UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20162022

OR

For the transition period from             to             

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-13458

SCOTT’S LIQUID GOLD-INC.

(NameExact name of small businessRegistrant as specified in its charter)Charter)

4880 Havana Street, Suite 400, Denver, CO 80239

(Address of principal executive offices and Zip Code)

(303) 373-4860

(Registrant’s telephone number, including area code)code: (303) 373-4860

Securities registered pursuant to Section 12(b) of the Act: NoneAct.

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.10 Par Value

Indicate by check mark if the registrantRegistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☐  Yes    No☒  No

Indicate by check mark if the registrantRegistrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes☐  Yes    No☒  No

Indicate by check mark whether the registrantRegistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒  Yes     No☐  No

Indicate by check mark whether the registrantRegistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit and post such files). Yes☒  Yes    No☐  No

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark if disclosurewhether any of delinquent filers pursuant to Item 405those error corrections are restatements that required a recovery analysis of Regulation S-K is not contained herein, and will not be contained, to the bestincentive-based compensation received by any of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendmentexecutive officers during the relevant recovery period pursuant to this Form 10-K. ☒§240.10D-1(b). ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act.)    Exchange Act). Yes☐  Yes    No☒  No

The aggregate market value of the common stock held by non-affiliates of the issuer was $4,358,654Registrant, based on June 30, 2016.

Asthe closing price of March 30, 2017, there were 11,857,026the shares of common stock $0.10 par value per share, outstanding.on June 30, 2022, was $5,903,122.

DOCUMENTS INCORPORATED BY REFERENCEThe number of shares of Registrant’s Common Stock outstanding as of March 28, 2023 was 12,797,423.

CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of U.S. federal securities laws.the Private Securities Litigation Reform Act of 1995, in addition to historical information. All statements, other than statements of historical facts, included in this Report that address activities, events, or developments with respect to our financial condition, results of operations, or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements.You can typically identify forward-looking statements by the use of words, such as “may,” “could,” “should,” “assume,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” and other similar words. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

The forward-looking statements contained in this Report are based on management’s current expectations and are subject to uncertainty and changes in circumstances. We cannot assure you that future developments affecting us will be those that we have anticipated. Forward-looking statements and our performance inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to:

We caution you that forward-looking statements are not guarantees of future performance and that actual results or performance may be materially different from those expressed or implied in the forward-looking statements.The forward-looking statements in this Report speak as of the filing date of this Report. Although we may from time to time voluntarily update our prior forward-looking statements, we undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this Report.

TABLE OF CONTENTS

PART I

(in thousands, except per share data)

General

ITEM 1. BUSINESS

Overview

Scott’s Liquid Gold-Inc., a Colorado corporation, was incorporated on February 15, 1954. Through our wholly-owned subsidiaries, we develop, manufacture, market and sell quality household and skin and hair care products. These products include:

In this Report the terms “we”, “us”“we,” “us,” or “our” refer to Scott’s Liquid Gold-Inc. and our subsidiaries, collectively. We develop, market, and sell high-quality, high-value household and health and beauty care products. Our business is divided into two operating segments,segments; household products and skinhealth and hairbeauty care products. During 2022, our family of brands included:

In 2021, we sold the Dryel® brand and concluded our distribution agreement of Batiste Dry Shampoo. In December 2022, we sold the Prell® brand, and in January 2023 we sold the Scott’s Liquid Gold® brand.

Financial Information About Segments and Principal Products

The following table setsset forth below shows the principal products inpercentage of our household products segment.net sales from continuing operations contributed by each operating segment during 2022 and 2021:

The following table sets forth the principal products in our skin and hair care products segment.

For more financial information on our operating segments, please seerefer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1012 to our Consolidated Financial Statements in Item 8.

Strategy

We are focused on strategies that we believe will enhance our long-term financial health and deliver long-term shareholder value. In order to achieve these objectives, we plan to generate continued growth of our existing brands and products, as well as pursue new opportunities to develop, acquire or distribute new brands and products.

On June 30, 2016, Neoteric Cosmetics, Inc., (“Neoteric”), a wholly owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Ultimark Products, Inc. (“Ultimark”) and consummated the transaction contemplated thereby (the “Acquisition”), pursuant to which Neoteric purchased from Ultimark all intellectual property assets and certain related assets owned by Ultimark as well as inventory of finished goods owned by Ultimark and used in connection with the manufacture, sale and distribution of the Prell^®, Denorex^® and Zincon^® brands of hair and scalp care products (collectively, the “Brands”). The total consideration Neoteric paid for the Brands was approximately $9 million, plus the assumption by Neoteric of certain specific liabilities of Ultimark related to the performance of certain purchase orders and contracts following June 30, 2016.

On June 30, 2016, the Company and Neoteric, as borrowers, entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“Chase”), as lender, pursuant to which Chase provided a term loan and a revolving credit facility that was used by us to finance a portion of the Acquisition and for the Company’s general corporate purposes and working capital.

For 2017, we plan to pursue the following primary goals: (1) continue to increase sales by strengthening and broadening consumer awareness of our products; (2) continue to add additional products to the mix of products that one or more of our existing major customers already buy from us; (3) continue to obtain new distribution of our products at retailers that currently do not buy products from us; and (4) continue to evaluate potential products to be developed, acquired, manufactured and/or distributed by us.

Household Products

During 2022, products in our household segment included:

1

Scott’s Liquid Gold® Wood Care has been our core product since our inception. It has been sold in the United States for over 6070 years. Unlike a furniture polish, our product contains natural oils that penetrate the wood’s surface to clean, replace lost moisture, minimize the appearance of scratches and bring out the natural beauty of wood. We have also introduced an additional wood care product in a wipe form, a wood wash product, and a floor restore product. Our Dust ’N Go pre-moistened cloth wipes are quick, easy and convenient dusting wipes for wood and numerous other surfaces, our wood wash product simply and safely cleans all types of wood surfaces and our Scott’s Liquid Gold® Floor Restore product is a quick and easy way to renew and protect hardwood floors.

Since 1982, On January 23, 2023, we have sold Touch of Scent^{the Scott’s Liquid Gold®} air fresheners. Our air fresheners offer a unique dispenser with aerosol refills. Touch of Scent^® air fresheners are available in a wide assortment of concentrated fragrances, which are quick, easy to use brand, including the Wood Care and effective.

Household products accounted for 17.0% of our consolidated net sales in 2016 and 21.8% in 2015. We continually evaluate potential new householdFloor Restore products, to be developed,a company that markets and distributes wood care products.

On October 1, 2019, we acquired manufactured and/or distributedthe Kids N Pets® and Messy Pet® brands. Founded in 1989, Kids N Pets® brands are award-winning, safe, stain and odor removing products targeted toward households with children and pets. These high-quality, high-value products excel at controlling odor and cleaning up kid and pet accidents, and food and drink stains while being products that parents can feel safe using around their children and pets. The primary sales channels for Kids N Pets® and Messy Pet® are through retail stores such as Walmart and Home Depot, and online through e-commerce retailers such as Amazon.

On July 1, 2020, we acquired BIZ® and Dryel® brands. BIZ® is a top performing detergent in the market, utilizing a proprietary enzyme-based formula to fight stains and eliminate odors. It was established by us.Procter & Gamble in 1968 and is sold in Powder, Liquid, and Liquid Booster Packs.

SkinOn December 23, 2021, we sold the Dryel® brand. We have reflected the operations of Dryel® as discontinued operations for all periods presented. See Note 3 - “Discontinued Operations” in the Notes to Consolidated Financial Statements for further information.

Health and HairBeauty Care Products

In 1992, we began to develop, manufacture, marketDuring 2022, products in our health and sell skinbeauty care products under the trade name of segment included:

Our Alpha Hydrox®skin care Skin Care brand was one of the first to use AHAs.alpha hydroxy acids (“AHAs”) in lines of facial care products, body lotion, and body wash. Products containing AHAs gently slough off dead skin cells to promote a healthier, more youthful appearance and help to diminish fine lines and wrinkles. Starting in January 2016, we began marketing and selling our Alpha Hydrox® Skin Care line of products under the trade name of Alpha^® Skin Care.  There were several reasons for the change in names, including the desire to reflect that our line of skin care products is broader than just products containing AHAs.

In 2016, we acquired the Prell®, Denorex® and Zincon^® brands of hair and scalp care products. Prell^® Shampoo, an iconic brand since 1947, is a classic clean shampoo for healthy hair. Our Denorex® products are dermatologist-recommended medicated shampoos and conditionershair care products to control the symptoms of dandruff seborrheic dermatitis and psoriasis.other scalp conditions. Our Zincon® product is a medicated anti-dandruff shampoo.

