2017. The Company also incurred $5.4 million of debt financing costs related to the transaction, which are amortized over the term of each loan. The net cash provided by financing activities for the 2016 period was primarily due to the proceeds from the issuance of common stock, offset by the repayment of debt and payment of deferred acquisition cost. The net cash provided by financing activities for the 2015 period was primarily due to increased borrowings on the PNC credit facility.

The Company had2023, cash and cash equivalents were $12.4 million, or approximately $7.1 million higher than the $5.3 million of $5.0 millioncash and $33.9 millioncash equivalents at December 31, 2017 and 2016, respectively. The Company may, to the extent necessary, continue to utilize its cash balances to purchase equipment primarily for its operations. The Company continues to assess its capital expenditure needs.2022.

The following is a summary of the Company's significant contractual obligations for the periods indicated that existed as of December 31, 2017 (in 000’s):

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Under the terms of the PNCAmended Wells Fargo Facility, the BorrowersBorrowers: (i) immediately borrowed $15 million in the form of a “first in last out” term loan (the “FILO Tranche”) and (ii) may borrow from time to time, up to $150$75 million at any time consisting of revolving loans (the “Revolving Loans”) in a maximum amount up to the lesser of $150$75 million and a borrowing base that is calculated based on the outstanding amount of the Borrowers’ eligible receivables and eligible inventory, as described in the PNCAmended Wells Fargo Facility. The PNCAmended Wells Fargo Facility also contains a sublimit of $15$9 million for swing line loans and $5$2 million for letters of credit.

The Company currently has a $0.9 million letter of credit outstanding. The FILO Tranche was repaid in full in July 2023 and may not be reborrowed.

Amounts borrowed under the PNCAmended Wells Fargo Facility weremay be used by the Borrowers to consummate the acquisition of ARI and for working capital needs, certain permitted future acquisitions, and to reimburse drawings under letters of credit. At December 31, 2017, total borrowings

Interest under the PNC Facility were $65 million, and total availability was $64.3 million. In addition, there was a $130,000 outstanding letter of credit at December 31, 2017.

Interest on loans under the PNCAmended Wells Fargo Facility is payable in arrears on the first day of each month with respect to loans bearing interest at the domestic rate (as set forth in the PNC Facility) and at the end of each interest period with respect to loans bearing interest at the Eurodollar rate (as set forth in the PNC Facility) or, for Eurodollar rate loans with an interest period in excess of three months, at the earlier of (a) each three months from the commencement of such Eurodollar rate loan or (b) the end of the interest period.month. Interest charges with respect to loansRevolving Loans are computed on the actual principal amount of loansRevolving Loans outstanding during the month at a rate per annum equal to (A) with respect to domestic rateBase Rate loans, the sum of (i) a rate per annum equal to the higher of (1) 1.0%, (2) the basefederal funds rate plus 0.5%, (3) one month term SOFR plus 1.0%, and (4) the prime commercial lending rate of PNC, (2) the federal funds open rate plus 0.5% and (3) the daily LIBOR plus 1.0%,Wells Fargo, plus (ii) between 0.50%1.25% and 1.00%1.75% depending on average quarterlymonthly undrawn availability and (B) with respect to Eurodollar rateSOFR loans, the sum of the Eurodollarapplicable SOFR rate plus between 1.50%2.36% and 2.00%2.86% depending on average quarterly undrawn availability. Interest charges with respect to the FILO Tranche were computed on the actual principal amount of FILO Tranche loans outstanding at a rate per annum equal to (A) with respect to Base Rate FILO Tranche loans, the sum of (i) a rate per annum equal to the higher of (1) 1.0%, (2) the federal funds rate plus 0.5%, (3) one month term SOFR plus 1.0%, and (4) the prime commercial lending rate of Wells Fargo, plus (ii) 6.5% and (B) with respect to SOFR FILO Tranche loans, the sum of the applicable SOFR rate plus 7.50%. The Amended Wells Fargo Facility also includes a monthly unused line fee ranging from 0.35% to 0.75% per annum determined based upon the level of average Revolving Loans outstanding during the immediately preceding month measured against the total Revolving Loans that may be borrowed under the Amended Wells Fargo Facility.

