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What changed in HUDSON TECHNOLOGIES INC /NY's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HUDSON TECHNOLOGIES INC /NY's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+109 added−146 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-14)

Top changes in HUDSON TECHNOLOGIES INC /NY's 2023 10-K

109 paragraphs added · 146 removed · 87 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

27 edited+8 added−3 removed57 unchanged
Biggest changeProducts and Services Sustainability From its inception, the Company has sold refrigerants, and has provided refrigerant reclamation and refrigerant management services that are designed to recover and reuse refrigerants, thereby protecting the environment from release of refrigerants to the atmosphere and the corresponding ozone depletion and global warming impact and supporting the circular economy.
Biggest changeThe proposed rule, which is expected to be finalized during the third quarter of 2024, includes requirements for repairing leaky equipment, use of automatic leak detection systems on large refrigeration systems, use of reclaimed HFCs for certain applications, recovery of HFCs from cylinders before their disposal, and a container tracking system. 4 Table of Contents Products and Services Sustainability From its inception, the Company has sold refrigerants, and has provided refrigerant reclamation and refrigerant management services that are designed to recover and reuse refrigerants, thereby protecting the environment from release of refrigerants to the atmosphere and the corresponding ozone depletion and global warming impact and supporting the circular economy.
Hudson’s technicians have applied for or obtained such certification. The Company may also be subject to regulations adopted by the EPA which impose reporting requirements arising out of the importation of certain HCFCs, and arising out of the importation, purchase, production, use and/or emissions of certain greenhouse gases, including HFCs.
Hudson’s technicians have applied for or obtained such certification. The Company may also be subject to regulations adopted by the EPA which impose reporting requirements arising out of the importation, purchase, production, use and/or emissions of certain greenhouse gases, including HFCs.
In July 2016 the Company was awarded, as prime contractor, a five-year contract, together with a five-year renewal option which has been exercised in July 2021, by the United States Defense Logistics Agency (“DLA”) for the management, supply, and sale of refrigerants, compressed gases, cylinders and related services.
In July 2016 the Company was awarded, as prime contractor, a five-year contract, together with a five-year renewal option which was exercised in July 2021, by the United States Defense Logistics Agency (“DLA”) for the management, supply, and sale of refrigerants, compressed gases, cylinders and related services.
These patents will expire between December 2023 and December 2036. There can be no assurance as to the breadth or degree of protection that patents may afford the Company, that any patent applications will result in issued patents or that patents will not be circumvented or invalidated.
These patents will expire between December 2024 and December 2036. There can be no assurance as to the breadth or degree of protection that patents may afford the Company, that any patent applications will result in issued patents or that patents will not be circumvented or invalidated.
The Company is also subject to regulations adopted by the California Air Resources Board which impose certain reporting requirements arising out of the reclamation and sale of refrigerants that takes place within the State of California. The Company believes that it is in material compliance with all applicable regulations that are material to its business operations.
The Company is also subject to regulations adopted by the California Air Resources Board which impose certain reporting requirements arising out of the reclamation and sale of refrigerants that takes place within the State of California. 8 Table of Contents The Company believes that it is in material compliance with all applicable regulations that are material to its business operations.
Certain HFC refrigerants are highly weighted greenhouse gases that are believed to contribute to global warming and climate change and, as a result, are now subject to various state regulations relating to the sale, use and emissions of HFC refrigerants, as well as federal restrictions on the production and consumption of HFCs (as set forth below).
Certain HFC refrigerants are highly weighted greenhouse gases that are believed to contribute to global warming and climate change and, as a result, are now subject to various state regulations relating to the sale, use and emissions of HFC refrigerants, as well as federal restrictions on the production and consumption of HFCs under the AIM Act (as set forth below).
The AIM Act directs the EPA to address the reduction in virgin HFCs and provides authority to do so in three respects: 1) phase down the production and consumption of listed HFCs, 2) manage these HFCs and their substitutes, and 3) facilitate the transition to next-generation technologies.
The AIM Act directs the EPA to address the reduction in virgin HFCs and provides authority to do so in three respects: 1) phase down the production and consumption of listed HFCs, 2) manage these HFCs and their substitutes including reclamation of refrigerants, and 3) facilitate the transition to next-generation technologies.
The Company also separates “crossed” (i.e. commingled) refrigerants and provides re-usable cylinder refurbishment and hydrostatic testing services. 4 Table of Contents The Company has also created alternative solutions to reactive and preventative maintenance procedures that are performed on commercial and industrial refrigeration systems.
The Company also separates “crossed” (i.e. commingled) refrigerants and provides re-usable cylinder refurbishment and hydrostatic testing services. The Company has also created alternative solutions to reactive and preventative maintenance procedures that are performed on commercial and industrial refrigeration systems.
The Company employs twelve persons engaged full-time in quality control and to monitor the Company’s operations for regulatory compliance. Human Capital Resources On February 23, 2023, the Company had 232 full time employees including air conditioning and refrigeration technicians, chemists, engineers, sales and administrative personnel. None of the Company’s employees are represented by a union.
The Company employs twelve persons engaged full-time in quality control and to monitor the Company’s operations for regulatory compliance. Human Capital Resources On February 1, 2024, the Company had 237 full time employees including air conditioning and refrigeration technicians, chemists, engineers, sales and administrative personnel. None of the Company’s employees are represented by a union.
Hudson received an allocation consumption allowance for calendar year 2022 and 2023 equal to approximately 3 million Metric Tons Exchange Value Equivalents, or 1% of the total HFC consumption. Reclamation will be critical to maintaining necessary HFC supply levels to ensure an orderly phasedown.
Hudson received allocation allowances for calendar years 2022, 2023 and 2024 equal to approximately 3 million, 3 million and 1.9 million Metric Tons Exchange Value Equivalents, respectively, per year, or approximately 1% of the total HFC consumption. Reclamation will be critical to maintaining necessary HFC supply levels to ensure an orderly phasedown.
Competition The Company competes primarily on the basis of the performance of its proprietary high volume, high-speed equipment used in its operations, the breadth of services offered by the Company, including proprietary RefrigerantSide® Services and other on-site services, and price, particularly with respect to refrigerant sales.
The Company’s executive officers devote significant time and effort to customer relationships. Competition The Company competes primarily on the basis of the performance of its proprietary high volume, high-speed equipment used in its operations, the breadth of services offered by the Company, including proprietary RefrigerantSide® Services and other on-site services, and price, particularly with respect to refrigerant sales.
The Company believes it has good relations with its employees. 8 Table of Contents Patents and Proprietary Information The Company holds several U.S. and foreign patents, as well as pending patent applications, related to certain RefrigerantSide® Services and supporting systems developed by the Company for systems and processes for measuring and improving the efficiency of refrigeration systems, and for certain refrigerant recycling and reclamation technologies.
Patents and Proprietary Information The Company holds several U.S. and foreign patents, as well as pending patent applications, related to certain RefrigerantSide® Services and supporting systems developed by the Company for systems and processes for measuring and improving the efficiency of refrigeration systems, and for certain refrigerant recycling and reclamation technologies.
For the year ended December 31, 2022, there was no customer accounting for greater than 10% of the Company’s revenues, but one customer accounted for over 10% of outstanding receivables at December 31, 2022.
For the year ended December 31, 2022, there was no customer that accounted for 10% of the Company’s revenues, but one customer accounted for over 10% of the outstanding accounts receivable at December 31, 2022.
Government Regulation The business of refrigerant and industrial gas sales, reclamation and management is subject to extensive, stringent and frequently changing federal, state and local laws and substantial regulation under these laws by governmental agencies, including the EPA, the United States Occupational Safety and Health Administration (“OSHA”) and the United States Department of Transportation (“DOT”).
Hudson maintains environmental impairment insurance of $10,000,000 per occurrence, and $10,000,000 annual in the aggregate. 7 Table of Contents Government Regulation The business of refrigerant and industrial gas sales, reclamation and management is subject to extensive, stringent and frequently changing federal, state and local laws and substantial regulation under these laws by governmental agencies, including the EPA, the United States Occupational Safety and Health Administration (“OSHA”) and the United States Department of Transportation (“DOT”).
