Overview of Financial Performance

The company has three main product lines: EWCP (a chemical used in swimming pools and spas), TPAs (biodegradable polymers used in various industries), and nitrogen conservation products for the agriculture industry. The company’s financial performance for the year ended December 31, 2024 showed some mixed results compared to the previous year:

• Sales of EWCP products increased due to higher customer orders, while sales of TPA products decreased due to lower customer orders.
• Gross profit increased, as raw material costs declined to catch up with customer price reductions already in place.
• Several expense items increased, including insurance, office and miscellaneous expenses, consulting fees, professional fees, research costs, and utilities. This was partially offset by a decrease in investor relations expenses.
• Currency exchange losses increased due to movements in the US/Canadian dollar exchange rate.
• The company incurred a one-time loss on the termination of a lease in Naperville, IL.
• Interest income increased due to higher interest rates and more term deposits, but interest expense also increased due to higher debt levels.
• The company recorded a one-time loss on the sale of 30.1% of a Florida-based LLC, but this was offset by a gain on the investment in the prior year.
• Income tax expense increased due to one-time adjustments in the prior year that did not recur.

Liquidity and Capital Resources

The company’s cash flow from operating activities was $5,568,346 in 2024, down from $6,116,171 in 2023. The company used cash for purchases of property and equipment, repayment of long-term debt, and dividend payments. It also received cash from the sale of an investment, distributions from equity investments, and proceeds from new long-term debt.

As of December 31, 2024, the company had working capital of $22,714,190, up from $20,172,833 in the prior year. The company believes it has sufficient cash resources to meet its future commitments and cash flow requirements for the coming year.

Key Factors Affecting Future Performance

The key factors that will most significantly affect the company’s future operating results are:

• The sale price of crude oil, which is used in the manufacture of aspartic acid, a key ingredient in the company’s TPA product. Tariff increases could lead to price increases for some customers.
• Activity in the oil and gas industry, as the company sells its TPA product to oil and gas companies.
• Drought conditions, as the company also sells its TPA product to farmers.

Critical Accounting Policies and Estimates

The company’s critical accounting policies and estimates include:

• Allowances for doubtful accounts receivable
• Provisions for inventory obsolescence
• Valuation of goodwill and intangible assets
• Useful lives of property, equipment, leaseholds, and intangible assets
• Revenue recognition
• Stock-based compensation
• Income taxes
• Valuation of privately held equity investments

The company regularly reviews these policies and estimates, and changes could impact the company’s financial statements.

Conclusion

Overall, the company’s financial performance in 2024 was mixed, with some increases in revenue and gross profit offset by higher expenses in several areas. The company maintains a strong liquidity position and is focused on managing key factors that could impact future performance, such as commodity prices and industry activity. The company’s critical accounting policies and estimates will continue to be an important area of focus as it navigates the evolving business environment.