Our Neoteric Diabetic^® Healing Cream product was introduced in 2001. This product was developed to address the skin conditions of persons living with diabetes, caused by poor blood circulation. Our healing cream is a therapeutic moisturizer that provides a clinically proven and patented treatment for dry skin by helping to increase blood circulation and speed the healing of minor scrapes and cuts.

Since 2001, we have been the exclusive distributor in the United States for face and other skin care masque sachets manufactured by Montagne Jeunesse International Ltd. (“Montagne Jeunesse”). These masque sachets are currently sold under the trade name 7^th Heaven. Montagne Jeunesse is based in the United Kingdom. Their sachet products are currently sold in over 70 countries. These masques are sold for single use in unique and attractive packages in a wide assortment of types and fragrances. A significant portion of our business consists of the sale of these sachet products. See “Manufacturing and Suppliers” in this Item 1 below for information on the terms of our agreement with Montagne Jeunesse.

We have beenwere a distributor in the United States for Batiste Dry Shampoo since 2009.from 2009 through 2021. Under our current distribution agreement with the manufacturer of Batiste Dry Shampoo, Church & Dwight Co. Inc. (“Church & Dwight”), we arewere the exclusive specialty retail distributor in the United States of Batiste Dry Shampoo until our agreement expired on December 31, 2021.

On December 15, 2022, we sold the Prell® brand to a company that markets and distributes natural hair and skin care products. We have reflected the operations of Prell® as discontinued operations for all periods presented. See Note 3 - “Discontinued Operations” in the specialty retailer channel.  The specialty retailer channel includes primarily beauty supply stores, such as Ulta Salon, Cosmetics & Fragrance, Inc. (“Ulta”), our largest customer, apparel retailers, and department stores. Dry shampoo is a quick and convenient wayNotes to refresh hair between washes. Batiste was one of the innovators of dry shampoo. We believe that there is a large and fast-growing marketConsolidated Financial Statements for dry shampoo. See “Manufacturing and Suppliers” in this Item 1 below for information on the terms of our agreement with Church & Dwight.further information.

Skin and hair care products accounted for 83.0% of our consolidated net sales in 2016 and 78.2% in 2015. We continually evaluate potential new skin and hair care products as well as other beauty care products to be developed, acquired, manufactured and/or distributed by us.

Marketing and Distribution

We primarily market our products through: (1) trade promotions to support price features, displays, slotting fees and other merchandising of our products by our retail customers; (2) consumer incentives such as coupons and rebates; and (3) consumer marketing in print, social and digital mediamedia; and television advertising.(3) to a lesser extent, consumer incentives such as coupons and rebates.

Our products are sold nationally both directly through our sales force and indirectly through independent brokers and manufacturers’ representatives, to mass marketers,merchandisers, drugstores, supermarkets, hardware stores, e-commerce retailers, and other retail outlets and to wholesale distributors. Our products were previously sold internationally through independent distributors in Canada and China.

In 2016 and 2015, Ulta accounted for approximately 29% and 31%, respectively, of our skin and hair care products and approximately 24% of our aggregate2

The table set forth below shows net sales onto our significant customers as a consolidated basis. In 2016 and 2015, Wal-Mart Stores, Inc. (“Wal-Mart”) accounted for approximately 32% and 34%, respectively,percentage of ourconsolidated net sales of household products. For our skinduring 2022 and hair care products, Wal-Mart accounted for approximately 18% and 10% of our net sales in 2016 and 2015, respectively. Wal-Mart accounted for approximately 21% and 15% of our aggregate net sales on a consolidated basis in 2016 and 2015, respectively. In 2016 and 2015, TJ Maxx and Marshalls (collectively, “TJ Maxx”) together accounted for approximately 14% and 21%, respectively, of our skin and hair care products and approximately 12% and 16% of our aggregate net sales on a consolidated basis in 2016 and 2015, respectively. 2021:

As is typical in our industry, we do not have a long-term contractcontracts with Wal-Mart, TJ Maxx,Walmart, Ulta, or any other retail customer.

We also useHistorically, we have used our Scott’s Liquid Gold and Neoteric Cosmetics websites for sales of our products directly to consumers. SuchBeginning in January 2022, our websites redirect consumers to our e-commerce retail partners to fulfill sales accounted for approximately 6% and 8% of total netour products directly to our consumers.

International sales in 2016 and 2015, respectively.

Our household and skin and hair care products are available in limited distribution in Canada and other foreign countries. Currently, foreign sales arewere historically made to distributors who arewere responsible for the selling and marketing of the products, and we arewere paid for these products in United States dollars ordollars. In February 2022, we discontinued sales of our Denorex® products to Canada due to uneconomic results. With the sale of the Scott’s Liquid Gold® brand in January 2023, we no longer have any products distributed in Canada.

We terminated our exclusive distribution agreement for sales in China with HK NFS Limited (“HK NFS”) on July 12, 2022 due to breaches of the distribution agreement by HK NFS, and began establishing a direct model to resume sales of our products to consumers in China.

Under our distribution agreement with Church & Dwight, we were the exclusive distributor of Batiste Dry Shampoo products in the case of sales to our Canadian distributor,specialty retailer channel in Canadian dollars.the United States through December 31, 2021.

From time to time, our customers return products to us. For our household products, we permit returns only for a limited time. With regard toFor our skinhealth and hairbeauty care products, returns are more frequent under an unwritten industry standard that permits returnsaccepted for a varietygreater period of reasons. In the event a skin and hair care customer requests a return of a product, we will consider the request, and may grant such requesttime in order to maintain or enhance our relationship with the customer, even in the absence of an enforceable right of the customer to do so.customer. Typically, customers that return products to us takeare granted a credit on our invoice equal to the original sale price plus a handling charge ranging from 8-10% of the original sales price.charge.

Manufacturing and Suppliers

We owned allAs of March 2020, we identified third-party logistics and contract manufacturing partners for our manufacturing facilities until February 1, 2013, whenproduct lines, and we sold the facilities and entered into a lease with the new owner for a portion of the facilities. Please see Note 12 to our Consolidated Financial Statements in Item 8 for information on our leasing back certain of the manufacturing facilities that we sold. We own and operate all of our manufacturing equipment. Weno longer manufacture allor ship any of our products with the exceptiondirectly to our retail partners.

Almost all of the following products: (1) those productsraw and packaging materials used by the Company are purchased from third parties, some of whom are single-source suppliers. The prices we pay for whichmaterials and other commodities are subject to fluctuation. Due primarily to COVID-19 related supply chain disruptions that have continued as the economy re-opens, we act as a distributor; (2) the products that we acquired in the Acquisition;experienced limited supply constraints and (3) our Scott’s Liquid Gold^® Dust ’N Go wipes. We plan to start manufacturing the products that we acquired in the Acquisition during the second half of 2017. We maintain sufficient inventories of all of our products to ship most orders as they are received.

Quality control is enforced at all stages of production, as well as upon the receipt ofcommodity costs increases for certain raw materials from suppliers. We purchase our raw materials from a number of suppliers and atfinished goods. When prices for these items change, we may or may not be able to pass the present time, all of our raw materials are readily available. However, we do not have long term contracts with our suppliers and any contracts we do have with suppliers may be terminated at any time. Our sole supplier for the oxygenated oil used in our Neoteric Diabetic^® Healing Cream product is a French company with which we have a non-exclusive supply agreement. In addition, we have sole suppliers for two of the polymers used in our Scott’s Liquid Gold^® Floor Restore product. We believe that we have good relationships with all of our suppliers.

Most of our manufacturing operations, including most packaging, are highly automated, and, as a result, our manufacturing operations are not labor intensive, nor, for the most part, do they involve extensive training. We currently operate on a one-shift basis. Our manufacturing facilities can produce substantially larger quantities of our products without any expansion, including the products that we acquired in the Acquisition and, for that reason, we believe that our physical plant facilities are adequate for the foreseeable future.

In 2001, Neoteric commenced purchases of face and other skin care sachets from Montagne Jeunesse under a distributorship agreement covering the United States. Pursuantchange to our distribution agreement with Montagne Jeunesse that became effective on September 15, 2014, wecustomers. The Company expects continued volatility and increased cost pressures in both commodities and transportation to continue as the exclusive distributor to market and sell Montagne Jeunesse’s face and other skin care sachets in the United States. The initial term of the distribution agreement with Montagne Jeunesse expires on September 15, 2017 and automatically renews for twofiscal year terms, unless terminated at the end of any such term upon six months prior notice.2023.