For the year ended December 31, 2021, one customer accounted for 10% of the Company’s revenues and one customer accounted for over 10% of the outstanding accounts receivable at December 31, 2021.
For the year ended December 31, 2023, there was one customer accounting for greater than 10% of the Company’s revenues and one customer accounted for over 10% of the outstanding accounts receivable at December 31, 2023.
Refrigerant and Industrial Gas Sales The Company sells reclaimed and virgin (new) refrigerants to a variety of customers in the air conditioning and refrigeration industry. The Company continues to sell reclaimed CFC and certain HCFC based refrigerants, which are no longer manufactured. Virgin refrigerants are purchased by the Company from several suppliers and resold by the Company.
Refrigerant and Industrial Gas Sales The Company sells reclaimed and virgin (new) refrigerants to a variety of customers in the air conditioning and refrigeration industry. The Company continues to sell reclaimed CFC and certain HCFC based refrigerants, which are no longer manufactured, and HFC’s, which are being phased down as discussed above.
Congress also required that EPA shall consider ways to promote reclamation in all phases of its implementation of the AIM Act. The final rule introduces a stepdown of 10% from baseline levels and a subsequent allowance rule must establish a cumulative 40% reduction in the baseline for 2024.
Congress required that the EPA consider ways to promote reclamation in all phases of its implementation of the AIM Act. The AIM Act introduced a stepdown of 10% from baseline levels in 2022 and 2023, and establishes a cumulative 40% reduction in the baseline for 2024.
Strategic Relationships Hudson announced the following strategic relationships in 2022: - In, January 2022, Hudson entered into an agreement with AprilAire, the leading provider of professional grade healthy air solutions for homes, to meet the requirements of the recently finalized California Air Resources Board (CARB) Regulation Order for Reclaimed Refrigerant Use for Manufacturers of AC Equipment.
For the year ended December 31, 2021, one customer accounted for 10% of the Company’s revenues and one customer accounted for over 10% of the outstanding accounts receivable at December 31, 2021. 6 Table of Contents Strategic Relationships Hudson announced the following strategic relationships: - In, January 2022, Hudson entered into an agreement with AprilAire, the leading provider of professional grade healthy air solutions for homes, to meet the requirements of the recently finalized California Air Resources Board (CARB) Regulation Order for Reclaimed Refrigerant Use for Manufacturers of AC Equipment.
On September 23, 2021, the United States Environmental Protection Agency (“EPA”) issued the final rule establishing the framework to allocate allowances for virgin production and consumption of HFCs. The EPA is responsible for the administration of the HFC phase down enacted by Congress under the AIM Act.
AIM Act The United States Environmental Protection Agency (“EPA”) issued several final rules establishing the framework to allocate allowances for virgin production and consumption of hydrofluorocarbon refrigerants (“HFCs”) that currently provide allowances through 2028. The EPA is responsible for the administration of the HFC phase down enacted by Congress under the AIM Act.
Hudson and its customers are subject to the requirements of the Clean Air Act and the AIM Act, and the regulations promulgated thereunder by the EPA, which make it unlawful for any person in the course of maintaining, servicing, repairing, and disposing of air conditioning or refrigeration equipment, to knowingly vent or otherwise release or dispose of ozone depleting substances, and non-ozone depleting substitutes, used as refrigerants. 7 Table of Contents Pursuant to the Act, reclaimed refrigerant must satisfy the same purity standards as newly manufactured, virgin refrigerants in accordance with standards established by AHRI prior to resale to a person other than the owner of the equipment from which it was recovered.
Hudson and its customers are subject to the requirements of the Clean Air Act and the AIM Act, and the regulations promulgated thereunder by the EPA, which make it unlawful for any person in the course of maintaining, servicing, repairing, and disposing of air conditioning or refrigeration equipment, to knowingly vent or otherwise release or dispose of ozone depleting substances, and non-ozone depleting substitutes, used as refrigerants.
Hudson employs various marketing methods, including digital marketing, segment targeted outreach, social media, trade and industry events, webinars, in-person solicitation, print advertising, response to quotation requests and the internet through the Company’s websites (www.hudsontech.com and www.ASPENRefrigerants.com).
Hudson employs various marketing methods, including digital marketing, segment targeted outreach, social media, trade and industry events, webinars, in-person solicitation, print advertising, response to quotation requests and the internet through the Company’s website (www.hudsontech.com). Information on the Company’s website is not part of this report. The Company’s sales personnel are compensated on a combination of a base salary and commission.
The Company may be held strictly liable for damages, which could be substantial, regardless of whether it exercised due care and complied with all relevant laws and regulations. Hudson maintains environmental impairment insurance of $10,000,000 per occurrence, and $10,000,000 annual aggregate, for events occurring subsequent to November 1996.
The Company may be held strictly liable for damages, which could be substantial, regardless of whether it exercised due care and complied with all relevant laws and regulations.
Additionally, the Company regularly purchases used or contaminated refrigerants, from many different sources, which refrigerants are then reclaimed using the Company’s high speed proprietary reclamation equipment, its proprietary Zugibeast® system, and then are resold by the Company. The Company also sells industrial gases to a variety of industry customers, predominantly to users in or involved with the US Military.
The Company purchases virgin refrigerants, such as HFC’s and HFO’s, from several suppliers and resold by the Company. Additionally, the Company regularly purchases used or contaminated refrigerants, from many different sources, which refrigerants are then reclaimed using the Company’s high speed proprietary reclamation equipment, its proprietary Zugibeast® system, and then are resold by the Company.
Effective January 1, 1996, the Clean Air Act, as amended (the “Act”) prohibited the production of virgin CFC refrigerants and limited the production of virgin HCFC refrigerants.
Currently the Company purchases virgin and reclaimable hydrofluoro-olefin (“HFO”) and hydrofluorocarbon (“HFC”) refrigerants and reclaimable, primarily hydrochlorofluorocarbon (“HCFC”) and chlorofluorocarbon (“CFC”) refrigerants from suppliers and its customers. Effective January 1, 1996, the Clean Air Act, as amended (the “Act”) prohibited the production of virgin CFC refrigerants and limited the production of virgin HCFC refrigerants.
As a component of the Company’s products and services, the Company also participates in the generation of carbon offset projects. The Company operates principally through its wholly-owned subsidiary, Hudson Technologies Company. Unless the context requires otherwise, references to the “Company”, “Hudson”, “we”, “us”, “our”, or similar pronouns refer to Hudson Technologies, Inc. and its subsidiaries.
RefrigerantSide® Services consists of system decontamination to remove moisture, oils and other contaminants intended to restore systems to designed capacity.As a component of the Company’s products and services, the Company also participates in the generation of carbon offset projects. The Company operates principally through its wholly-owned subsidiary, Hudson Technologies Company.
The Company’s executive offices are located at 300 Tice Boulevard, Suite 290, Woodcliff Lake, New Jersey and its telephone number is (845) 735-6000. The Company maintains a website at www.hudsontech.com , the contents of which are not incorporated into this filing.
Unless the context requires otherwise, references to the “Company”, “Hudson”, “we”, “us”, “our”, or similar pronouns refer to Hudson Technologies, Inc. and its subsidiaries. The Company’s executive offices are located at 300 Tice Boulevard, Suite 290, Woodcliff Lake, New Jersey and its telephone number is (845) 735-6000.
Industry Background The Company participates in an industry that is highly regulated, and changes in the regulations affecting our business could affect our operating results. Currently the Company purchases virgin hydrofluoro-olefin (“HFO”) and hydrofluorocarbon (“HFC”) refrigerants and reclaimable, primarily hydrochlorofluorocarbon (“HCFC”), HFC and chlorofluorocarbon (“CFC”) refrigerants from suppliers and its customers.
The Company maintains a website at www.hudsontech.com , the contents of which are not incorporated into this filing. Industry Background The Company participates in an industry that is highly regulated, and changes in the regulations affecting our business could affect our operating results.
Removed
RefrigerantSide® Services consists of system decontamination to remove moisture, oils and other contaminants intended to restore systems to designed capacity. In addition, the Company’s SmartEnergy OPS® service is a web-based real time continuous monitoring service applicable to a facility’s refrigeration systems and other energy systems. The Company’s Chiller Chemistry® and Chill Smart® services are also predictive and diagnostic service offerings.
