10-K

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

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

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

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

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

Indicate by check mark whether the Registrant: (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 Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 Registrant was required to submit such files). Yes ☒ 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 whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “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 Exchange Act). Yes ☐ No ☒

The aggregate market value of the common stock held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on June 30, 2023, was $2,510,508.

The number of shares of Registrant’s Common Stock outstanding as of March 25, 2024 was 13,006,162.

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of 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.

Scott’s Liquid Gold-Inc., a Colorado corporation, was incorporated on February 15, 1954. In this Report the terms “we,” “us,” or “our” refer to Scott’s Liquid Gold-Inc. and our subsidiaries, collectively. We develop, market, and sell high quality products. Our business is comprised of one segment, household products. During 2023, our family of brands included:

In December 2022, we sold the Prell® brand, in January 2023 we sold the Scott’s Liquid Gold® brand, and in June 2023 we sold the BIZ® and Alpha® Skin Care brands. In September 2023 we sold our wholly owned subsidiary Neoteric Cosmetics, Inc. (“Neoteric”), which included the Neoteric Diabetic Skin Care®, Denorex®, and Zincon® brands through a stock purchase agreement. We sold each of these brands to unaffiliated buyers.

Alpha® Skin Care, Neoteric Diabetic Skin Care®, Denorex®, and Zincon® brands previously comprised our health and beauty care segment. Upon the sale of these various brands throughout 2023, our business now operates under a single household products segment consisting of our Kids N Pets® and Messy Pet® product lines. Kids N Pets® and Messy Pet® represent our continuing operations in all periods presented.

In conjunction with the sale of the Scott’s Liquid Gold® brand, the Company may continue to use names “Scott’s Liquid Gold” and “SLG” for up to one year following the closing date of the agreement on January 23, 2023. On December 6, 2023, the Company signed a Second Amendment to the Asset Purchase Agreement which extended the use of the aforementioned names to eighteen months following the closing date of the agreement on January 23, 2023. Following this transitional name period, the Company will only be able to use the aforementioned names in connection with retaining records and other historical or archived documents and any use required by or permitted as a fair use or otherwise under applicable law.

On October 1, 2019, we acquired the 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 December 19, 2023, Scott’s Liquid Gold-Inc. (the “Company”), Horizon Kinetics LLC (“Horizon Kinetics”) and HKNY ONE, LLC, a wholly-owned subsidiary of the Company (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), providing for the acquisition of Horizon Kinetics by the Company. The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, upon obtaining the requisite shareholder approval, (i) the Company will convert from a Colorado to a Delaware corporation, increase its authorized shares of common stock and change its name and (ii) Merger Sub will be merged with and into Horizon Kinetics, with Horizon Kinetics being the surviving entity (collectively, the “Merger”).

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 marketing in print, social and digital media; and (3) to a lesser extent, consumer incentives such as coupons and rebates.

Our products are sold nationally through our sales force to mass merchandisers, hardware stores, e-commerce retailers, and other retail outlets and to wholesale distributors.

The table set forth below shows net sales to our significant customers from continuing operations as a percentage of consolidated net sales during 2023 and 2022:

As is typical in our industry, we do not have long-term contracts with any retail customer.

International sales were historically made to distributors who were responsible for the selling and marketing of the products. With the sale of the Scott’s Liquid Gold® brand in January 2023, we no longer have any products distributed internationally.

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.

From time to time, our customers return products to us. For our household products, we permit returns only for a limited time. For our health and beauty care products, returns are accepted for a greater period of time in order to maintain or enhance our relationship with the customer. Typically, customers are granted a credit equal to the original sale price plus a handling charge.

Almost all of the raw and packaging materials used by the Company are purchased from third parties, some of whom are single-source suppliers. The prices we pay for materials 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 experienced limited supply constraints and commodity costs increases for certain raw materials and finished goods. When prices for these items change, we may or may not be able to pass the change to our customers. The Company expects continued volatility and increased cost pressures in both commodities and transportation to continue in fiscal year 2024.

The household product category is highly competitive and innovative. We compete 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 primarily on the basis of quality, brand recognition, and the distinguishing characteristics of our product.