Borrowers andIn connection with the closing of the Amended Wells Fargo Facility, the Company grantedalso entered into a First Amendment to Guaranty and Security Agreement, dated as of March 2, 2022 (the “Amended Revolver Guaranty and Security Agreement”), pursuant to which the Company and certain subsidiaries are continuing to unconditionally guarantee the payment and performance of all obligations owing by Borrowers to Wells Fargo, as Agent for the benefit of the revolving lenders. Pursuant to the Amended Revolver Guaranty and Security Agreement, Borrowers, the Company and certain other subsidiaries are continuing to grant to the Agent, for the benefit of the Wells Fargo Facility lenders, a security interest in substantially all of their respective assets, including receivables, equipment, general intangibles (including intellectual property), inventory, subsidiary stock, real property, and certain other assets.

The PNCAmended Wells Fargo Facility contains a fixed charge coverage ratiofinancial covenant requiring the Company to maintain at all times minimum liquidity (defined as availability under the Amended Wells Fargo Facility plus unrestricted cash) of at least $5 million, of which at least $3 million must be derived from availability. The Amended Wells Fargo Facility also contains a springing covenant, which takes effect only upon a failure to maintain undrawn availability of at least $11.25 million or upon an election by the Borrowers to increase the inventory component of the borrowing base, requiring the Company to maintain a Fixed Charge Coverage Ratio (FCCR) of not less than 1.00 to 1.00, as of the end of each trailing period of twelve consecutive months commencing with the month prior to the triggering of the covenant. The PNCFCCR (as defined in the Wells Fargo Facility) is the ratio of (a) EBITDA for such period, minus unfinanced capital expenditures made during such period, to (b) the aggregate amount of (i) interest expense required to be paid (other than interest paid-in-kind, amortization of financing fees, and other non-cash interest expense) during such period, (ii) scheduled principal payments (but excluding principal payments relating to outstanding Revolving Loans under the Amended Wells Fargo Facility), (iii) all net federal, state, and local income taxes required to be paid during such period (provided, that any tax refunds received shall be applied to the period in which the cash outlay for such taxes was made), (iv) all restricted payments paid (as defined in the Amended Wells Fargo Facility) during such period, and (v) to the extent not otherwise deducted from EBITDA for such period, all payments required to be made during such period in respect of any funding deficiency or funding shortfall with respect to any pension plan. The FCCR covenant ceases after the Borrowers have been in compliance therewith for two consecutive months.

The Amended Wells Fargo Facility also contains customary non-financial covenants relating to the Company and the Borrowers, including limitations on the Borrowers’ ability to pay dividends on common stock or preferred stock, and also includes certain events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, impairments to guarantees and a change of control.

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The Company evaluated the Amended Wells Fargo Facility in accordance with the provisions of ASC 470-50 to determine if the amendment was a modification or an extinguishment of debt and concluded that the amendment was a modification of the original revolving credit facility for accounting purposes. As a result, the Company capitalized an additional $0.9 million of deferred financing costs in connection with the amendment, which, along with the $0.2 million of remaining deferred financing costs of the original revolving facility, is being amortized over the five year term of the Amended Wells Fargo Facility.

The commitments under the PNCAmended Wells Fargo Facility will expire and the full outstanding principal amount of the loans, together with accrued and unpaid interest, are due and payable in full on October 10, 2022,March 2, 2027, unless the commitments are terminated and the outstanding principal amount of the loans are accelerated sooner following an event of default.default or in the event of certain other cross-defaults.

In connection with the closingTermination of the PNC Facility, the Company also entered into an Amended and Restated Guaranty and Suretyship Agreement, dated as of October 10, 2017 (the “Revolver Guarantee”), pursuant to which the Company affirmed its unconditional guarantee of the payment and performance of all obligations owing by Borrowers to PNC, as Agent for the benefit of the revolving lenders.