Added
Reclamation is not subject to the allowance system or restricted from use.
Removed
AIM Act In December 2020, Congress enacted the American Innovation and Manufacturing Act of 2020 (the “AIM Act”) in the United States that will require the phasedown of virgin production and consumption of HFCs, which will also increase opportunities for reclamation of HFCs.
Added
On October 6, 2023, the EPA announced the latest actions to phase down HFCs under the AIM Act: 1) Finalization of the Technology Transition Rule- The first new action is a final rule to accelerate the ongoing transition to more efficient and climate-safe technologies in new refrigeration, heating and cooling systems and other products by restricting the use of HFCs where alternatives are already available.
Removed
Information on the Company’s websites are not part of this report. 6 Table of Contents The Company’s sales personnel are compensated on a combination of a base salary and commission. The Company’s executive officers devote significant time and effort to customer relationships.
Added
The rule, which applies to both imported and domestically manufactured products, bans HFCs in certain equipment and sets a limit on the global warming potentials (GWPs) of the HFCs that can be used in each subsector, with compliance dates ranging from 2025 to 2028.
Added
In December 2023, the EPA announced an interim final rule on this matter, which provides an additional year, until January 1, 2026, for the installation of new residential and light commercial A/C and heat pump systems that use components manufactured or imported prior to January 1, 2025.
Added
Importantly, to qualify for the extended compliance deadline, all components of a system using the higher GWP HFC must be manufactured or imported prior to January 1, 2025. 2) Proposed Refrigerant Management Rule- The second action is a proposed rule to better manage and reuse existing HFCs, including by reducing wasteful leaks from equipment and supporting HFC recycling and reclamation.
Added
The Company also sells industrial gases to a variety of industry customers, predominantly to users in or involved with the US Military.
Added
Pursuant to the Act, reclaimed refrigerant must satisfy the same purity standards as newly manufactured, virgin refrigerants in accordance with standards established by AHRI prior to resale to a person other than the owner of the equipment from which it was recovered.
Added
The Company believes it has good relations with its employees.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur revenues, results of operations and cash flows are affected by market prices for refrigerant gases. Commodity prices generally are affected by a wide range of factors beyond our control, including weather, seasonality, the availability and adequacy of supply, government regulation and policies and general political and economic conditions.
Biggest changeCommodity prices generally are affected by a wide range of factors beyond our control, including weather, seasonality, the availability and adequacy of supply, government regulation and policies and general political and economic conditions. We are exposed to fluctuating commodity prices as the result of our inventory of various refrigerant gases. At any time, our inventory levels may be substantial.
Therefore, our business is substantially dependent on the availability of both new and used refrigerants in large quantities, which may be affected by several factors including, without limitation: (i) commercial production and consumption limitations imposed by the Act and legislative limitations and ban on HCFC refrigerants; (ii) the amendment to the Montreal Protocol, the AIM Act, and any legislation and regulation enacted to implement the amendment, could impose limitations on production and consumption of HFC refrigerants; (iii) introduction of new refrigerants and air conditioning and refrigeration equipment; (iv) price competition resulting from additional market entrants; (v) changes in government regulation on the use and production of refrigerants; and (vi) reduction in price and/or demand for refrigerants.
Therefore, our business is substantially dependent on the availability of both new and used refrigerants in large quantities, which may be affected by several factors including, without limitation: (i) commercial production and consumption limitations imposed by the Act and legislative limitations and ban on HCFC refrigerants; (ii) the amendment to the Montreal Protocol, the AIM Act, and any legislation and regulation enacted to implement the amendment, imposes limitations on production and consumption of HFC refrigerants; (iii) introduction of new refrigerants and air conditioning and refrigeration equipment; (iv) price competition resulting from additional market entrants; (v) changes in government regulation on the use and production of refrigerants; and (vi) reduction in price and/or demand for refrigerants.
As a result, we may be required to seek additional equity or debt financing in order to develop our RefrigerantSide® Services business, our refrigerant sales business and our other businesses. We have no current arrangements with respect to, or sources of, additional financing other than our existing credit facility and term loan.
As a result, we may be required to seek additional equity or debt financing in order to develop our RefrigerantSide® Services business, our refrigerant sales business and our other businesses. We have no current arrangements with respect to, or sources of, additional financing other than our existing credit facility.
Item 1A. Risk Factors There are many important factors, including those discussed below (and above as described under “Patents and Proprietary Information”), that have affected, and in the future could affect Hudson’s business including, but not limited to, the factors discussed below, which should be reviewed carefully together with the other information contained in this report.
Item 1A. Risk Factors There are many important factors, including those discussed below (and above as described under “Business-Patents and Proprietary Information”), that have affected, and in the future could affect Hudson’s business including, but not limited to, the factors discussed below, which should be reviewed carefully together with the other information contained in this report.
Our failure to obtain and resell sufficient quantities of virgin refrigerants on commercially reasonable terms, or at all, or to obtain, reclaim and resell sufficient quantities of used refrigerants would have a material adverse effect on our operating margins and results of operations. 12 Table of Contents Issues relating to potential global warming and climate change could have an impact on our business.
Our failure to obtain and resell sufficient quantities of virgin refrigerants on commercially reasonable terms, or at all, or to obtain, reclaim and resell sufficient quantities of used refrigerants would have a material adverse effect on our operating margins and results of operations. Issues relating to potential global warming and climate change could have an impact on our business.
Financial Covenants These conditions could impact our ability to meet our loan covenants which, if we are unable to obtain a waiver from our lenders, could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations. Our business is impacted by customer concentration.
Financial Covenants These conditions could impact our ability to meet our loan covenants which, if we are unable to obtain a waiver from our lenders, could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations. 10 Table of Contents Our business is impacted by customer concentration.
Some of the factors are beyond Hudson’s control and future trends are difficult to predict. Risks Related to Business Strategy and Operations Our existing and future debt obligations could impair our liquidity and financial condition.
Some of the factors are beyond Hudson’s control and future trends are difficult to predict. 9 Table of Contents Risks Related to Business Strategy and Operations Our existing and future debt obligations could impair our liquidity and financial condition.
If we are unable to maintain our listing on NASDAQ, the market liquidity of our common stock may be severely limited. Our management has significant control over our affairs. Currently, our officers and directors collectively beneficially own approximately 8.8% of our outstanding common stock.
If we are unable to maintain our listing on NASDAQ, the market liquidity of our common stock may be severely limited. 12 Table of Contents Our management has significant control over our affairs. Currently, our officers and directors collectively beneficially own approximately 7.8% of our outstanding common stock.
In December 2020, legislation was enacted in the United States that will require the phasedown of virgin production of HFCs. Risks Related to Our Common Stock and Other General Risks As a result of competition, and the strength of some of our competitors in the market, we may not be able to compete effectively.
In December 2020, AIM Act legislation was enacted in the United States that requires the phasedown of virgin production of HFCs. Risks Related to Our Common Stock and Other General Risks As a result of competition, and the strength of some of our competitors in the market, we may not be able to compete effectively.
Moreover, the terms of our credit facilities also include financial and negative covenants that, among other things, may limit our ability to incur additional indebtedness.
Moreover, the terms of our credit facility also includes financial and negative covenants that, among other things, may limit our ability to incur additional indebtedness.
In addition, we may not be able to successfully integrate any assets, liabilities, customers, systems or management personnel we may acquire into our operations and we may not be able to realize related revenue synergies and cost savings within expected time frames.
In addition, we may not be able to successfully integrate any assets, liabilities, customers, systems or management personnel we may acquire into our operations and we may not be able to realize related revenue synergies and cost savings within expected time frames. There can be no assurance that we will be able to successfully integrate any prior or future acquisition.
If we violate any loan covenants and do not obtain a waiver from our lenders, our indebtedness under the credit facilities would become immediately due and payable, and the lenders could foreclose on their security, which could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations. 9 Table of Contents Our revenues, results of operations and cash flows could be materially and adversely affected by changes in commodity prices.
If we violate any loan covenants and do not obtain a waiver from our lenders, our indebtedness under the credit facilities would become immediately due and payable, and the lenders could foreclose on their security, which could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations.