Under the terms of the agreement, Neoteric agreed, among other things: (1) not to distribute during the duration of the agreement any goods of the same description as and which compete with the Montagne Jeunesse products; (2) to use our commercially reasonable endeavors to develop, promote and sell the products in the United States and to expand the sale of the products to all potential purchasers by all reasonable and proper means; (3) to purchase certain core products; and (4) to maintain an inventory of the products for our own account for sale of these products throughout the United States. Montagne Jeunesse agreed to use commercially reasonable efforts to meet all of our orders for the products. The initial pricing terms for the products were negotiated with Montagne Jeunesse. Any changes to the prices must be mutually agreed to by both parties and must be agreed to at least six months in advance. Neoteric may not assign or transfer any rights or obligations under the agreement or subcontract the performance of any obligation.Competition

Under our distribution agreement with Church & Dwight that became effective on January 1, 2015, as amended effective July 1, 2016, we are the exclusive distributor of Batiste Dry Shampoo products in the specialty retailer channel in the United States. The specialty retailer channel includes primarily beauty supply stores, such as Ulta, our largest customer, apparel retailers and department stores. Church & Dwight retained the rights to sell Batiste products to the remainder of the market in the United States.

The agreement provides that we will not be permitted to manufacture, distribute or sell any products that are competitive with Batiste Dry Shampoo products. The initial pricing terms for the Batiste products were negotiated with Church & Dwight, but may be increased by Church & Dwight at any time upon 90 days’ prior written notice of any price increase. The term of the agreement runs through December 31, 2017 and will automatically renew for successive one year terms until it is terminated by either party upon 180 days’ prior written notice.

Competition

Both the household and skinhealth and hairbeauty care products marketsproduct categories are highly competitive.competitive and innovative. We compete in both marketscategories against a range of competitors, most of which are significantly larger and have greater financial resources, name recognition, innovation capabilities, and product and market diversification than us. We compete in both categories primarily on the basis of quality, brand recognition, and the distinguishing characteristics of our products. The wood care and air freshenerlaundry care product categories are dominated by three to fivea small number of companies that are significantly larger than us and each of these competitors produces several competing products. In the skinhealth and hairbeauty care category, several of our competitors are also significantly larger than us and each of these competitors produces several competing products. Some of these companies also manufacture products with AHAs with which our Alpha^® Skin Care products must compete.

Regulation3

Regulation

We are subject to various federal, state and local laws and regulations that pertain to the types of consumer products that we manufacture and sell. Many chemicals used in consumer products, some of which are used in several of our product formulations, have come under scrutiny by various state governments and the Federalfederal government. TheseSome of these chemicals are called volatile organic compounds (“VOCs”), which arguably contribute to the formation of ground level ozone. Many states as well as the Federal government have passed regulations that limit the amount of VOCs allowed in various categories of consumer products.. All of our products currently meet the most stringent VOC regulations and may be sold throughout the United States. Any new or revised VOC regulations developed by various states or the Federal government may apply to our products and could potentially require reformulation of those products in the future. Limitation of VOC content in consumer products by both state and Federal governments will continue to be part of regulatory efforts to achieve compliance with clean air regulations. We continue to monitor all environmental regulatory activities and believe that we have done all that is necessary to satisfy the current requirements of the Federal Clean Air Act and the laws of various state governments.

Many of our skin care products, several of which contain AHAs, are considered cosmetics within the definition of the Federal Food Drug and Cosmetic Act (the “FFDCA”). The FFDCA defines cosmetics as products intended for cleansing, beautifying, promoting attractiveness or altering the appearance without affecting the body’s structure or functions. Our cosmetic products are subject to the regulations under the FFDCA and the Fair Packaging and Labeling Act. The relevant laws and regulations are enforced by the FDA. SuchWe believe that we are producing and marketing all of our products in compliance with all applicable laws and regulations governin the ingredients and labeling of cosmetic products and set forth good manufacturing practices for companies to follow. Although FDA regulations require that the safety of a cosmetic ingredient be substantiated prior to marketing, there is no requirement that a company submit the results of any testing performed or any other data or information with respect to any ingredient to the FDA.markets in which we participate.

The FDA’s National Center for Toxicological Research has periodically been investigating the effect of long term exposure to AHAs since 2003. On December 31, 2003, the FDA published a call for data on certain ingredients in various products, including AHAs that are part of wrinkle remover products. Manufacturers were asked to submit any data supporting the reclassification of these cosmetic products as over-the-counter drugs. In January 2005, the FDA issued final guidance to the effect that products containing AHAs should alert users that those products may increase skin sensitivity to sun and possible sunburn and the steps to avoid such consequences. On March 20, 2014, the FDA published a set of Q&As that dealt with both long term exposure and drug/cosmetic issues.

In the 2014 Q&As, the FDA restated its traditional position that certain AHA products intended for therapeutic use, such as acne treatments or skin lighteners, are considered drugs. However, the FDA also confirmed that other AHA products, including those marketed by us, are considered cosmetics and therefore are not subject to more stringent regulations applicable to drugs. The Q&A also reported on the results of two studies on the issue of skin damage caused by UV rays, and the potential photocarcinogenicity of AHA products. The studies concluded that applying AHA products to the skin resulted in increasing UV sensitivity, but that the effect was completely reversible. In addition another study on potential photocarcinogenesis found that AHA products had no effect on the process. Accordingly, we believe we are appropriately marketing our products as cosmetics, and our labeling fully complies with the FDA’s guidance.

Our advertising is subject to regulation under the Federal Trade Commission Act and related regulations, which prohibit false and misleading claims in advertising. We believe that allPrivate and derivative labeling claims are common in this industry and can result in costly settlements and distraction of management. Changes in these regulations, or interpretations or enforcement of these regulations, could adversely affect our labelingprofitability, result in regulatory actions, or private or derivative claims.

Our international sales are primarily conducted in China. As such, we may be impacted by regulations, economic conditions, and promotional materials comply with these regulations.tariffs imposed by the PRC.

Employees

We employ 61As of December 31, 2022, we employed 22 people, of which 27 full-time and 1 part-time work in plant and production related functions and 33who work in administrative, sales, advertising, marketing and advertisingoperational functions. Through our history, we appreciate the importance of retention, growth and development of our employees. We believe we offer competitive compensation (including salary, incentive bonus, and equity) and benefits packages to our employees. We are also focused on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress. We continue to focus on building a pipeline for talent to create more opportunities for workplace diversity and to support greater representation within the Company.

No contracts exist between us and any union. We monitor wage and salary rates in the Rocky Mountain area and pursue a policy of providing competitive compensation to our employees. The compensation of our executive officers is subject to annual review by the Compensation Committee of our Board of Directors. Additional benefits that we provide for our employees include medical, vision and dental plans, short-term disability, life insurance, a 401(k) plan with matching contributions for employees earning $50,000 or less per annum and an employee stock ownership (ESOP) plan. We consider our employee relations to be satisfactory.

Patents and Trademarks

At present, we own one patent for our Neoteric Diabetic® Healing Cream. Additionally, we actively use our registered trademarks for Scott’s Liquid Gold^Alpha®, Alpha^® Skin Care, Prell^Denorex®, Denorex^®, Zincon®,Neoteric Diabetic Skin Care®, Neoteric®,Kids N Pets®, Messy Pet®, and Touch of Scent^BIZ® in the United States and have registered trademarks in a number of additional countries. Our registered trademarks protect names and logos relating to our products as well as the design of boxes for certain of our products. We transferred all registered trademarks of our Scott’s Liquid Gold® brand as part of the sale of that brand in January 2023.

During 2016 and 2015,Public Information

Our website address is www.slginc.com. The information contained on our expenditures for research and development were insignificant.

Available Information and Codewebsite is not included as a part of, Ethics

or incorporated by reference into, this Annual Report on Form 10-K. We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). We will make available, free of charge, throughon our website (www.slginc.com), this annual reportour Annual Reports on Form 10-K, our quarterly reportsQuarterly Reports on Form 10-Q, shareholder proxy statements on Schedule 14A, interactive data files posted pursuant to Rule 405 of Regulation S-T, our current reportsCurrent Reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after we have electronically file or furnishfiled such material with, or furnished it to, the SEC. Information on our website is not incorporated by reference into this ReportUnited States Securities and should not be considered part of this document. We will provide upon request (see below for instructions) and at no charge electronic or paper copies of these filings with the SEC (excluding exhibits)Exchange Commission (the “SEC”).

You may also access and read our filings without charge through the SEC’s website at www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information regarding the operation of its public reference room. We will also provide to any person without charge, upon request (see below for instructions), a copy of our Code of Business Conduct and Ethics Policy.www.sec.gov.

A request for our reports filed with the SEC or ourOur Code of Business Conduct and Ethics Policy, may be made to:Audit Committee Charter, Governance and Nominating Committee Charter, and Compensation Committee Charter, are all available, free of charge, on our website. The documents referenced above are available in print at no cost to any stockholder who requests them from our Corporate Secretary Scott’s Liquid Gold-Inc., 4880 Havana Street,at 8400 East Crescent Parkway, Suite 400, Denver,450, Greenwood Village, Colorado 80239.80111.