New2022 Term Loan Facility

On October 10, 2017, HTC,March 2, 2022, Hudson Technologies Company (“HTC”), an indirect subsidiary of Hudson Technologies, Inc. (the “Company”), and the Company’s subsidiary Hudson Holdings, and ARI,Inc., as borrowers (collectively, the “Borrowers”), and the Company, as guarantor, became obligated under a Term Loan Credit and Security Agreement (the “Term Loan Facility”) with U.S. Bank National Association,TCW Asset Management Company LLC, as administrative agent and collateral agent (“Term Loan Agent”) and funds advised by FS Investments and sub-advised by GSO Capital Partners LP and such other lenders as may thereafter become a party to the Term Loan Facilitylender parties thereto (the “Term Loan Lenders”).

Under the terms of the Term Loan Facility, the Borrowers immediately borrowed $105$85 million pursuant to a term loan (the “Initial Term“Term Loan”) and may borrow up to an additional $25 million for, which had a period of eighteen months after closing to fund additional permitted acquisitions (the “Delayed Draw Commitment”, and together with the Initial Term Loan, the “Term Loans”).

The Term Loans mature on October 10, 2023. Principal payments on the Term Loans are required on a quarterly basis, commencing with the quarter endingmaturity date in March 31, 2018, in the amount of 1% of the original principal amount of the outstanding Term Loans per annum. The Term Loan Facility also requires annual payments of up to 50% of Excess Cash Flow (as defined in the Term Loan Facility) depending upon the Company’s Total Leverage Ratio (as defined in the Term Loan Facility) for the applicable year. The Term Loan Facility also requires mandatory prepayments of the Term Loans in the event of certain asset dispositions, debt issuances, and casualty and condemnation events. The Term Loans may be prepaid at the option of the Borrowers at par in an amount up to $30 million. Additional prepayments are permitted after the first anniversary of the closing date subject to a prepayment premium of 3% in year two, 1% in year three and zero in year four and thereafter.

Interest on the Term Loans is generally payable on the earlier of the last day of the interest period applicable to such Eurodollar rate loan and the last day of2027. Amounts borrowed under the Term Loan Facility as applicable. Interest is payable atwere used by the rate per annum ofBorrowers to repay the Eurodollar Rate (as defined inoutstanding principal amount and related fees and expenses under the Term Loan Facility) plus 7.25%. The Borrowers have the option of paying 3.00% interest per annum in kind by adding such amount to the principal of the Term Loans during no more than five fiscal quarters during the term of the Term Loan Facility.

Borrowers and the Company granted to the Term Loan Agent, for the benefit of the Term Loan Lenders, a security interest in substantially all of their respective assets, including receivables, equipment, general intangibles (including intellectual property), inventory, subsidiary stock, real property, and certain other assets.

ThePrior Term Loan Facility contains a total leverage ratio covenant, tested quarterly.(as defined below) and for other corporate purposes. The Term Loan Facility also contains customary non-financial covenants relating toCompany paid approximately $4.3 million of term loan deferred financing costs.

During the third quarter of 2023, the Company andrepaid in full the Borrowers, including limitations on their ability to pay dividends on common stock or preferred stock, and also includes certain events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, impairments to guarantees and a change of control.

In connection with the closing ofremaining principal balance outstanding under the Term Loan Facility and the FILO Tranche.