Our failure to comply with applicable laws, rules or regulations or permit requirements could subject us to civil remedies, including substantial fines, penalties and injunctions, as well as possible criminal sanctions, which would, if of significant magnitude, materially adversely impact our operations and future financial condition.
Our failure to comply with applicable laws, rules or regulations or permit requirements could subject us to civil remedies, including substantial fines, penalties and injunctions, as well as possible criminal sanctions, which would, if of significant magnitude, materially adversely impact our operations and future financial condition. 11 Table of Contents A number of factors could negatively impact the price and/or availability of refrigerants, which would, in turn, adversely affect our business and financial condition.
Our information technology systems provide critical data connectivity, information and services for internal and external users. These include, among other things, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, storing project information and other processes necessary to manage the business.
These include, among other things, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, storing project information and other processes necessary to manage the business.
If any of these events were to materialize, the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified and could have a material adverse effect on our reputation, operating results, and financial condition. Our business has been impacted by the COVID-19 pandemic.
If any of these events were to materialize, the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified and could have a material adverse effect on our reputation, operating results, and financial condition. Risks Related to Regulatory and Environmental Matters The nature of our business exposes us to potential liability.
Our existing credit facilities, consisting of an asset-based lending facility of up to $90 million from Wells Fargo Bank, National Association (“Wells Fargo Bank”) and other lenders, and a term loan with a principal balance of approximately $32 million from funds advised by TCW Asset Management Company, LLC, are secured by substantially all of our assets and the asset-based lending facility contains formulas that limit the amount of our future borrowings under that facility.
Our existing credit facility, consisting of an asset-based lending facility of up to $75 million from Wells Fargo Bank, National Association (“Wells Fargo Bank”) and other lenders, is secured by substantially all of our assets and contains formulas that limit the amount of our future borrowings under that facility.
Our contract with DLA expires in July 2026. For the years ended December 31, 2022 and 2021, the DLA accounted for 8% and 10% of our revenues.
Our contract with DLA expires in July 2026. For the years ended December 31, 2023, 2022 and 2021, the DLA accounted for 18%, 8% and 10% of our revenues. The loss of DLA as a customer could have a material adverse effect on our financial position and results of operations.
If these controls and strategies are not successful in mitigating our exposure to these fluctuations, we could be materially and adversely affected. We may need additional financing to satisfy our future capital requirements, which may not be readily available to us . Our capital requirements may be significant in the future.
We may need additional financing to satisfy our future capital requirements, which may not be readily available to us . Our capital requirements may be significant in the future. We may incur additional expenses in the development and implementation of our operations.
The loss of DLA as a customer could have a material adverse effect on our financial position and results of operations. ​ 10 Table of Contents Our information technology systems, processes, and sites may suffer interruptions, failures, or attacks which could affect our ability to conduct business.
Our information technology systems, processes, and sites may suffer interruptions, failures, or attacks which could affect our ability to conduct business. Our information technology systems provide critical data connectivity, information and services for internal and external users.
We are exposed to fluctuating commodity prices as the result of our inventory of various refrigerant gases. At any time, our inventory levels may be substantial. We have processes in place to monitor exposures to these risks and engage in strategies to manage these risks.
We have processes in place to monitor exposures to these risks and engage in strategies to manage these risks. If these controls and strategies are not successful in mitigating our exposure to these fluctuations, we could be materially and adversely affected.
A number of factors could negatively impact the price and/or availability of refrigerants, which would, in turn, adversely affect our business and financial condition. Refrigerant sales continue to represent a significant majority of our revenues.
Refrigerant sales continue to represent a significant majority of our revenues.
Removed
We may incur additional expenses in the development and implementation of our operations.
Added
Our revenues, results of operations and cash flows could be materially and adversely affected by changes in commodity prices. Our revenues, results of operations and cash flows are affected by market prices for refrigerant gases.
Removed
The public health crisis caused by the COVID-19 pandemic and the measures being taken by governments, businesses, including us, and the public at large to limit COVID-19’s spread may have certain negative impacts on our business including, without limitation, the following: • Although we have not experienced this during 2022, future potential disruptions in supply chains may place constraints on our ability to source refrigerants, which may increase our processing costs. • Governmental authorities in the United States and throughout the world may continue to increase or impose new income taxes or indirect taxes, or revise interpretations of existing tax rules and regulations, as a means of financing the costs of stimulus and other measures enacted or taken, or that may be enacted or taken in the future, to protect populations and economies from the impact of the COVID-19 pandemic.
Removed
Such actions could have an adverse effect on our results of operations and cash flows. • As a result of the COVID-19 pandemic, including related governmental guidance or directives, we have required most office-based employees to work remotely on a hybrid basis, i.e. part-time office and part-time away from the office.
Removed
We may experience reductions in productivity and disruptions to our business routines while our remote work policy remains in place. • Attempting to comply with rapidly evolving and conflicting legal requirements regarding vaccination and/or mandatory testing of our workforce. • Actions we have taken or may take, or decisions we have made or may make, as a consequence of the COVID-19 pandemic may result in legal claims or litigation against us.
Removed
Any of the negative impacts of the COVID-19 pandemic, including those described above, alone or in combination with others, may have a material adverse effect on our results of operations, financial condition and cash flows.
Removed
The full extent to which the COVID-19 pandemic will negatively affect our results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any further actions taken by governmental authorities and other third parties in response to the pandemic. 11 Table of Contents Risks Related to Regulatory and Environmental Matters The nature of our business exposes us to potential liability.
Removed
There can be no assurance that we will be able to successfully integrate any prior or future acquisition. 13 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeHudson’s key operational facilities are as follows: Location Owned or Leased Description Woodcliff Lake, New Jersey ​ Leased ​ Company headquarters and administrative offices Champaign, Illinois ​ Owned ​ Reclamation and separation of refrigerants and cylinder refurbishment Champaign, Illinois ​ Leased ​ Refrigerant packaging, cylinder refurbishment, RefrigerantSide® Service depot, refrigerant and industrial gases storage Smyrna, Georgia ​ Leased ​ Reclamation and separation of refrigerants and cylinder refurbishment center Smyrna, Georgia ​ Owned ​ Refrigerant storage Escondido, California ​ Leased ​ Refrigerant and Industrial gas storage and cylinder refurbishment center Ontario, California ​ Leased ​ Refrigerant reclamation and cylinder refurbishment center ​ ​
Biggest changeThe Company also maintains four smaller service depots for the performance of its RefrigerantSide® Services and maintains three sales and telemarketing offices. ​ 14 Table of Contents Hudson’s key operational facilities are as follows: Location Owned or Leased Description Woodcliff Lake, New Jersey ​ Leased ​ Company headquarters and administrative offices Champaign, Illinois ​ Owned ​ Reclamation and separation of refrigerants and cylinder refurbishment Champaign, Illinois ​ Leased ​ Refrigerant packaging, cylinder refurbishment, RefrigerantSide® Service depot, refrigerant and industrial gases storage Smyrna, Georgia ​ Leased ​ Reclamation and separation of refrigerants and cylinder refurbishment center Smyrna, Georgia ​ Owned ​ Refrigerant storage Escondido, California ​ Leased ​ Refrigerant and Industrial gas storage and cylinder refurbishment center Ontario, California ​ Leased ​ Refrigerant reclamation and cylinder refurbishment center ​ ​
The Company also sells industrial gases out of facilities located in Escondido, California and in Champaign, Illinois. The Company maintains smaller reclamation and cylinder refurbishing facilities in Ontario, California. The Company also maintains four smaller service depots for the performance of its RefrigerantSide® Services and maintains three sales and telemarketing offices.
The Company also sells industrial gases out of facilities located in Escondido, California and in Champaign, Illinois. The Company maintains smaller reclamation and cylinder refurbishing facilities in Ontario, California.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn addition, the Company has a credit facility with Wells Fargo Bank, National Association and a separate term loan that, among other things, restrict the Company’s ability to declare or pay any cash dividends on its capital stock.