4

ITEM 1A. RISK FACTORS.

The following is a discussion of certain material risks that may affect our business. These risks may negatively impact our existing business, future business opportunities, our financial condition or our financial results. In such case, the trading price of our common stock could also decline. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may also negatively impact our business.

Our cash flowBusiness and Industry Risks

A loss of one or more of our major customers could have a material adverse effect on our product sales.

For a majority of our sales, we are dependent upon a small number of major retail customers. The easy access of consumers to our products is dependent upon operating cash flow, available cashthese major retail stores and available funds underother retail stores carrying our financing agreement with Chase.products. The willingness of retail customers to carry any of our products depends on various factors, including the level of sales of the product at their stores. In addition, private label products sold by retail trade chains, which are typically sold at lower prices than branded products, are a source of competition for certain of our product lines.

Because we are dependent onAny declines in sales of our operating cash flow, anyproducts to consumers could result in the loss of retail customers and a significant customer, any further decreasescorresponding decrease in the distribution of the products, as well as increased costs related to any markdown or return of our skinproducts. It is uncertain whether the consumer base served by these stores would purchase our products at other retail stores.

Our sales of Alpha® Skin Care products to China have been interrupted by the termination of our exclusive distribution agreement.

We terminated our arrangement with our exclusive distributor due to breaches of the distribution agreement by HK NFS and hair care or household products, new competitive products affectingare establishing a direct model to resume sales levels of our products to consumers in China. The reestablishment of an effective business model in China is dependent on deploying significant resources to marketing and advertising efforts and regulatory compliance, as well as the successful shutdown of our former distributor’s storefronts on various e-commerce platforms. We possess limited resources to fund marketing and regulatory efforts, and as a result our success in these efforts is not guaranteed, which could adversely affect our operating results.

Our international operations in China expose us to a number of risks.

There is both cost and risk associated with establishing, developing, and maintaining international sales operations, and promoting our brand internationally. The PRC’s economic, political, and social conditions, and its government policies, could adversely affect our business. We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our operating results.

Our international operations also subject us to changes in trade policies and agreements and other foreign or any significant expense not includeddomestic legal and regulatory requirements, including those resulting in potentially adverse tax consequences or the imposition of onerous trade restrictions such as tariffs, sanctions, and price controls. Any changes in these international trade policies could adversely affect our internal budget could resultprofitability and stock price.

A continued change in the needconsumer product retail market may cause our sales to raise cash. decline.

Our agreementperformance depends upon the general health of the economy and of the retail environment in particular. Consumer products, such as those marketed by us, are increasingly being sold by club stores, dollar stores, mass merchandisers, e-commerce retailers and subscription services. The retail environment is changing with Chase hasthe growth of third-party resellers and alternative retail channels that could significantly change the way traditional retailers do business. If we are not effective in limiting these third-party resellers in selling our products, or if the alternative retail channels were to take significant market share away from traditional retailers or we are not successful in these alternative retail channels, our margins and results of operations may be negatively impacted.

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In both health and beauty care and household products, our competitors include some of the largest consumer products companies in the United States.

The markets in which our products compete are intensely competitive, and many of the other competitors in these markets are larger multi-national consumer products companies. These competitors have much greater financial, technical, and other resources than us, and as a term that expiresresult, are able to regularly introduce new products and spend considerably more on June 30, 2019. advertising. The distribution and sales of our products can be adversely impacted by the actions of our competitors, and we may have little or no ability to take action to prevent or mitigate these adverse impacts.

We have no other arrangements forlimited resources to promote our products with advertising and marketing effectiveness.

We believe the growth of our net sales is dependent upon our ability to introduce our products to current and new consumers through advertising and marketing. At present, we have limited resources compared to many of our competitors to spend on advertising and marketing our products. Advertising and marketing can be important in reaching consumers, although the effectiveness of any external financing of debt or equity,particular advertisement and any such financingmarketing cannot be predicted. Additionally, we may not be available on acceptable terms. In orderable to improveobtain optimal effectiveness at our operating cash flow, we needcurrent advertising and marketing budget. Our limited resources to continue to increasepromote our revenues and/or further reduce our costs.

Unfavorable economic conditions could adversely affect demand for our products.

Unfavorableproducts through advertising and uncertain economic conditions in the past have adversely affected, and in the futuremarketing may adversely affect consumer demand for some of our products, resulting in reducednet sales volume. Factors that can affect consumer demand include rates of unemployment, consumer confidence, health care costs, fuel and other energy costs and other economic factors affecting consumer spending behavior.operating results.

Sales of our existing products are affected by changing consumer preferences.

Our primary market is retail stores in the United States which sell to consumers or end users in the mass market. Consumer preferences can change rapidly and are affected by new competitive products. This situation is true for both skinhealth and hairbeauty care and household products and has affected our products. For example, we believe that our Alpha^® Skin Care products with AHAs are effective in helping to diminish fine lines and wrinkles, but consumers may change permanently or temporarily to other products using other technologies or otherwise viewed as “new.” Any changes in consumer preferences can materially affect the sales and distribution of our products and thereby our revenues andthe results of our operations.

In both skinOur future performance and hair care and household products, our competitors include some of the largest consumer products companies in the United States.

The markets in which our products compete are intensely competitive, and many of the other competitors in these markets are multi-national consumer products companies that are significantly larger than us. These large competitors have financial, technical, and other resources exceeding those available to us, and as a result, are able to regularly introduce new products and spend considerably more than we can on advertising. The distribution and sales of our products can be adversely impacted by the actions of our competitors, and we may have little or no ability to take action to prevent or mitigate these adverse impacts.

We have limited resources to promote our products with effective advertising and marketing.

We believe the growth of our net sales is substantially dependent upon our ability to introduce our products to current and new consumers through advertising and marketing. At present, we have limited resources compared to many of our competitors to spend on advertising and marketing. Advertising and marketing can be important in reaching consumers, although the effectiveness of any particular advertisement and marketing cannot be predicted. Additionally, we may not be able to obtain optimal effectiveness at our current advertising and marketing budget even though we made a strategic decision to increase our advertising and marketing spending in 2016 and 2015 compared to the prior several years. Our limited resources to promote our products through advertising and marketing may adversely affect our net sales and operating performance.

Maintaining or increasing our revenues is dependent, in part, on the introduction of new or acquired products that are successful in the marketplace.

Our future performance and growth is partially dependent on our ability to successfully identify, develop and introduce new products and product line extensions. The successful development and introduction of new products involves substantial research, development, marketing and promotional expenditures, which we may be unable to recover if the new products do not gain widespread market acceptance.

We have pursued and may continue to pursue acquisitions of brands or businesses. Acquisitions involve numerous potential risks, including, among other things, the successful integration of the acquired products or brands and realization of the full extent of expected benefits or synergies. Acquisitions could also result in additional debt, exposure to liabilities, the potential impairment of goodwill or other intangible assets, or transaction costs. Any of these risks, should they materialize, could adversely impact our operating results.

Any loss of our key executives or other personnel could harm our business.

Our success has depended on the experience and continued service of our executive officers and key employees. If we are not successfulfail to retain these officers or key employees, our ability to continue our business and effectively compete may be substantially diminished.

Our stock price can be volatile and can decline substantially.

Our stock is traded on the OTC Pink Market tier of the OTC Markets. The volume of trades in making ongoing salesour stock varies from day to day but is relatively limited. As a result, any events can result in volatile movements in the price of our newer products to retail stores or these products are not well received by consumers, our revenues could be materiallystock and adversely affected.

A loss of one or morecan result in significant declines in the market price of our major customers couldstock.

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We rely on trademark, copyright, and trade secret laws, which may not be sufficient to protect our intellectual property.

We rely on a combination of laws, such as copyright, trademark and trade secret laws, as well as confidentiality provisions and limited licenses, to establish and protect our intellectual property. We have a material adverse effect on our product sales.

For more than a majority of our sales, we are dependent upon salesregistered U.S. and foreign country trademarks, and HK NFS has contractually agreed to a small number of major retail customers, including Ulta, which is our largest customer and Wal-Mart, which is our second largest customer. The easy access of consumersundertake steps to our products is dependent upon these major retail stores and other retail stores carrying our products. The willingness of these customers (i.e., retail stores) to carry anyprevent counterfeiting of our products depends on various factors, including the level of sales of the product at their stores. Any declines in sales of a productand to consumers can resultotherwise protect our trademarks in the lossPRC. These forms of retail storesintellectual property protection are critically important to our ability to establish and a corresponding decrease in the distribution of the product. Itmaintain our competitive position. However, it is uncertain whether the consumer base served by these stores would purchase our products atpossible that laws, contractual restrictions, and other retail stores. In the past, sales of our products have been affected by retail stores which discontinue a product or carry the product in fewer stores.