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. We believe that we are producing and marketing all of our products in compliance with all applicable laws and regulations in the markets in which we participate.

Our advertising is subject to regulation under the Federal Trade Commission Act and related regulations, which prohibit false and misleading claims in advertising. Private 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 profitability, result in regulatory actions, or private or derivative claims.

As of December 31, 2023, we employed 8 people, who work in administrative, sales, advertising, marketing and operational 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.

On December 21, 2023, the Board and the Company’s President and Principal Executive Officer, Tisha Pedrazzini, agreed that Ms. Pedrazzini would resign as the Company’s Principal Executive Officer and a director effective December 31, 2023. On December 21, 2023, the Board reduced the size of the Board to three seats and appointed David M. Arndt to the hold the position of President and Principal Executive Officer in addition to continuing to serve as the Company’s Chief Financial Officer.

No contracts exist between us and any union. The compensation of our executive officers is subject to annual review by the Compensation Committee of our Board of Directors.

We actively use our registered trademarks for Kids N Pets® and Messy Pet® 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, Alpha® Skin Care, Denorex®, Zincon®, Neoteric Diabetic Skin Care®, and BIZ® as part of the sale of those brands in 2023.

Our website address is www.slginc.com. The information contained on our website is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. We make available, free of charge, on our website our Annual Reports on Form 10-K, our Quarterly 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 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 as soon as reasonably practicable after we have electronically filed such material with, or furnished it to, the United States Securities and Exchange Commission (the “SEC”). You may also access and read our filings without charge through the SEC’s website at www.sec.gov.

Our Code of Business Conduct and Ethics Policy, 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 at 8400 East Crescent Parkway, Suite 450, Greenwood Village, Colorado 80111.

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.

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 these major retail stores and other retail stores carrying our 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.

Any declines in sales of our products to consumers could result in the loss of retail customers and a corresponding decrease in the distribution of the products, as well as increased costs related to any markdown or return of our products. It is uncertain whether the consumer base served by these stores would purchase our products at other retail stores.

A continued change in the consumer product retail market may cause our sales to decline.

Our performance 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 the 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.

Our competitors include some of the largest consumer products companies in the United States.

The market 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 result, are able to regularly introduce new products and spend considerably more 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 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 particular advertisement and marketing cannot be predicted. Additionally, we may not be able to obtain optimal effectiveness at our current advertising and marketing budget. Our limited resources to promote our products through advertising and marketing may adversely affect our net sales and operating results.

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 health and beauty care and household products. Any changes in consumer preferences can materially affect the sales of our products and the results of our operations.

Our future performance and growth is dependent, in part, on the introduction of new or acquired products or businesses.

On December 19, 2023, the Company, Horizon Kinetics and Merger Sub entered into the Merger Agreement, providing for the acquisition of Horizon Kinetics by the Company. The proposed transaction entails important risks, including, among others: the expected timing and likelihood of completion of the proposed transaction, including the timing, receipt and terms and conditions of any required governmental and regulatory clearance of the proposed transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; the inability to consummate the proposed transaction due to the failure to satisfy other conditions to complete the proposed transaction; risks that the proposed transaction disrupts our current plans and operations; the amount of the costs, fees, expenses and charges related to the proposed transaction; the risk that transaction and/or integration costs are greater than expected, including as a result of conditions regulators put on any approvals of the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; and other risks to be described in our filings with the SEC.

The Company’s ability to utilize its net operating loss (“NOL”) carryforwards may be substantially limited due to ownership changes that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax, respectively. Further, if the Company experiences such an ownership change and does not satisfy certain requirements in Section 382 of the Code to continue its business enterprise (which generally requires that the Company continue its historic business or use a significant portion of its historic business assets in a business for the two-year period beginning on the date of the ownership change), its NOL carryforwards may be disallowed, subject to certain exceptions. In general, an “ownership change,” as defined by Section 382 of the Code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain stockholders or public groups.

In addition, 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.

Our directors, officers, and current principal stockholders own a large percentage of our common stock and could limit other stockholders’ influence over corporate decisions.