Biggest changeIn addition, the Company has a credit facility with Wells Fargo Bank, National Association among other things, restricts the Company’s ability to declare or pay any cash dividends on its capital stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock trades on the NASDAQ Capital Market under the symbol “HDSN”. The number of record holders of the Company’s common stock was approximately 104 as of March 8, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock trades on the NASDAQ Capital Market under the symbol “HDSN”. The number of record holders of the Company’s common stock was approximately 87 as of March 8, 2024.
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Stock Price Performance Graph The following graph illustrates a comparison of the total cumulative five-year stockholder return of a $100 investment in our common stock on December 31, 2018, to two indices: the NASDAQ Composite Index and the Nasdaq Industrial Index.
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The stockholder return shown in the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. ​ 15 Table of Contents The above Stock Price Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSelling, general and administrative (“SG&A”) expenses for the year ended December 31, 2022 were $28.6 million, an increase of $2.0 million, or 7.5%, from the $26.6 million reported during the comparable 2021 period. The increase in SG&A was primarily due to increased payroll-related expenses, higher noncash stock compensation expense, and increased expenditures related to an enhanced information technology system.
Biggest changeThe increase in the cost of sales percentage from 61% to 50% is primarily due to the lower selling prices of certain refrigerants sold, as described above. Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2023 were $30.5 million, an increase of $1.9 million from the $28.6 million reported during the comparable 2022 period.
As a result, the Company capitalized an additional $0.9 million of deferred financing costs in connection with the amendment, which, along with the $0.2 million of remaining deferred financing costs of the original revolving facility, is being amortized over the remaining five year term of the Amended Wells Fargo Facility.
As a result, the Company capitalized an additional $0.9 million of deferred financing costs in connection with the amendment, which, along with the $0.2 million of remaining deferred financing costs of the original revolving facility, is being amortized over the five year term of the Amended Wells Fargo Facility.
Termination of Prior Term Loan Facility In conjunction with entry into the new Term Loan Facility as described above, on March 2, 2022 the Company’s existing term loans, as amended (the “Prior Term Loan Facility”), which had a principal balance of approximately $63.9 million after payment of a $16.0 million excess cash flow amount thereunder, were repaid in full, together with associated required lender fees and expenses of $3.3 million, and the Prior Term Loan Facility was terminated.
Termination of Prior Term Loan Facility In conjunction with entry into the new Term Loan Facility as described above, on March 2, 2022 the Company’s then-existing term loans, as amended (the “Prior Term Loan Facility”), which had a principal balance of approximately $63.9 million after payment of a $16.0 million excess cash flow amount thereunder, were repaid in full, together with associated required lender fees and expenses of $3.3 million, and the Prior Term Loan Facility was terminated.
The Company’s ability to sell and replace its inventory on a timely basis and the prices at which it can be sold are subject, among other things, to current market conditions and the nature of supplier or customer arrangements and the Company’s ability to source CFC and HCFC based refrigerants (which are no longer being produced) and HFC refrigerants (virgin production currently in the process of being phased down).
The Company’s ability to sell and replace its inventory on a timely basis and the prices at which it can be sold are subject, among other things, to current market conditions and the nature of supplier or customer arrangements and the Company’s ability to source CFC and HCFC based refrigerants (which are no longer being produced) and HFC refrigerants (virgin production currently in the process of being phased down) and HFO refrigerants.
The Amended Wells Fargo Facility also contains customary non-financial covenants relating to the Company and the Borrowers, including limitations on the Borrowers’ ability to pay dividends on common stock or preferred stock, and also includes certain events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, impairments to guarantees and a change of control. 19 Table of Contents The Company evaluated the Amended Wells Fargo Facility in accordance with the provisions of ASC 470-50 to determine if the amendment was a modification or an extinguishment of debt and concluded that the amendment was a modification of the original revolving credit facility for accounting purposes.
The Amended Wells Fargo Facility also contains customary non-financial covenants relating to the Company and the Borrowers, including limitations on the Borrowers’ ability to pay dividends on common stock or preferred stock, and also includes certain events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, impairments to guarantees and a change of control. 20 Table of Contents The Company evaluated the Amended Wells Fargo Facility in accordance with the provisions of ASC 470-50 to determine if the amendment was a modification or an extinguishment of debt and concluded that the amendment was a modification of the original revolving credit facility for accounting purposes.
Interest charges with respect to the FILO Tranche are computed on the actual principal amount of FILO Tranche loans outstanding at a rate per annum equal to (A) with respect to Base Rate FILO Tranche loans, the sum of (i) a rate per annum equal to the higher of (1) 1.0%, (2) the federal funds rate plus 0.5%, (3) one month term SOFR plus 1.0%, and (4) the prime commercial lending rate of Wells Fargo, plus (ii) 6.5% and (B) with respect to SOFR FILO Tranche loans, the sum of the applicable SOFR rate plus 7.50%.
Interest charges with respect to the FILO Tranche were computed on the actual principal amount of FILO Tranche loans outstanding at a rate per annum equal to (A) with respect to Base Rate FILO Tranche loans, the sum of (i) a rate per annum equal to the higher of (1) 1.0%, (2) the federal funds rate plus 0.5%, (3) one month term SOFR plus 1.0%, and (4) the prime commercial lending rate of Wells Fargo, plus (ii) 6.5% and (B) with respect to SOFR FILO Tranche loans, the sum of the applicable SOFR rate plus 7.50%.
Other intangible assets that meet certain criteria are amortized over their estimated useful lives. 15 Table of Contents An impairment charge is recorded based on the excess of a reporting unit’s carrying amount over its fair value. An impairment charge would be recognized when the carrying amount exceeds the estimated fair value of a reporting unit.
Other intangible assets that meet certain criteria are amortized over their estimated useful lives. 17 Table of Contents An impairment charge is recorded based on the excess of a reporting unit’s carrying amount over its fair value. An impairment charge would be recognized when the carrying amount exceeds the estimated fair value of a reporting unit.
Under the Act the phase-down of future production of certain virgin HCFC refrigerants commenced in 2010 and has been fully phased out by the year 2020, and production of all virgin HCFC refrigerants is scheduled to be phased out by the year 2030.
Under the Clean Air Act the phase-down of future production of certain virgin HCFC refrigerants commenced in 2010 and has been fully phased out by the year 2020, and production of all virgin HCFC refrigerants is scheduled to be phased out by the year 2030.
Such factors include, but are not limited to, changes in the laws and regulations affecting the industry, changes in the demand and price for refrigerants (including unfavorable market conditions adversely affecting the demand for, and the price of refrigerants), the Company’s ability to source refrigerants, regulatory and economic factors, seasonality, competition, litigation, the nature of supplier or customer arrangements that become available to the Company in the future, adverse weather conditions, possible technological obsolescence of existing products and services, possible reduction in the carrying value of long-lived assets, estimates of the useful life of its assets, potential environmental liability, customer concentration, the ability to obtain financing, the ability to meet financial covenants under our financing facilities, any delays or interruptions in bringing products and services to market, the timely availability of any requisite permits and authorizations from governmental entities and third parties as well as factors relating to doing business outside the United States, including changes in the laws, regulations, policies, and political, financial and economic conditions, including inflation, interest and currency exchange rates, of countries in which the Company may seek to conduct business, and integration of any other assets it acquires from third parties into its operations, the impact of the COVID-19 pandemic, and other risks detailed in this report and in the Company’s other subsequent filings with the Securities and Exchange Commission (“SEC”).
Such factors include, but are not limited to, changes in the laws and regulations affecting the industry, changes in the demand and price for refrigerants (including unfavorable market conditions adversely affecting the demand for, and the price of refrigerants), the Company’s ability to source refrigerants, regulatory and economic factors, seasonality, competition, litigation, the nature of supplier or customer arrangements that become available to the Company in the future, adverse weather conditions, possible technological obsolescence of existing products and services, possible reduction in the carrying value of long-lived assets, estimates of the useful life of its assets, potential environmental liability, customer concentration, the ability to obtain financing, the ability to meet financial covenants under our financing facility, any delays or interruptions in bringing products and services to market, the timely availability of any requisite permits and authorizations from governmental entities and third parties as well as factors relating to doing business outside the United States, including changes in the laws, regulations, policies, and political, financial and economic conditions, including inflation, interest and currency exchange rates, of countries in which the Company may seek to conduct business, the Company’s ability to successfully integrate any assets it acquires from third parties into its operations, and other risks detailed in this report, and in the Company’s other subsequent filings with the Securities and Exchange Commission (“SEC”).