A significant part of our sales of skin and hair care products are represented by the Montagne Jeunesse sachet products and Batiste Dry Shampoo products, both of which depend upon the continuation of our distributorship agreements with the manufacturers of these products.

If our agreements with Montagne Jeunesse or Church & Dwight are terminated, we will no longer be able to distribute Montagne Jeunesse or Batiste Dry Shampoo products and sales in our skin and hair care segment would be adversely affected. Please see “Manufacturing and Suppliers” in Item 1 for information on the terms of our agreements with Montagne Jeunesse and Church & Dwight.

We face the risk that raw materials for our productsefforts may not be available or that costs for these materials will increase, thereby affecting either our abilitysufficient to manufacture the products or our gross margin on the products.

We obtain our raw materials from third party suppliers, three of which are sole source suppliers. We have no long term contracts with our suppliers, and, if a contract exists, it is subject to termination or cost increases. We may not have sufficient raw materials for production of products manufactured by us if there is a shortage in raw materials or oneprevent misappropriation of our suppliers terminates our relationship. In addition, changing suppliers could involve delays that restrict our abilityproperty or to manufacture or buy products in a timely manner to meet delivery requirements of our customers. Our suppliers of products which we distribute can also be subject to the same risk with their vendors.deter others from developing similar intellectual property.

Until we start to manufacture the products that we acquired in the Acquisition we face the risk that these products may not be available to us or that costs for these products will increase, thereby affecting either our ability to sell the products or our gross margin on the products.

We obtain the products that we acquired in the Acquisition from third party contract manufacturers. We have no long term contracts with these manufacturers. We may not have sufficient inventory of these products if there is a delay in receiving products from one of these third party contract manufacturers or one of them terminates our relationship.

Our sales are affected adversely by returns.

In our industry, our customers may be given authorization by us to return products. These returns result in refunds, a reduction of our revenues and usually the need to dispose of the resulting inventory at discounted prices. Accordingly, the level of returns can significantly impact our revenues and cash flow. See information about returns in “Results of Operations” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Changes in the regulation of our products, including environmental regulations, could have an adverse effect on the distribution, cost or function of our products.

Regulations affecting our products include requirements of the FDA for cosmetic products and environmental regulations affecting emissions from our products. In the past, the FDA has mentioned the treatment of products with AHAs as drugs, which could make our production and sale of certain Alpha^® Skin Care products more expensive or prohibitive. Also, in the past, we have been required to change the formulation of our household products to comply with environmental regulations and may be required to do so again in the future if the applicable regulations are further amended.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers, and business partners and personally identifiable information of our customers and employees, on our networks. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could resultstolen, resulting in legal claims or proceedings, liability under laws that protect the privacy of personal information,which could disrupt our operations and damage our reputation, adversely affect our operating results and stock price.

We may from time to time expand our business through acquisitions, which could disrupt our business.

We have completed, and may pursue in the future, acquisitions of businesses or assets that are complementary to our business. Such acquisitions involve a number of risks, including:

If we fail to properly evaluate acquisitions, we may not achieve the anticipated benefits of such acquisitions, we may incur costs in excess of what is anticipated, and management resources and attention may be diverted from other necessary or valuable activities. Any acquisition may not result in short-term or long-term benefits to us. If we are unable to integrate or successfully manage any business that we acquire, we may not realize anticipated cost savings, improved efficiencies or revenue growth, which may result in reduced profitability or operating losses.

There is substantial doubt about our ability to continue as a going concern, and if we are unable to continue our business, our shares may have little or no value.

Primarily due to a decline in net sales, disruption of our international sales to China, and increases in costs associated with the manufacture and distribution of our products, the Company has incurred net losses and uses of operating cash flows that likely will require additional liquidity to continue its operations over the next 12 months. Management has implemented actions to reduce the Company’s operating expenses and has restructured debt facilities, and is considering various strategic actions including asset sales, obtaining additional debt or equity financing (potentially in conjunction with acquisitions), and further reduction of operating costs. However, given the impact of the economic downturn in the U.S., the Company may be unable to execute these plans under acceptable terms, which may make it difficult to raise sufficient capital for the Company to continue to finance our operations.

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Operational Risks

Disruptions in our supply chain and other factors affecting the distribution of our finished goods inventory could adversely impact our business.

A disruption within our logistics or supply chain network could adversely affect our ability to maintain appropriate inventory or deliver products in a timely manner, which could impair our ability to meet customer demand for products and result in lost sales, increased supply chain costs, or damage to our reputation. As a result of COVID-19, we have encountered shortages of raw materials for certain of our products and delays in receiving finished goods product from contract manufacturers, which has prevented us from meeting certain customer demands for our products. Along with many other industry participants, our contract manufacturing partners have experienced difficulty procuring certain raw materials and components.

Continued increases in costs as well as any impacts to our partners' abilities to fulfill sales to our customers could continue to affect our ability to meet debt requirements and lead to increased debt costs.

We face the risk that raw materials for our products may not be available or that costs for these materials will increase.

Raw materials required for our products are sourced and obtained from third party suppliers, some of which are sole source suppliers. We have no long-term contracts with such suppliers and are subject to cost increases. Manufacturers of our products may not have sufficient raw materials for production if there is a shortage in raw materials or other disruption in the supply chain or if suppliers terminate their relationships or are otherwise unable to supply raw materials. In addition, if our contract manufacturers change suppliers it could involve delays that restrict our ability to have our products manufactured or to buy products in a timely manner to meet delivery requirements of our customers. Suppliers of raw materials for our products can also be subject to the same risk with their vendors.

Financial and Economic Risks

Unfavorable and uncertain economic conditions could adversely affect our profitability.

Unfavorable and uncertain economic conditions in the past have adversely affected, and in the future financial resultsmay adversely affect, consumer demand for some of our products, resulting in reduced sales volume and stock price.a decrease in our overall profitability. Factors that can affect consumer demand for our products include inflation, slower growth or recession, rates of unemployment, consumer confidence, tighter credit, higher interest rates, health care costs, fuel and other energy costs and other economic factors affecting consumer spending behavior.

Our products are subject to transportation costs, both in delivery to us at our production facility as well as shipments to our customers. As a result, we are exposed to volatility in the freight industry that could affect our costs, including changes in regulations and labor costs. Any increases in transportation costs could adversely affect our profitability if we are not able to pass those costs on to our customers.

Changes in the economic environment have resulted, and could further result, in significant impairments of certain of our goodwill and long-lived assets.

Under U.S. generally accepted accounting principles (“GAAP”), we review the carrying value of our goodwill on an annual basis. We also review the carrying value of our long-lived assets when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable, based on their expected future cash flows. The impact of reduced expected future cash flow could require the write-down of all or a portion of the carrying value for these assets, which would result in additional impairments, resulting in decreased earnings. During 2022 and 2021, we determined that the fair values of goodwill and certain intangible assets in our Detergent, All-Purpose, and Shampoo reporting units were less than their carrying values which resulted in impairment charges.

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Legal and Regulatory Risks

Changes in the regulation of our products, including environmental regulations, could have an adverse effect on the distribution, cost or function of our products.

Regulations affecting our products include requirements of the FDA and NMPA for cosmetic products and environmental regulations. In the past, the FDA has mentioned the treatment of products with AHAs as drugs, which could make our production and sale of certain Alpha® Skin Care products more expensive or prohibitive. Also, in the past, we have been required to change the formulation of our products to comply with environmental regulations and may be required to do so again in the future if the applicable regulations are further amended.

Labeling practices in our industry have recently experienced an increase of warning letters admonishing cosmetics manufacturers for promotional claims on their websites and product labels deemed by the FDA to blur the line between “cosmetics” and “drugs.” The increase of warning letters by the FDA has also triggered a wave of follow-on class action lawsuits against cosmetic manufacturers in general, including manufacturers not singled out via FDA warning letters. We have in the past and may in the future receive claims that our labeling is inaccurate or non-compliant. Any claims levied against us could result in costly settlements, distract management and have an adverse effect on our operating results.

Any adverse developments in litigation could have a material impact on us.

We are subject to lawsuits from time to time in the ordinary course of business. While we expect those lawsuits not to have a material effect on us, an adverse development in any such lawsuit or the insurance coverage for a lawsuit could materially and adversely affect our financial condition and cash flow.operating results.

Any loss of our key executives or other personnel could harm our business.

Our success has depended on the experience and continued service of our executive officers and key employees. If we fail to retain these officers or key employees, our ability to continue our business and effectively compete may be substantially diminished. Because of our size, we must rely in many departments within our Company on one or two key employees. The loss of any one of these employees could slow our product development, production of a product and sale and distribution of a product.

Our stock price can be volatile and can decline substantially.