As of March 25, 2024, our directors, officers, and current stockholders holding more than 5% of our common stock collectively beneficially own, directly or indirectly, in the aggregate, approximately 41.2% of our outstanding common stock, with Maran Capital beneficially owning 40.3% of our outstanding common stock. As a result, these stockholders acting alone or together may be capable of controlling most matters requiring stockholder approval, including the election of directors, approval of acquisitions requiring the issuance of a significant amount of the Company’s equity, approval of equity incentive plans, and other significant corporate transactions. The interests of these stockholders may not always coincide with our corporate interests or the interests of our other stockholders, and they may act in a manner with which some stockholders may not agree or that may not be in the best interests of all stockholders.

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.

Our stock is traded on the OTC Pink Market tier of the OTC Markets. The volume of trades in our 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 stock and can result in significant declines in the market price of our stock.

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 registered U.S. and foreign country trademarks. These forms of intellectual property protection are critically important to our ability to establish and maintain our competitive position. However, it is possible that laws, contractual restrictions, and other efforts may not be sufficient to prevent misappropriation of our property or to deter others from developing similar intellectual property.

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 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, resulting in legal claims or proceedings, which could disrupt our operations and damage our reputation, adversely affect our operating results and stock price.

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.

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 may adversely affect, consumer demand for some of our products, resulting in reduced sales volume and 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.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud, and, as a result, investors could lose confidence in our financial reporting, which could adversely affect our business and the value of our shares.

We are required to include in our annual reports filed with the SEC a report from our management regarding internal control over financial reporting. As a result, we documented and evaluated our internal control over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act and SEC rules and regulations, which require an annual management report on our internal control over financial reporting, including, among other matters, management's assessment of the effectiveness of internal control over financial reporting. Failure or circumvention of our system of internal control could have an adverse effect on our business, profitability, and financial condition, and could result in regulatory actions and loss of investor confidence. Additionally, if we fail to identify and correct any significant deficiencies or material weaknesses in the design or operating effectiveness of our internal control over financial reporting or fail to prevent fraud, current and potential stockholders could lose confidence in our financial reporting, which could adversely affect our business, financial condition and results of operations, and the value of our shares.

We have identified a material weakness in our internal control over financial reporting.

Based on management’s assessment, we have identified a material weakness in our controls related to our finance department lacking a sufficient number of trained professionals with technical accounting expertise to process and account for complex, non-routine transactions in accordance with GAAP. The material weakness that we previously reported was identified as of June 30, 2023, and the deficiencies in internal control over financial reporting were detailed in Item 4 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. The specific factors leading to this conclusion are described in Part II – Item 9A.“Controls and Procedures” of this Annual Report on Form 10-K. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim Consolidated Financial Statements would not be prevented or detected on a timely basis.

This material weakness did not result in any restatements to our Consolidated Financial Statements. As of December 31, 2023, this material weakness had not been remediated. If our remedial measures are insufficient, or if additional material weakness or significant deficiencies in our internal control over financial reporting or in our disclosure controls occur in the future, our future Consolidated Financial Statements or other information filed with the SEC may contain material misstatements and could require a restatement of our Consolidated Financial Statements, cause us to fail to meet our reporting obligations or cause investors to lose confidence in our reported financial information, leading to a decline in the market value of our securities.

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

Generally, the manufacture, processing, formulation, packaging, labeling, storage, distribution, advertising and sale of the Company’s products and the conduct of its business operations must comply with extensive federal, state and foreign laws and regulations. For example, in the U.S., many of the Company’s products are regulated by the Environmental Protection Agency, the Food and Drug Administration (including applicable current good manufacturing practice regulations) and/or the Consumer Product Safety Commission, and the Company’s product claims and advertising are regulated by the Federal Trade Commission, among other regulatory agencies. Additionally, the Company’s and its suppliers’ manufacturing and distribution operations are also subject to regulation by the Occupational Safety and Health Administration. Most states have agencies that regulate in parallel to these federal agencies. Additionally, the Company could be subject to future inquiries or investigations by governmental and other regulatory bodies. Any determination that the Company’s operations or activities are not in compliance with applicable law could expose the Company to future impairment charges or significant fines, penalties or other sanctions that may result in a reduction in net income or otherwise adversely impact the business and reputation of the Company.

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 operating results.