The Company was in compliance with all covenants, under the Amended Wells Fargo Facility and the Term Loan Facility, as of December 31, 2022. The Company’s ability to comply with these covenants in future quarters may be affected by events beyond the Company’s control, including general economic conditions, weather conditions, regulations and refrigerant pricing.
The Company was in compliance with all covenants under the Amended Wells Fargo Facility as of December 31, 2023. The Company’s ability to comply with these covenants in future quarters may be affected by events beyond the Company’s control, including general economic conditions, weather conditions, regulations and refrigerant pricing.
(the “Company”) as a guarantor, entered into an Amended and Restated Credit Agreement (the “Amended Wells Fargo Facility”) with Wells Fargo Bank, National Association, as administrative agent and lender (“Agent” or 18 Table of Contents “Wells Fargo”) and such other lenders as have or may thereafter become a party to the Amended Wells Fargo Facility.
(the “Company”) as a guarantor, entered into an Amended and Restated Credit Agreement (the “Amended Wells Fargo Facility”) with Wells Fargo Bank, National Association, as administrative agent and lender (“Agent” or “Wells Fargo”) and such other lenders as have or may thereafter become a party to the Amended Wells Fargo Facility.
At December 31, 2022, cash and cash equivalents were $5.3 million, or approximately $1.8 million higher than the $3.5 million of cash and cash equivalents at December 31, 2021. Revolving Credit Facility On March 2, 2022, Hudson Technologies Company (“HTC”) and Hudson Holdings, Inc. (“Holdings”), as borrowers (collectively, the “Borrowers”), and Hudson Technologies, Inc.
At December 31, 2023, cash and cash equivalents were $12.4 million, or approximately $7.1 million higher than the $5.3 million of cash and cash equivalents at December 31, 2022. Revolving Credit Facility On March 2, 2022, Hudson Technologies Company (“HTC”) and Hudson Holdings, Inc. (“Holdings”), as borrowers (collectively, the “Borrowers”), and Hudson Technologies, Inc.
Under the terms of the Amended Wells Fargo Facility, the Borrowers may borrow up to $90 million consisting of: (i) $15 million immediately borrowed in the form of a “first in last out” term loan (the “FILO Tranche”) and (ii) from time to time, up to $75 million at any time consisting of revolving loans (the “Revolving Loans”) in a maximum amount up to the lesser of $75 million and a borrowing base that is calculated based on the outstanding amount of the Borrowers’ eligible receivables and eligible inventory, as described in the Amended Wells Fargo Facility.
The Amended Wells Fargo facility amended and restated the prior Wells Fargo Facility entered into on December 19, 2019. 19 Table of Contents Under the terms of the Amended Wells Fargo Facility, the Borrowers: (i) immediately borrowed $15 million in the form of a “first in last out” term loan (the “FILO Tranche”) and (ii) may borrow from time to time, up to $75 million at any time consisting of revolving loans (the “Revolving Loans”) in a maximum amount up to the lesser of $75 million and a borrowing base that is calculated based on the outstanding amount of the Borrowers’ eligible receivables and eligible inventory, as described in the Amended Wells Fargo Facility.
The commitments under the Amended Wells Fargo Facility will expire and the full outstanding principal amount of the loans, together with accrued and unpaid interest, are due and payable in full on March 2, 2027, unless the commitments are terminated and the outstanding principal amount of the loans are accelerated sooner following an event of default or in the event of certain other cross-defaults. 2022 Term Loan Facility On March 2, 2022, Hudson Technologies Company (“HTC”), an indirect subsidiary of Hudson Technologies, Inc.
The commitments under the Amended Wells Fargo Facility will expire and the full outstanding principal amount of the loans, together with accrued and unpaid interest, are due and payable in full on March 2, 2027, unless the commitments are terminated and the outstanding principal amount of the loans are accelerated sooner following an event of default or in the event of certain other cross-defaults.
Off-Balance Sheet Arrangements None. 21 Table of Contents Inflation Inflation, historically or the recent increase, has not had a material impact on the Company’s operations. Reliance on Suppliers and Customers The Company participates in an industry that is highly regulated, and changes in the regulations affecting our business could affect our operating results.
Inflation Inflation, historically or the recent increase, has not had a material impact on the Company’s operations. Reliance on Suppliers and Customers The Company participates in an industry that is highly regulated, and changes in the regulations affecting our business could affect our operating results.
For the year ended December 31, 2022, there was no customer accounting for greater than 10% of the Company’s revenues, but one customer accounted for over 10% of outstanding receivables at December 31, 2022.
For the year ended December 31, 2022, there was no customer accounted for 10% of the Company’s revenues but one customer accounted for over 10% of the outstanding accounts receivable at December 31, 2022.
Under the terms of the Term Loan Facility, the Borrowers immediately borrowed $85 million pursuant to a term loan (the “Term Loan”). Amounts borrowed under the Term Loan Facility were used by the Borrowers to repay the outstanding principal amount and related fees and expenses under the Prior Term Loan Facility (as defined below) and for other corporate purposes.
Amounts borrowed under the Term Loan Facility were used by the Borrowers to repay the outstanding principal amount and related fees and expenses under the Prior Term Loan Facility (as defined below) and for other corporate purposes. The Company paid approximately $4.3 million of term loan deferred financing costs.
There can be no assurance that the foregoing factors will not occur and result in a material adverse effect on the Company’s financial position and significant losses. The Company believes that to a lesser extent there is a similar seasonal element to RefrigerantSide® Service revenues as refrigerant sales.
There can be no assurance that the foregoing factors will not occur and result in a material adverse effect on the Company’s financial position and significant losses.
To the extent that actual results differ from management’s judgments and estimates, there could be a material adverse effect on the Company.
To the extent that actual results differ from management’s judgments and estimates, there could be a material adverse effect on the Company. On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its inventory reserves, goodwill and intangible assets.
The net income for the year ended December 31, 2022 was $103.8 million, an increase of $71.5 million from the $32.3 million of net income reported during the comparable 2021 period, primarily due to higher revenues, as described above.
The net income for the year ended December 31, 2023 was $52.2 million, a decrease of $51.6 million from the $103.8 million of net income reported during the comparable 2022 period, primarily due to lower revenues, higher cost of sales and a higher tax rate, as described above.
Overview The Company is a leading provider of sustainable refrigerant products and services to the Heating Ventilation Air Conditioning and Refrigeration (“HVACR”) industry.
There were no goodwill impairment losses recognized in any of the three years ended December 31, 2023, 2022 and 2021. Overview The Company is a leading provider of sustainable refrigerant products and services to the Heating Ventilation Air Conditioning and Refrigeration (“HVACR”) industry.
There can be no assurance that the Company’s proposed or future plans will be successful, and as such, the Company may require additional capital sooner than anticipated, which capital may not be available on acceptable terms, or at all.
There can be no assurance that the Company’s proposed or future plans will be successful, and as such, the Company may require additional capital sooner than anticipated, which capital may not be available on acceptable terms, or at all. 21 Table of Contents CARES Act Loan On April 23, 2020 the Company received a loan in the amount of $2.475 million from Meridian Bank under the Paycheck Protection Program (“PPP”) pursuant to the CARES Act.
The Amended Wells Fargo Facility also contains a sublimit of $9 million for swing line loans and $2 million for letters of credit. The Company currently has a $0.9 million letter of credit outstanding. Amounts borrowed under the Amended Wells Fargo Facility may be used for working capital needs, certain permitted acquisitions, and to reimburse drawings under letters of credit.
The Amended Wells Fargo Facility also contains a sublimit of $9 million for swing line loans and $2 million for letters of credit. The Company currently has a $0.9 million letter of credit outstanding. The FILO Tranche was repaid in full in July 2023 and may not be reborrowed.
Liquidity and Capital Resources At December 31, 2022, the Company had working capital, which represents current assets less current liabilities, of $124.2 million, an increase of $68.7 million from the working capital of $55.5 million at December 31, 2021.