Our stock is traded on the OTC Bulletin Board. The volume of trades in our stock varies from day to day but is relatively limited. As a result, any events affecting us can result in volatile movements in the price of our stock and can result in significant declines in the market price of our stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

Until February 1, 2013, we owned real property, buildings and related improvements located in Denver, Colorado consisting of four connected buildings and a parking garage (approximately 241,684 square feet in total) and about 16.3 acres of land (the “Property”). These buildings range in age from approximately 16 to 39 years (126,600 square feet having been added in 1995 and 1996). ITEM 2. PROPERTIES.

We sold the Property on February 1, 2013 and leased the portion of the Property used by our facilities back from the purchaser. Our facilities houselease our corporate headquarters and all of our manufacturing and warehouse operations, which are used by both of our operating segments.headquarter facilities in Greenwood Village, Colorado. Please see Note 128 to our Consolidated Financial Statements in Item 8 for more information on our leasing back of certain of the facilities that we sold. We believe that our current leased space will provide capacity for growth for the foreseeable future.facilities.

ITEM 3. LEGAL PROCEEDINGS.

We are subject to lawsuits from time to time in the ordinary course of business. While we expect those lawsuits not to have a material effect on us, an adverse development in any such lawsuit or the lack of insurance coverage for a lawsuit could materially and adversely affect our financial condition and cash flow.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

(in thousands, except per share data)

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our $0.10 par value common stock is traded on the OTC Bulletin Board (a regulatedPink Market tier of the OTC Markets (an electronic inter-dealer quotation service)system) under the ticker symbol “SLGD.” Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The high and low prices of our common stock as traded on the OTC Bulletin BoardPink Market tier of the OTC Markets were as follows.follows:

Shareholders of Record

As of March 30, 2017,28, 2023, based on inquiry, we had approximately 693633 shareholders of record.

Dividends

We did not pay any cash dividends during the two most recent fiscal years. No decision has been made as to future dividends.

Equity Plans

The following table provides, as of December 31, 2016, information regarding our 2005 and 2015 Stock Option Plans. We also have an employee stock ownership plan which invests only in our common stock, but which isdo not includedanticipate paying dividends in the table below.foreseeable future.

Not applicable.ITEM 6. RESERVED.

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Critical Accounting Policies

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s consolidated financial statements. This Item 7 contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Please refer to “Item 1A. Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements.

COVID-19 Pandemic

The COVID-19 pandemic and government steps to reduce the spread and address the impact of COVID-19 have had and continue to have an impact on the way people live, work, interact and shop. While the impact of COVID-19 on our business has largely abated at this time, uncertainties continue. We have identifiedalso experienced certain disruptions to our supply chain due to COVID-19, which have impacted and may continue to impact sales of and consumer access to our products. In addition, we have experienced changes in the accounting policies summarized belowpurchasing patterns of our customers, including a shift in many markets to purchasing our products online. COVID-19 may continue to impact consumers’ behavior, shopping patterns and consumption preferences.

While we currently expect to be able to continue operating our business as criticaldescribed above, uncertainty resulting from COVID-19 could result in unforeseen additional disruptions to our business, including our global supply chain and retailer network, and/or require us to incur additional operational costs.

Sale of Brands

On December 15, 2022, we sold the Prell® brand to a company that markets and distributes natural hair and skincare products. We have reflected the operations of Prell® as discontinued operations for all periods presented. On December 23, 2021, we sold the Dryel® brand to a company that markets and distributes household cleaning products. We have reflected the operations of Dryel® as discontinued operations for all periods presented.

See Note 3 - “Discontinued Operations” in the Notes to Consolidated Financial Statements for further information on the sale of both brands.

On January 23, 2023, we sold the Scott’s Liquid Gold® brand, including the Wood Care and Floor Restore products, to a company that markets and distributes wood care products.

Distribution to China

We terminated our exclusive distribution agreement of Alpha® Skin Care products with HK NFS on July 12, 2022 due to breaches of the distribution agreement by HK NFS, and are establishing a direct model to resume sales of our products to consumers in China. The reestablishment of an effective business model in China is dependent on deploying significant resources to marketing and advertising efforts and regulatory compliance, as well as the successful shutdown of our former distributor’s storefronts on various e-commerce platforms.

Throughout 2020 and early 2021, we obtained components and produced finished goods specifically designed and formulated for distribution in the PRC. Our exclusive distributor ultimately did not purchase these products in accordance with their minimum order requirements. Due to the difficulties we have encountered in establishing our own e-commerce storefronts, this has resulted in our accumulation of high amounts of finished goods inventories and raw materials specifically designed for China. Due to uncertainties of future production requirements, raw materials that we have acquired is included in our impairment of inventories for the years ended December 31, 2022 and 2021, respectively.

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Distribution Agreement with Church & Dwight

Our distribution agreement with Church & Dwight Co., Inc. and our subsidiary, Neoteric Cosmetics, Inc., was not extended beyond December 31, 2021. As a result, the distribution agreement expired on its own terms as of December 31, 2021 and the Company ceased to distribute Batiste Dry Shampoo products. Unless offset by increased sales of our other products, the conclusion of this distribution agreement is expected to have a material impact on our net sales and result of operations. Net sales of Batiste were $7,155 for the year ended December 31, 2021.

Executive Overview

Our Business

Scott’s Liquid Gold-Inc. exists to positively impact consumers’ lives in the markets we serve and create shareholder value. We develop, market, and sell high-quality, high-value household and health and beauty care products nationally and internationally to mass merchandisers, drugstores, supermarkets, hardware stores, e-commerce retailers, other retail outlets, and to wholesale distributors. Our long history has generated strong consumer and customer loyalty for our brands.

On an ongoing basis, management focuses on a variety of key indicators to monitor our business health and performance. These key indicators include (but are not limited to) the following:

To achieve our business and financial objectives, we focus on initiatives to drive the growth of the key indicators above. Our ability to drive and generate growth depends on consumer demand for our products and retail customers’ willingness to carry our products in a competitive marketplace. In this environment, we intend to continue to focus on our key indicators to remain competitive, sustain our current level of operations, and drive further growth in future periods.

During 2022, the understandingCompany achieved objectives focused on optimization, cost reduction, and modernization of our resultsbusiness. These included (but were not limited to) the following:

Outlook

Looking forward, we are focused on both short- and long-term strategies that we believe will enhance our financial health and deliver shareholder value. While the marketplace in which we operate has always been highly competitive, we expect that the category challenges and the level of competition will continue to rise. We believe that some of the trends in our business and industry could adversely affect our profitability, including the following:

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We believe our history of providing high-quality, high-value products to consumers positions us to meet the challenges in our marketplace by us. For a detailed discussioncontinuing to focus on the applicationfollowing key priorities in 2023:

Results of Operations

Net loss changed primarily due to the following:

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Segment Results

The following tables show comparative net sales, gross margin, gross profit, loss from operations, volume and percentage changes for our household and health and beauty care products between periods:

Household products

Health and beauty care products

Liquidity and Capital Resources

Financing Agreements

Please see Note 17 to our Consolidated Financial Statements for information on our debt facilities with UMB Bank, N.A. (“UMB”) and La Plata Capital, LLC (“La Plata”).

Liquidity and Changes in Item 8.Cash Flows

At December 31, 2022, we had approximately $49 in cash on hand, a decrease of $1,221 from December 31, 2021.

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The following is a summary of cash provided by or used in each of the indicated types of activities:

The accompanying Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern, which contemplates the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern exists.

Primarily due to a decline in net sales, disruption of our international sales to China, and increases in costs associated with the manufacture and distribution of our products, the Company used net cash in operating activities of $1,849 during the year ended December 31, 2022. All proceeds from the sale of our Scott's Liquid Gold® brand in January 2023 were used to reduce outstanding debt. In February 2023, the Company terminated its Loan and Security Agreement with UMB Bank, N.A. and repaid its revolving credit facility in full. The Company's debt agreement with La Plata Capital, LLC matures on November 9, 2023, which will require repayments of all principal amounts outstanding during 2023. Management’s assessment of cash flow forecasts indicate that, absent any other action, the Company likely will require additional liquidity to continue its operations over the next 12 months.

Management has implemented actions to reduce the Company’s operating expenses and has restructured debt facilities through the adjustments to the timing of required principal payments and covenant compliance periods. Management is considering additional various strategic actions including asset sales, obtaining additional debt or equity financing (potentially in conjunction with acquisitions), workforce reduction, deferring or eliminating certain capital expenditures, and further reduction of other operating expenses to ensure alignment with customer demand in order to address liquidity needs and pursue its business plan. The Company expects that these strategic actions will reduce expenses and outstanding debt balances and provide required liquidity for ongoing operations. However, given the impact of the economic downturn on the U.S., the Company may be unable to sell assets or access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

The Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to use judgment and make estimates. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. Actual results could ultimately differ from those estimates. The accounting policies that are most critical in the preparation of the Company’s Consolidated Financial Statements are those that are both important to the presentation of the Consolidated Financial Statements and require significant or complex judgments and estimates on the part of management.