The Company utilizes information systems to support a variety of business processes and activities in its operations. These systems may be subject to cyber-based attacks or breaches. Some examples of the cybersecurity threats that could negatively impact the Company are denial of service attacks, excessive port scans, firewall breach and computer virus outbreak.

Cybersecurity risk management is part of management’s annual risk assessment program. In order to manage the risks associated with cybersecurity threats, the Company maintains a risk-based cybersecurity program consisting of processes, technologies, and controls to assess, identify and manage material risks from cybersecurity threats.

While the Company's information systems are exposed to cybersecurity threats and risks, the Company has not experienced any material cybersecurity incidents affecting its business strategy, results of operations, or financial condition, and any costs or operational impacts related to cybersecurity incidents were immaterial during the period presented.

For additional information related to the risks associated with cybersecurity threats, refer to the Information Security, Cybersecurity and Data Privacy Risks section of Item 1A. Risk Factors.

The Company’s Board of Directors is responsible for providing oversight and strategic guidance to management to support the long-term interests of the Company's shareholders. The Audit Committee is the lead committee of the Board of Directors responsible for oversight of the Company’s risk-based cybersecurity program and bears the primary responsibility for oversight of this aspect of the business. As part of this responsibility, the Audit Committee of the Board of Directors annually reviews the Company's Information Security Incident Response Plan.

On a quarterly basis, or more often as applicable, any cybersecurity incidents are summarized and reported to the Audit Committee of the Board of Directors which cover any identified cybersecurity incidents, results of third-party vulnerability testing, and key developments in policies.

The Company’s cybersecurity risk management is managed by the President and Chief Financial Officer.

The Company engages with a range of third-party experts, including cybersecurity assessors, consultants, and auditors in evaluating and testing its risk management systems. These relationships enable management to leverage specialized knowledge and insights with respect to the Company’s cybersecurity strategies and processes.

We lease our corporate headquarter facilities in Greenwood Village, Colorado. Please see Note 7 to our Consolidated Financial Statements for more information on our facilities.

Effective November 29, 2023, the Company entered into a sublease agreement (the "Sublease") with the consent of our landlord pursuant to which the Company will sublease the premises for a term commencing on April 1, 2024 and continuing until March 31, 2027 with the option to renew until the expiration of the Lease on March 31, 2030.

Through our annual assessment conducted in December 2023, we concluded that the Sublease triggered the need for a quantitative review of the carrying values of our operating lease right-of-use assets and resulted in an impairment charge for the year ended December 31, 2023.

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

Our $0.10 par value common stock is traded on the OTC Pink Market tier of the OTC Markets (an electronic inter-dealer quotation 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 Pink Market tier of the OTC Markets were as follows:

As of March 25, 2024, based on inquiry, we had approximately 612 shareholders of record.

We did not pay any cash dividends during the two most recent fiscal years. We do not anticipate paying dividends in the foreseeable future.

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.

On September 15, 2023, we entered into and consummated a Stock Purchase Agreement with a buyer to sell 100% of the outstanding stock of our wholly owned subsidiary Neoteric Cosmetics, Inc. ("Neoteric). Effective June 30, 2023, and closed in July 2023, we sold the Alpha® Skin Care product line to a company that markets and distributes skin care products. Effective June 30, 2023, and closed in July 2023, we sold the BIZ® product line to a company that markets and distributes laundry products. On January 23, 2023, we sold the Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor Restore product lines to a company that markets and distributes wood care products. 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 Neoteric, Alpha® Skin Care, BIZ®, Scott's Liquid Gold® and Prell® 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 these brands.

In conjunction with the sale of the Scott’s Liquid Gold® brand, as discussed below, the Company may continue to use names “Scott’s Liquid Gold” and “SLG” for up to eighteen months following the closing date of the agreement on January 23, 2023. Following this transitional name period, the Company will only be able to use the aforementioned names in connection with retaining records and other historical or archived documents and any use required by or permitted as a fair use or otherwise under applicable law.

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 products 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 2023, the Company achieved objectives focused on optimization, cost reduction, and modernization of our business. These included (but were not limited to) the following:

Looking forward, we are focused on both short- and long-term strategies that we believe will enhance our financial health and deliver shareholder value. The Company entered into the Merger Agreement with the purpose of creating meaningful shareholder value for all shareholders of the combined entity.