Termination of Prior Term Loan Facility

In conjunction with entry into the new Term Loan Facility as described above, on March 2, 2022 the Company’s then-existing term loans, as amended (the “Prior Term Loan Facility”), which had a principal balance of approximately $63.9 million after payment of a $16.0 million excess cash flow amount thereunder, were repaid in full, together with associated required lender fees and expenses of $3.3 million, and the Prior Term Loan Facility was terminated. The termination of the Prior Term Loan Facility constituted an extinguishment of debt, which resulted in the Company also entered into a Guarantyrecording an additional $4.6 million of interest expense during the first quarter of 2022, which included the aforementioned $3.3 million of prior lender fees and Suretyship Agreement, dated asexpenses and $1.3 million of October 10, 2017 (the “Term Loan Guarantee”), pursuant to whichpre-existing deferred financing costs from the Company affirmed its unconditional guarantee of the payment and performance of all obligations owing by Borrowers toPrior Term Loan Agent, as agent for the benefit of the Term Loan Lenders.

The Term Loan Agent and the Agent have entered into an intercreditor agreement governing the relative priority of their security interests granted by the Borrowers and the Guarantor in the collateral, providing that the Agent shall have a first priority security interest in the accounts receivable, inventory, deposit accounts and certain other assets (the “Revolving Credit Priority Collateral”) and the Term Loan Agent shall have a first priority security interest in the equipment, real property, capital stock of subsidiaries and certain other assets (the “Term Loan Priority Collateral”).

Facility.

The Company was in compliance with all covenants under the PNC Facility and the Term LoanAmended Wells Fargo Facility as of December 31, 2017. 2023.

The Company’s ability to comply with these covenants in future quarters may be affected by events beyond the Company’s control, including general economic conditions, weather conditions, regulations and refrigerant pricing. Although we expect to remain in compliance with all covenants in the PNC Facility and the Term Loan Facility depending on our future operating performance and general economic conditions,Therefore, we cannot make any assurance that we will continue to be in compliance.

December 2016 Public Offering

On December 8, 2016 the Company entered into an Underwriting Agreement with two investment banking firms for themselves and as representatives for two other investment banking firms (collectively, the “Underwriters”), in connection with an underwritten offering (the “Offering”) of 6,428,571 shares of the Company’s common stock, par value $0.01 per share (the “Firm Shares”). Pursuant to the Underwriting Agreement, the Company agreed to sell to the Underwriters, and the Underwriters agreed to purchase from the Company, an aggregate of 6,428,571 shares of common stock and also granted the Underwriters a 30 day option to purchase up to 964,285 additional shares of its common stock to cover over-allotments, if any. The Company also agreed to reimburse certain expenses incurred by the Underwriters in the Offering.

The closing of the Offering was held on December 14, 2016, at which time the Company sold 7,392,856 shares of its common stock to the Underwriters (including 964,285 shares to cover over-allotments) at a price to the public of $7.00 per share, less underwriting discounts and commissions, and received gross proceeds of $51.7 million. The Company incurred approximately $3.3 million of transaction fees in connection with the Offering, resulting in net proceeds of $48.4 million.

compliance during future periods.

The Company believes that it will be able to satisfy its working capital requirements for the foreseeable future from anticipated cash flows from operations and available funds under the PNCAmended Wells Fargo Facility. Any unanticipated expenses, including, but not limited to, an increase in the cost of refrigerants purchased by the Company, an increase in operating expenses or failure to achieve expected revenues from the Company'sCompany’s RefrigerantSide® Services and/or refrigerant sales or additional expansion or acquisition costs that may arise in the future would adversely affect the Company'sCompany’s future capital needs. There can be no assurance that the Company'sCompany’s proposed or future plans will be successful, and as such, the Company may require additional capital sooner than anticipated, which capital may not be available on acceptable terms, or at all.

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CARES Act Loan

InflationOn April 23, 2020 the Company received a loan in the amount of $2.475 million from Meridian Bank under the Paycheck Protection Program (“PPP”) pursuant to the CARES Act. The loan had a term of two years, was unsecured, and bore interest at a fixed rate of one percent per annum, with the first nine months of principal and interest deferred. As a result of the COVID-19 pandemic, in applying for the loan the Company made a good faith assertion based upon the degree of uncertainty introduced to the capital markets and the industries affecting the Company’s customers and the Company’s dependency to curtail expenses to fund ongoing operations. The PPP loan proceeds were used in part to help offset payroll costs as stipulated in the legislation. All or a portion of the PPP loan could be forgiven by the U.S. Small Business Administration (“SBA”) upon application by the Company and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs and other covered areas, such as rent payments, mortgage interest and utilities, as applicable. During the third quarter of 2021, the Company received forgiveness of the loan from the SBA, resulting in $2.475 million of Other income recorded in the Company’s Consolidated Income Statements.