Revenue Recognition

Our revenue recognition policy is significant because the amount and timing of revenue is a key component of our results of operations. Certain criteria are required to be metSee Note 1(l), “Revenue Recognition” in order to recognize revenue. If these criteria are not met, then the associated revenue is deferred until it is met. In our case, the criteria generally are met when we have an arrangement to sell a product, we have delivered the product in accordance with that arrangement, the sales price of the product is determinable and we believe that we will be paid for the sale.

We establish reserves for customer returns of our products and customer allowances. We estimate these reserves based upon, among other things, an assessment of historical trends, information from customers and anticipated returns and allowances related to current sales activity. These reserves are established in the period of sale and reduce our revenue in that period.

Our reserve for customer allowances includes primarily reserves for trade promotions to support price features, displays, slotting fees and other merchandising of our products to our customers. The actual level of returns and customer allowances are influenced by several factors, including the promotional efforts of our customers, changes in the mix of our customers, changes in the mix of the products we sell and the maturity of the product. We may change our estimates based on actual results and consideration of other factors that cause returns and allowances. In the event that actual results differ from our estimates, the results of future periods may be impacted.

We also establish reserves for coupons, rebates and certain other promotional programs for consumers. We estimate these reserves based upon, among other things, an assessment of historical trends and current sales activity. These reserves are recorded as a reduction of revenue at the later of the date at which the revenue is recognized or the date at which the sale incentive is offered. In the event that actual results differ from our estimates, the results of future periods may be impacted.

We have also established an allowance for doubtful accounts. We estimate this allowance based upon, among other things, an assessment of the credit risk of specific customers and historical trends. We believe our allowance for doubtful accounts is adequate to absorb any losses which may arise. In the event that actual losses differ from our estimates, the results of future periods may be impacted.

Intangible Assets

Intangible assets consist of customer relationships, trade names, formulas and batching processes and a non-compete agreement.  The fair value of the intangible assets is amortized over their estimated useful lives and range from a period of five to 15 years and are reviewed for impairment when changes in market circumstances occur and written down to fair value if impaired.

Goodwill

Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired in the Acquisition discussed in Notes 4 and 5.  Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests, and in certain circumstances these assets are written down to fair value if impaired.

Income Taxes

Income taxes reflect the tax effects of transactions reported in the financial statements and consist of taxes currently payable plus deferred income taxes related to certain income and expenses recognized in different periods for financial and income tax reporting purposes. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. A valuation allowance is provided when it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which related temporary differences become deductible. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Taxes are reported based on tax positions that meet a more-likely-than-not standard and that are measured at the amount that is more-likely-than-not to be realized. Differences between financial and tax reporting which do not meet this threshold are required to be recorded as unrecognized tax benefits or expense. We classify penalty and interest expense related to income tax liabilities as an income tax expense. There are no significant interest and penalties recognized in the statement of operations or accrued on the balance sheet. For additional discussion, see Note 7, “Income Taxes,” to our Consolidated Financial Statements in Item 8.8 for additional discussion.

Inventories Valuation15

Intangible Assets and ReservesGoodwill

Inventories consist of raw materials and finished goods and are statedGoodwill is tested for impairment at the lowerreporting unit level, which is the level at which discrete financial information is available and reviewed by management. For fiscal year 2022, the Company’s reporting units for goodwill impairment testing purposes were its individual components, which are differentiated by their product categories.

Determining the fair value of the Company’s reporting units for goodwill and the fair value of its intangible assets requires significant estimates and judgments by management. When a quantitative analysis is performed, the Company generally uses the income approach, which requires several estimates, including future cash flows consistent with management’s strategic plans, sales growth rates, and the selection of royalty rates and a discount rate. Estimating sales growth rates requires significant judgment by management in areas such as future economic conditions, category growth rates, product pricing, consumer tastes and preferences and future expansion expectations. In selecting an appropriate royalty rate, the Company considers recent market transactions for similar brands and products. In determining an appropriate discount rate, the Company considers the current interest rate environment and its estimated cost (first-in, first-out method)of capital. Other qualitative factors the Company considers, in addition to those quantitative measures discussed above, include assessments of general macroeconomic conditions, industry-specific considerations and historical financial performance. The Company generally engages a third-party valuation firm to assist it in determining the fair value of intangible assets acquired in business combinations.

In determining the fair value of the Company’s reporting units, fair value is also determined using the market approach, which is generally derived from metrics of comparable publicly traded companies. As multiple valuation methodologies are used, the Company also performs a qualitative analysis comparing the fair value of a reporting unit under each method to assess its reasonableness and ensure consistency of results.

Determining the expected life of a brand requires management judgment and is based on an evaluation of several factors including market share, brand history, future expansion expectations, the level of in-market support anticipated by management, legal or market. regulatory restrictions and the economic environment where the products are sold.

We estimate anmade revisions to the internal forecasts relating to all reporting units during the second quarter of 2022 due to changes in the economic outlook of our All-Purpose reporting unit, and during the fourth quarter of 2022 related to our annual assessment of all reporting units. Through our assessments, we concluded that the changes in circumstances in these reporting units triggered the need for a quantitative review of the carrying values of goodwill and certain intangible assets and resulted in impairment charges to each of our reporting units during the year ended December 31, 2022, and resulted in the following impairment charges:

InventoriesValuation

Our inventory reservevaluation policy is significant because the costs and valuation of slow-moving or obsolete inventories are key components of our results of operations. See Note 1(f), “Inventories Valuation” in our Consolidated Financial Statements in Item 8 for additional discussion.

During the years ended December 31, 2022 and 2021, we specifically identified slow moving and obsolete productsinventories, resulting in an impairment of $461 and raw materials based upon, among other things, an assessment of historical and anticipated sales$404, respectively.

16

Income Taxes

Our income taxes policy is significant because our estimate for taxes is a key component of our products. In the event that actual results differ from our estimates, the results of future periods may be impacted. We record a reserveoperations. See Note 1(k), “Income Taxes” in our Consolidated Financial Statements in Item 8 for slow moving and obsolete products and raw materials. We estimate this reserve based upon historical and anticipated sales. Amounts are stated in Note 2.

additional discussion.

Recently Issued Accounting Standards

For information on recently issued accounting standards, see Note 1(p), “Recently Issued Accounting Standards,” to our Consolidated Financial Statements in Item 8.Statements.

Recently Adopted Accounting Standards

For information on recently adopted accounting standards, see Note 1(q), “Recently Adopted Accounting Standards,” to our Consolidated Financial Statements in Item 8.

Results of Operations

Our consolidated net sales for 2016 were $35,228,400 compared to $29,188,400 for 2015, an increase of $6,040,000 or 20.7%. We saw an 83.4% increase in net sales of our own line of skin and hair care products and a 13.8% increase in net sales of the skin and hair care products that we distribute for other companies. We saw a 5.8% decrease in net sales of our household products. The reasons for the foregoing changes in net sales of our products are described below.

Our net income for 2016 was $1,854,500 compared to a net income of $4,779,900 for 2015, a decrease of $2,925,400 or 61.2%. The decrease in net income for 2016 compared to the net income for 2015 resulted primarily from: (1) changes in income tax expense; and (2) the incurrence of transaction costs related to the Acquisition and the amortization of the acquired intangible assets.

Our income tax expense for 2016 was $1,248,100 versus an income tax benefit of $2,504,500 for 2015. During 2015 we released our valuation allowance related to a deferred tax asset which resulted in the forgoing tax benefit.  See Note 1(k), “Income Taxes,” and Note 7, “Income Taxes,” to our Consolidated Financial Statements in Item 8.

Summary of Results as a Percentage of Net Sales

Our gross margins may not be comparable to those of other companies who include all of the costs related to their distribution network in cost of sales because we, like some other companies, exclude a portion of these costs (i.e., freight out to customers) from gross margin. Instead, we include them as part of selling expenses. See Note 1(o), “Operating Costs and Expenses Classification,” to our Consolidated Financial Statements in Item 8.

Comparative Net Sales

Sales of household products for 2016 accounted for 17.0% of consolidated net sales compared to 21.8% for the same period in 2015. During 2016, the sales of our household products were $5,992,600 as compared to $6,359,100 for the same period in 2015, a decrease of $366,500 or 5.8%. This decrease is attributable primarily to: (1) lower sales of our Scott’s Liquid Gold^®Floor Restore product during the last three quarters of 2016 due to it being discontinued at one of our customers during the second quarter of 2016 and (2) lower sales of our Scott’s Liquid Gold^® Wood Wash and Touch of Scent^®Air Freshener products, which were discontinued at one of our customers. Our Scott’s Liquid Gold^® Wood Wash and Touch of Scent^®Air Freshener products account for a small percentage of the sales of our total household products.