Liquidity and Capital Resources At December 31, 2023, the Company had working capital, which represents current assets less current liabilities, of $146.4 million, an increase of $22.2 million from the working capital of $124.2 million at December 31, 2022. The increase in working capital is primarily attributable to continued profitability and the timing of borrowings, accounts receivable and inventory.
Results of Operations Year ended December 31, 2022 as compared to the year ended December 31, 2021 Revenues for the year ended December 31, 2022 were $325.2 million, an increase of $132.5 million or 69% from the $192.7 million reported during the comparable 2021 period. The increase was attributable to higher selling prices of certain refrigerants sold.
Results of Operations Year ended December 31, 2023 as compared to the year ended December 31, 2022 Revenues for the year ended December 31, 2023 were $289.0 million, a decrease of $36.2 million or 11% from the $325.2 million reported during the comparable 2022 period.
For 2022 and 2021, income tax expense for federal and state income tax purposes was determined by applying statutory income tax rates to pre-tax income after adjusting for certain items.
The key drivers of increased income tax expense are the reversal of valuation allowance during 2022 for federal NOLs that were fully utilized and can no longer reduce taxable income. Income tax expense for federal and state income tax purposes was determined by applying statutory income tax rates to pre-tax income after adjusting for certain items.
Interest under the Amended Wells Fargo Facility is payable in arrears on the first day of each month.
Amounts borrowed under the Amended Wells Fargo Facility may be used for working capital needs, certain permitted acquisitions, and to reimburse drawings under letters of credit. Interest under the Amended Wells Fargo Facility is payable in arrears on the first day of each month.
The increase in working capital is primarily attributable to increased profitability, accounts receivable and inventory, mainly as a result of increased pricing, as described above. Inventory and trade receivables are principal components of current assets. At December 31, 2022, the Company had inventory of $145.4 million, an increase of $51.3 million from $94.1 million at December 31, 2021.
Inventory and trade receivables are principal components of current assets. At December 31, 2023, the Company had inventory of $154.5 million, an increase of $9.1 million from $145.4 million at December 31, 2022.
At December 31, 2022, the Company had trade receivables, net of allowance for doubtful accounts, of $20.9 million, an increase of $6.7 million from $14.2 million at December 31, 2021. The Company’s trade receivables are concentrated with various wholesalers, brokers, contractors and end-users within the refrigeration industry that are primarily located in the continental United States.
The Company’s trade receivables are concentrated with various wholesalers, brokers, contractors and end-users within the refrigeration industry that are primarily located in the continental United States. The Company has historically financed its working capital requirements through cash flows from operations, debt, and the issuance of equity securities.
Amortization expense was $2.8 million during 2022 and 2021, respectively. Other expense for 2022 was $14.3 million, compared to the $8.9 million of other expense reported during the comparable 2021 period. Interest expense was higher due to the extinguishment of prior term loan debt and the related write-off of deferred financing fees, as described in “Liquidity and Capital Resources” below.
The increase in SG&A was primarily due to an increased number of employees and stock compensation. Amortization expense was $2.8 million during 2023 and 2022, respectively. Other expense for 2023 was $8.4 million, compared to the $14.3 million of other expense reported during the comparable 2022 period.
The variance is primarily due to increased net income in 2022, primarily as a result of increased selling price of certain refrigerants sold, partially offset by increased accounts receivable and inventories. Net cash used in investing activities for 2022 was $3.7 million when compared to the net cash used in investing activities of $1.9 million for the comparable 2021 period.
Net cash used in investing activities for 2023 was $3.6 million when compared to the net cash used in investing activities of $3.7 million for the comparable 2022 period. Net cash used in financing activities for 2023 was $47.8 million, compared with net cash used in financing activities of $57.4 million for 2022.
The Company has historically financed its working capital requirements through cash flows from operations, the issuance of debt and equity securities, and bank borrowings. Net cash provided operating activities for the year ended December 31, 2022 was $62.8 million, when compared to the net cash used in operating activities of $1.2 million for the comparable 2021 period.
Net cash provided by operating activities for the year ended December 31, 2023 was $58.5 million, when compared to the net cash provided by operating activities of $62.8 million for the comparable 2022 period. As discussed above, selling prices of certain refrigerants declined in 2023. Another contributory factor was the timing of accounts receivable and inventory balances.
Higher selling prices were fueled in part by the implementation of the AIM Act and the virgin HFC allocation system. Cost of sales for the year ended December 31, 2022 was $162.3 million or 50% of sales. Cost of sales for the year ended December 31, 2021 was $121.1 million or 63% of sales.
The decrease was mainly attributable to lower selling prices of certain refrigerants sold, partially offset by increase in revenues from our DLA and carbon credit programs. Cost of sales for the year ended December 31, 2023 was $177.5 million or 61% of sales. Cost of sales for the year ended December 31, 2022 was $162.3 million or 50% of sales.
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On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its inventory reserves, valuation allowance for the deferred tax assets relating to its net operating loss carry forwards (“NOLs”) and goodwill and intangible assets.
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During the third quarter of 2023, the Company repaid in full the remaining $32.5 million principal balance outstanding under its Term Loan Facility. In conjunction with this payoff, the Company recorded a non-cash write off of $3.4 million of deferred financing costs.
Removed
During the fourth quarter of 2022, we completed our annual impairment test as of October 1 and determined in our qualitative assessment that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, resulting in no goodwill impairment.
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Similarly, during the first quarter of 2022, the Company recorded a non-cash write off of $4.7 million of deferred financing cost.
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The Company’s performance and profitability has improved in 2021 and 2022, mainly from increased pricing, as discussed in Results of Operations; however, there can be no assurances that future sustained declines in macroeconomic or business conditions affecting our industry will not occur, which could result in goodwill impairment charges in future periods.
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Excluding these write offs, total interest expense for the year 2023 decreased by $4.7 million from the comparable 2022 period. 18 Table of Contents Income tax expense for 2023 was $17.6 million compared to income tax expense of $13.4 million for 2022.
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There were no goodwill impairment losses recognized in any of the two years ended December 31, 2022 and 2021. Other Intangibles Intangibles with determinable lives are amortized over the estimated useful lives of the assets currently ranging from 6 to 13 years. The Company reviews these useful lives annually to determine that they reflect future realizable value.
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Year ended December 31, 2022 as compared to the year ended December 31, 2021 Management’s discussion and analysis of the year ended December 31, 2022 as compared to the year ended December 31, 2021 is contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2023.
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As described above, due to increased profitability, we believe that these other intangibles are fairly stated. Income Taxes The Company is taxed at statutory corporate income tax rates after adjusting income reported for financial statement purposes for certain items. Current income tax expense reflects the tax results of revenues and expenses currently taxable or deductible.
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At December 31, 2023, the Company had trade receivables, net of credit losses, of $25.2 million, an increase of $4.3 million from $20.9 million at December 31, 2022, mainly due to timing. The Company typically generates its most significant revenue during the second and third quarters of any given year.
Removed
The Company utilizes the asset and liability method of accounting for deferred income taxes, which provides for the recognition of deferred tax assets or liabilities, based on enacted tax rates and laws, for the differences between the financial and income tax reporting bases of assets and liabilities.
Added
The Company refinanced its term loan debt during the first quarter of 2022, as described below, and paid off its remaining $32.5 million term loan debt during the third quarter of 2023.
Removed
The tax benefit associated with the Company’s net operating loss carry forwards (“NOLs”) is recognized to the extent that the Company expects to realize future taxable income. To the extent that the Company utilizes its NOLs, it will not pay tax on such income.
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Termination of 2022 Term Loan Facility On March 2, 2022, Hudson Technologies Company (“HTC”), an indirect subsidiary of Hudson Technologies, Inc.
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However, to the extent that the Company’s net income, if any, exceeds the annual NOL limitation, it will pay income taxes based on the then existing statutory rates. In addition, certain states either do not allow or limit NOLs and as such the Company will be liable for certain state income taxes.
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Under the terms of the Term Loan Facility, the Borrowers immediately borrowed $85 million pursuant to a term loan (the “Term Loan”), which had a maturity date in March 2027.