While the marketplace for household products 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:

Please see Note 6 to our Consolidated Financial Statements for information on our La Plata Loan Agreement, which was satisfied and terminated in July 2023, and our UMB Loan Agreement, which was satisfied and terminated in February 2023.

At December 31, 2023, we had approximately $3,927 in cash on hand, an increase of $3,878 from December 31, 2022.

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

The cash received from the sales of our BIZ® and Alpha® Skin Care brands in July 2023 was $3,700 and was partially used to pay off and terminate our La Plata Loan Agreement. Cash proceeds from the sale of Neoteric will be used to fund operations as we seek to grow our existing business while closing the Merger. While we believe that our current cash reserves represent sufficient cash to fund our operations, our liquidity has been affected by inflationary pressures at our customers which have caused sales decreases and higher costs on materials, logistics, and other purchases. We expect that our current cash reserves will be sufficient to meet operational cash needs during the next twelve months, but further economic impacts to our sales to customers or supply chain disruptions in the short-term could impact our liquidity.

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.

Our revenue recognition policy is significant because the amount and timing of revenue is a key component of our results of operations. See Note 1(k), “Revenue Recognition” in our Consolidated Financial Statements in Item 8 for additional discussion.

Long-lived assets are tested for impairment at the reporting unit level, which is the level at which discrete financial information is available and reviewed by management. For fiscal year 2023, the Company’s reporting units for 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 long-lived 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 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 regulatory restrictions and the economic environment where the products are sold.

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 long-lived assets and resulted in following impairment charges to certain reporting units during the year ended December 31, 2023 and 2022:

Our inventory valuation 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.

Our income taxes policy is significant because our estimate for taxes is a key component of our results of operations. See Note 1(j), “Income Taxes” in our Consolidated Financial Statements in Item 8 for 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.

We have audited the accompanying consolidated balance sheets of Scott’s Liquid Gold-Inc. and subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the results of its consolidated operations and its consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. 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 (the “SEC”) and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit 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 regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 7, the Company reviews its right-of-use assets (“ROU assets”) for impairment whenever events or changes in circumstances indicate that the carrying value of ROU assets may not be recoverable, including when there is an adverse change in the extent or manner in which a long-lived asset group is being used. The Company considered a triggering event occurred related to ROU assets associated with a specific lease as the Company closed its operations in the leased premises and then subleased the location. The Company concluded that the carrying value of the ROU asset will not be recovered based on expected undiscounted future cash flows, and accordingly an impairment loss was recorded to reduce the ROU asset to its fair value. This resulted in a non-cash impairment charge of $858,000 and a post impairment carrying value of the ROU asset of $1.4 million for the year ended December 31, 2023.

Auditing the Company’s recoverability test for right of use assets was challenging due to subjective estimates and assumptions used by the Company to determine the undiscounted cash flows associated with the lease and its determined fair value. The estimate of undiscounted cash flows and fair value was subject to higher estimation uncertainty due to management’s judgments over significant assumptions, including future sublease income. Changes in these significant assumptions could have a significant effect on the undiscounted cash flows and fair value of the ROU asset.

Our audit procedures over the Company’s impairment assessment for this ROU asset included, among others,

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 2 to the financial statements, for the year ended December 31, 2023 the Company had cash of $3.9 million, working capital of $4 million and shareholders’ equity $3.3 million. Management evaluated the Company’s liquidity within one year after the date of issuance of the consolidated financial statements to determine if there is substantial doubt about the Company’s ability to continue as a going concern. Management has concluded that, based on its current plans and projections, the Company will be able to satisfy its liquidity requirements for more than one year from when these financial statements were issued. In the preparation of the liquidity assessment, management applied judgment to estimate the projected cash flows of the Company, including the following: (i) projected cash outflows, (ii) projected cash inflows, and (iii) other quantitative factors of the Company’s business including a potential sale of the Company.