Sales of skin and hair care products for 2016 accounted for 83.0% of consolidated net sales compared to 78.2% in 2015. The net sales of these products were $29,235,800 in 2016 compared to $22,829,300 in 2015, an increase of $6,406,500 or 28.1%, primarily as a result of the addition of the net sales of Prell^®, Denorex^® and Zincon^®, which we acquired in the Acquisition on June 30, 2016 and an increase in net sales of the Montagne Jeunesse face masque sachets.

The net sales of our own skin and hair care products were $8,561,700 in 2016 compared to $4,668,600 in 2015, an increase of $3,893,100 or 83.4%. This increase is primarily attributable to the addition of the net sales of Prell^®, Denorex^® and Zincon^®, but also included a 10.3% increase in our other skin care products that we make. The net sales of Prell^®, Denorex^® and Zincon^®were $3,412,700 in the third and fourth quarters of 2016.

The net sales of Montagne Jeunesse sachet products and Batiste Dry Shampoo were $20,674,100 in 2016 compared to $18,160,700 in 2015, an increase of $2,513,400 or 13.8%. This increase is primarily attributable to increased sales of Montagne Jeunesse.

We paid our customers a total of $2,574,800 in 2016 for trade promotions to support price features, displays, slotting fees and other merchandising of our products, compared to total spending of $2,517,500 in 2015, an increase of $57,300 or 2.3%. This increase is primarily attributable to trade promotions related to the sales of Prell^®, Denorex^® and Zincon^® offset in part by more efficient trade promotion programs for our skin and hair care products.

Typically, customers that return products to us take a credit on our invoice equal to the original sale price plus a handling charge ranging from 8-10% of the original sales price. Our product returns (as a percentage of net sales) were 0.04% in 2016 compared to 0.33% in 2015. This decrease is primarily attributable to a few of our customers in the first quarter of 2015 returning various products to us that they no longer carry in certain stores.

On a consolidated basis, cost of sales was $20,036,700 for 2016 compared to $16,808,600 for 2015, an increase of $3,228,100 or 19.2%, on a net sales increase of 20.7%. As a percentage of consolidated net sales, cost of sales was 56.9% in 2016 compared to 57.6% in 2015.

As a percentage of net sales of our household products, the costs of sales for our household products increased to 50.0% of net sales in 2016 compared to 47.0% in 2015. This increase is primarily attributable to an increase in our costs for certain raw materials, additional depreciation expense on certain production and warehouse equipment that was purchased in 2016 and an increase in compensation expense during the second half of 2016 for our production and warehouse personnel.

As a percentage of net sales of our skin and hair care products, the cost of sales for our skin and hair care products decreased to 58.3% in 2016 compared to 60.5% in 2015. This decrease is primarily attributable to a higher percentage of net sales of our own skin and hair products, which have a lower cost than the skin and hair care products that we distribute for other companies.

Operating Expenses, Interest Expense and Other Income

Our operating expenses for 2016 were $11,976,900 compared to $10,102,000 for 2015, an increase of $1,874,900 or 18.6%. These expenses consisted primarily of advertising, selling, and general and administrative expenses.

Advertising expenses for 2016 were $1,576,200 compared to $1,532,600 for 2015, an increase of $34,600 or 2.3%.

Selling expenses for 2016 were $5,838,000 compared to $5,311,200 for 2015, an increase of $526,800 or 9.9%. This increase is primarily attributable to an increase in the commissions that we paid our sales brokers and an increase in our costs of freight-out to our customers due to higher sales volume.

General and administrative expenses for 2016 were $4,571,700 compared to $3,258,200 for 2015, an increase of $1,313,500 or 40.3%. This increase is due primarily to an increase in professional fees and bonuses to certain employees related to the Acquisition and the amortization of the acquired intangible assets.

Other income from interest earned on our cash reserves for 2016 and 2015 was $12,600 and $26,900, respectively.

Interest expense for 2016 and 2015 was $124,800 and $29,300, respectively. The increase is due to borrowings under the Credit Agreement on June 30, 2016 to help fund the Acquisition.

During 2016 and 2015, our expenditures for research and development were insignificant.

Liquidity and Capital Resources

Financing Agreements

Please see Note 6 to our Consolidated Financial Statements in Item 8 for information on our financing agreements with Chase. Please see Note 1(e) to our Consolidated Financial Statements in Item 8 for information on our financing agreements with Summit Financial Resources, L.P. (“Summit”) and Wells Fargo Bank, National Association (“Wells Fargo”), which were terminated during 2016.

Liquidity

At December 31, 2016, we had approximately $2.1 million in cash on hand. For 2016, the primary components of working capital (exclusive of cash that was $5,067,800 less at December 31, 2016 compared to December 31, 2015 primarily due to using cash for the Acquisition) that significantly affected operating cash flows are the following: (1) net accounts receivable were $2,441,700 more at December 31, 2016 than at December 31, 2015 due primarily to receivables related to the products acquired in the Acquisition and the timing of receiving payment; (2) inventory at December 31, 2016 was $942,700 more than at December 31, 2015 due primarily to the Acquisition and the timing of receiving certain inventory from our vendors and shipping our products to our customers; and (3) accounts payable and accrued expenses at December 31, 2016 were $862,500 more than at December 31, 2015 due primarily to increased inventory and the timing of payments on our inventory.

We believe that our cash on hand at any time during 2017 could be significantly less than at December 31, 2016 due primarily to the following: (1) the repayment of a portion of our revolving credit facility with Chase; (2) costs and capital expenditures related to the integration of the Acquisition; (3) the payment of performance bonuses in the first quarter of 2017 to our management, sales, administrative support and operations personnel that where accrued for in 2016; and (4) the timing of receiving and paying for the significant amounts of Batiste Dry Shampoo that we purchase every month from Church & Dwight.

We anticipate that our existing cash and our cash flow from operations, together with our current borrowing arrangement with Chase, will be sufficient to meet our cash requirements for the next 12 months. During 2016, we spent $283,600 to purchase production and warehouse equipment to improve our manufacturing capabilities and efficiencies and on additional production and warehouse equipment that is primarily related to the Acquisition. We expect to make approximately $500,000 in capital expenditures in 2017 on additional production and warehouse equipment that is primarily related to the Acquisition.

Not applicable.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors and Shareholders

of Scott’s Liquid Gold-Inc.Gold - Inc.

Denver, ColoradoOpinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Scott’s Liquid Gold-Inc. and subsidiariesGold - Inc. (the “Company”) as of December 31, 20162022 and 2015, andDecember 31, 2021, the related consolidated statements of operations, shareholders’stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2016. 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and December 31, 2021, and the results of its operations and its cash flows for each of the years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding Going Concern

The Company’saccompanying consolidated financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the entity has suffered recurring losses from operations, has experienced cash used from operations in excess of its current cash position, and has an accumulated deficit, that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter

Basis for Opinion

The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidatedthe Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. OurAs part of our audits, included considerationwe are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’sCompany's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidatedpresentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.

In

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

18

Impairment of Intangible Assets and Goodwill

Description of the Matter

At December 31, 2022, the Company had intangible assets and goodwill of $1,136,000 and $-0-, respectively. As discussed in Notes 1(i) and 6 to the consolidated financial statements, referredintangible assets are assessed for recoverability whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company evaluates assets for potential impairment by comparing estimated future undiscounted net cash flows to above present fairly,the carrying amount of the asset. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value. Goodwill is tested by the Company’s management for impairment at least annually, during the fourth quarter, unless events or circumstances indicate the carrying amount may not be recoverable. Goodwill is tested for impairment at the reporting unit level.

Auditing the Company’s impairment tests for intangible assets with finite lives was complex and highly judgmental due to the significant estimation in all material respects,management’s assumptions related to net sales growth rates, gross profit and operating margin, discount rates, and long-term growth rates to calculate the undiscounted cash flows and the fair value estimate. These assumptions can significantly affect the undiscounted cash flows and fair value of the intangible assets with finite lives. Auditing the Company’s impairment tests for goodwill was complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting units. Specifically, the fair value estimates of the reporting units are sensitive to assumptions such as net sales growth rates, discount rate, long-term growth rates and gross profit and operating margin. The fair value estimates of intangible assets and reporting units are affected by such factors as industry, market performance, and financial forecasts.

How We Addressed the Matter in Our Audit

Our audit procedures related to testing the valuation of intangible assets and goodwill, among others:

/s/ Plante & Moran, PLLC

We have served as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.Company’s auditor since 2003.

Broomfield, Colorado

March 31, 201729, 2023

Denver, Colorado19

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)