Removed
During the year ended December 31, 2022, the Company utilized all of its remaining $29.3 million of federal NOLs. As of December 31, 2022, the Company had state tax NOLs of approximately $1.5 million, expiring in various years.
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During the third quarter of 2023, the Company repaid in full the remaining principal balance outstanding under the Term Loan Facility and the FILO Tranche.
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The Company reviews the likelihood that it will realize the benefit of its deferred tax assets, and therefore the need for valuation allowances, on a quarterly basis. In determining the requirement for a valuation allowance, the historical and projected financial results are considered, along with all other available positive and negative evidence.
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For the year ended December 31, 2023, there was one customer accounting for greater than 10% of the Company’s revenues and one customer accounted for over 10% of the outstanding accounts receivable at December 31, 2023.
Removed
Concluding that a valuation allowance is not required is difficult when there is significant negative evidence that is objective and verifiable, such as cumulative losses in recent years.
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The Company believes that to a lesser extent there is a similar seasonal element to RefrigerantSide® Service revenues as refrigerant sales. 22 Table of Contents Recent Accounting Pronouncements See recent accounting pronouncements set forth in Note 1 of the financial statements contained in this report and commitments and contingencies noted in Note 11 thereof.
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We utilize a rolling twelve quarters of pre-tax income or loss adjusted for significant permanent book to tax differences, as well as non-recurring items, as a measure of our cumulative results in recent years.
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Based on our assessment as of December 31, 2019, 2020 and 2021, we concluded that due to the uncertainty that the deferred tax assets will not be fully realized in the future, we recorded a valuation allowance of approximately $11.3 million during 2018, and due to additional losses, increased the valuation allowance through 2019 and 2020 to $19.0 million.
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As described further in Results of Operations and Liquidity and Capital Resources, the Company has increased profitability in 2021 and 2022, while also generating significant cash flows and paying down over 50% of its debt.
Removed
For the year ended December 31, 2021, and due to additional income that resulted in the utilization of net operating losses of $16.8 million, we reduced the valuation allowance by $3.9 million resulting in an ending balance of $15.1 million as of December 31, 2021.
Removed
During the year ended December 31, 2022, the Company concluded that its deferred tax assets are more likely than not to become realizable, and as such, the Company reversed all $15.1 million of its existing valuation allowance.
Removed
The conclusion that a valuation allowance was no longer needed was based on the current year achievement of three years of cumulative pre-tax income, current year utilization of the Company’s $29.3 million Federal NOLs, which comprised a majority of the Company’s deferred tax assets, combined with estimates of future years’ pre-tax income that are sufficient to realize the remaining deferred tax assets.
Removed
The amount of the deferred tax asset considered realizable can change if 16 Table of Contents estimates of future taxable income change or if objective negative and positive evidence changes. While pricing and volume in future periods are uncertain, the Company has mitigated this risk by deleveraging its balance sheet and managing the business to reduce future risk.
Removed
The Company evaluates uncertain tax positions, if any, by determining if it is more likely than not to be sustained upon examination by the taxing authorities. As of December 31, 2022 and December 31, 2021, the Company believes it had no uncertain tax positions and there are no open federal or state examinations.
Removed
The reduction in the cost of sales percentage from 63% to 50% is primarily due to higher selling prices and lower costs of certain refrigerants sold during the year 2022 when compared to the year 2021.
Removed
In addition, during the third quarter of 2021, the Company received forgiveness of the PPP loan from the SBA, resulting in $2.5 million of Other income. 17 Table of Contents Income tax expense for 2022 was $13.4 million compared to income tax expense of $1.1 million for 2021.
Removed
The tax provision during the year ended December 31, 2022 includes a $15.1 million tax benefit related to its valuation allowance release.
Removed
The effective tax rate for the year ended December 31, 2022 was 11.3% compared to 2.7% for 2021.The key driver of higher income tax expense was due to increased profitability and the release of the Company’s remaining valuation allowance in 2022.
Removed
The increase in the inventory balance is primarily due to increases in inventory cost in 2022, consistent with the increase in selling price of certain refrigerants.
Removed
The increase was mainly due to increased expenditures relating to the implementation of a new Enterprise Resource Planning system in 2022, as well as the timing of capital expenditures related to our plants. Net cash used in financing activities for 2022 was $57.4 million, compared with net cash provided by financing activities of $5.3 million for 2021.
Removed
The Company refinanced its term loan debt during the first quarter of 2022 and received $100 million in proceeds, along with incurring $8.5 million of deferred financing cost. The Company utilized most of its cash flow from operations to pay down debt for the remainder of the year. Total debt repayment in 2022 was $148 million.
Removed
The Amended Wells Fargo facility amended and restated the prior Wells Fargo Facility entered into on December 19, 2019.
Removed
The Company paid approximately $4.3 million of term loan deferred financing costs. The Term Loan matures on March 2, 2027, or earlier upon certain acceleration or cross default events.
Removed
Principal payments on the Term Loan are required on a quarterly basis, commencing with the quarter ended March 31, 2022, in the amount of 5% of the original principal amount of the outstanding Term Loan per annum.
Removed
The Term Loan Facility also requires annual payments of 50% of Excess Cash Flow (as defined in the Term Loan Facility); provided that commencing with the year ending December 31, 2023 such payments may be reduced depending upon the Company’s leverage ratio (as defined in the Term Loan Facility) for the applicable year.
Removed
The Term Loan Facility also requires mandatory prepayments of the Term Loan in the event of certain asset dispositions, debt issuances, and other events.
Removed
The Term Loan may be prepaid at the option of the Borrowers subject to a prepayment premium of 3% in year one, 2% in year two, 1% in year three, and zero in year four and thereafter. Interest on the Term Loan is generally payable monthly, in arrears.
Removed
Interest charges with respect to the Term Loan are computed on the actual principal amount of the Term Loan outstanding at a rate per annum equal to (A) with respect to Base Rate loans, the sum of (i) a rate per annum equal to the higher of (1) 2.0%, (2) the federal funds rate plus 0.5%, (3) one month term SOFR plus 1.0%, and (4) the prime commercial lending rate quoted by The Wall Street Journal, plus (ii) between 6.0% and 7.0% depending on the applicable leverage ratio and (B) with respect to SOFR loans, the sum of the applicable SOFR rate plus between 7.0% and 8.0% depending on the applicable leverage ratio.
Removed
Borrowers and the Company granted to the Term Loan Agent, for the benefit of the Term Loan Lenders, a security interest in substantially all of their respective assets, including receivables, equipment, general intangibles (including intellectual property), inventory, subsidiary stock, real property, and certain other assets.
Removed
The Term Loan Facility contains a fixed charge coverage ratio covenant and a leverage ratio covenant, each tested quarterly.
Removed
The fixed charge coverage ratio (“FCCR”) covenant requires compliance with specified levels of (i) EBITDA minus unfunded capital expenditures to (ii) interest expense, scheduled principal payments, and other specified payments, in each case as specified in the Term Loan Facility, for a trailing four quarter period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Term Loan Facility has a balance of $31,812,500 as of December 31, 2022. Future interest rate changes on our borrowing under the Term Loan Facility and the Amended Wells Fargo Facility may have an impact on our consolidated results of operations.
Biggest changeFuture interest rate changes on our borrowing under the Amended Wells Fargo Facility may have an impact on our consolidated results of operations. Refrigerant Market We are also exposed to market risk from fluctuations in the demand, price and availability of refrigerants.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Sensitivity We are exposed to market risk from fluctuations in interest rates on the Amended Wells Fargo Facility and on the Term Loan Facility. The Amended Wells Fargo Facility is a $90,000,000 secured facility with a $15,000,000 outstanding balance as of December 31, 2022.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Sensitivity We are exposed to market risk from fluctuations in interest rates on the Amended Wells Fargo Facility. The Amended Wells Fargo Facility is a $75 million secured facility with a $0.0 million outstanding balance as of December 31, 2023.
Removed
If the loan bearing interest rate changed by 1%, the annual effect on interest expense would be approximately $0.9 million as of December 31, 2022. Refrigerant Market We are also exposed to market risk from fluctuations in the demand, price and availability of refrigerants.

Other HDSN 10-K year-over-year comparisons