Inflation

Inflation, historically or the recent increase, has not historically had a material impact on the Company'sCompany’s operations.

Reliance on Suppliers and Customers

The Company participates in an industry that is highly regulated, and changes in the regulations affecting our business could affect our operating results. Currently the Company purchases virgin HCFC and HFC refrigerants and reclaimable, primarily HCFC and CFC, refrigerants from suppliers and its customers. Under the Clean Air Act the phase-down of future production of certain virgin HCFC refrigerants commenced in 2010 and is scheduled to behas been fully phased out by the year 2020, and production of all virgin HCFC refrigerants is scheduled to be phased out by the year 2030. To the extent that the Company is unable to source sufficient quantities of refrigerants or is unable to obtain refrigerants on commercially reasonable terms or experiences a decline in demand and/or price for refrigerants sold by it, the Company could realize reductions in revenue from refrigerant sales, which could have a material adverse effect on the Company’s operating results and financial position.

For the year ended December 31, 2017, two customers each accounted2023, there was one customer accounting for greater than 10% or more of the Company’s revenues and  in the aggregate these two customersone customer accounted for 33%over 10% of the Company’s revenues. Atoutstanding accounts receivable at December 31, 2017, there were $2.7 million outstanding receivables from these customers.

2023. For the year ended December 31, 2016, two customers each2022, there was no customer accounted for 10% or more of the Company’s revenues and, in the aggregate these two customersbut one customer accounted for 30%over 10% of the Company’s revenues. Atoutstanding accounts receivable at December 31, 2016, there were no outstanding receivables from these customers.

2022. For the year ended December 31, 2015, two customers each2021, one customer accounted for 10% or more of the Company’s revenues and in the aggregate these two customersone customer accounted for 33%over 10% of the Company’s revenues. Atoutstanding accounts receivable at December 31, 2015, there were no outstanding receivables from these customers.

2021.

The loss of a principal customer or a decline in the economic prospects of and/or a reduction in purchases of the Company'sCompany’s products or services by any such customer could have a material adverse effect on the Company'sCompany’s operating results and financial position.

Seasonality and Weather Conditions and Fluctuations in Operating Results

The Company'sCompany’s operating results vary from period to period as a result of weather conditions, requirements of potential customers, non-recurring refrigerant and service sales, availability and price of refrigerant products (virgin or reclaimable), changes in reclamation technology and regulations, timing in introduction and/or retrofit or replacement of refrigeration equipment, the rate of expansion of the Company'sCompany’s operations, and by other factors. The Company'sCompany’s business is seasonal in nature with peak sales of refrigerants occurring in the first nine months of each year. During past years, the seasonal decrease in sales of refrigerants has resulted in losses particularly in the fourth quarter of the year. In addition, to the extent that there is unseasonably cool weather throughout the spring and summer months, which would adversely affect the demand for refrigerants, there would be a corresponding negative impact on the Company. Delays or inability in securing adequate supplies of refrigerants at peak demand periods, lack of refrigerant demand, increased expenses, declining refrigerant prices and a loss of a principal customer could result in significant losses. There can be no assurance that the foregoing factors will not occur and result in a material adverse effect on the Company'sCompany’s financial position and significant losses. The Company believes that to a lesser extent there is a similar seasonal element to RefrigerantSide® Service revenues as refrigerant sales. The Company is continuing to assess its RefrigerantSide® Service revenues seasonal trend.

Off-Balance Sheet Arrangements

None.