We identified management’s evaluation of the Company’s ability to continue as a going concern and related disclosures as a critical audit matter due to the significant judgments and assumptions used by management in preparing the Company’s forecasted cash flows and the risk of bias in management’s judgments and assumptions in estimating these cash flows. Auditing these judgments and assumptions required a high degree of auditor judgment and increased auditor effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

As discussed in Note 13 to the financial statements, on December 19, 2023, the Company entered into the Merger Agreement. The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, upon obtaining the requisite shareholder approval, the Company will be merged with another company, whereby, with the other company being the surviving entity. Our opinion is not modified with respect to this matter.

We have audited the accompanying balance sheets of Scott’s Liquid Gold-Inc. (the “Company”) as of December 31, 2022, the related statements of operations, stockholders' equity, and cash flows for each of the year in the period ended December 31, 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 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.

The accompanying 2022 consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, has experienced cash used from operations in excess of its current cash position, and has an accumulated deficit, which raised substantial doubt about its ability to continue as a going concern as of December 31, 2022 as assessed at March 29, 2023. Management’s plans in regard to these matters are also described in Note 2. The 2022 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.

The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and are required to be independent with respect to the Company in accordance with 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 PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material 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. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

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 regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

March 29, 2023 except for discontinued operations as disclosed in Note 3 as to which the date is March 26, 2024

Note 1. Organization and Summary of Significant Accounting Policies

(a) Company Background

Scott’s Liquid Gold-Inc., a Colorado corporation was incorporated on February 15, 1954. Scott’s Liquid Gold-Inc. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our,” or “us”) develop, market and sell high quality products. Our business is comprised of one household products segment.

(b) Principles of Consolidation

Our Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

On September 15, 2023, we entered into and consummated a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Neoteric Beauty Holdings, LLC, a Delaware limited liability company (the “Neoteric Buyer”), pursuant to which the Company agreed to sell 100% of the outstanding stock of our wholly owned subsidiary Neoteric Cosmetics, Inc. (“Neoteric”) to the Neoteric Buyer. Neoteric owned and operated the Denorex®, Zincon®, and Neoteric Diabetic Skin Care® brands. We have reflected the operations of the Neoteric brands as discontinued operations for all periods presented. The Neoteric brands were previously classified under our health and beauty care products segment. See Note 3 for further information.

Effective June 30, 2023, we entered into, and in July 2023 we closed, a purchase agreement with a buyer, pursuant to which we agreed to sell all of our right, title and interest in and to certain assets of the Alpha® Skin Care brand. We have reflected the operations of the Alpha® Skin Care brand as discontinued operations for all periods presented. The Alpha product line was previously classified under our health and beauty care products segment. See Note 3 for further information.

Effective June 30, 2023 we entered into, and in July 2023 closed, a purchase agreement with a buyer, pursuant to which we agreed to sell all of our right, title and interest in and to certain assets of the BIZ® brand. We have reflected the operations of the BIZ® brand as discontinued operations for all periods presented. The BIZ® product line was previously classified under our household products segment. See Note 3 for further information.

On January 23, 2023, we entered into an asset purchase agreement with a buyer, pursuant to which we agreed to sell all of our right, title and interest in and to certain assets of the Scott's Liquid Gold® brand, including the Wood Care and Floor Restore products. We have reflected the operations of the Scott's Liquid Gold® brand as discontinued operations for all periods presented, which was previously classified under our household products segment. See Note 3 for further information.

On December 15, 2022, we entered into an asset purchase agreement with a buyer, pursuant to which we agreed to sell to all of our right, title and interest in and to certain assets of the Prell® product line. We have reflected the operations the Prell® product line as discontinued operations for all periods presented, which was previously classified under our household products segment. See Note 3 for further information.

The accompanying Consolidated Financial Statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission. Certain previously reported financial information related to executive

salaries in the amount of $273 for the year ended December 31, 2022 has been reclassified from selling expenses to general and administrative expenses to conform to the current year’s presentation.

(d) Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts in our financial statements of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, the realization of deferred tax assets, reserves for slow moving and obsolete inventory, customer returns and allowances, intangible asset useful lives and amortization method, future cash flows associated with impairment testing of goodwill, right of use and other long-lived assets, assumptions used in stock-based compensation, and realization of deferred tax assets. Actual results could differ from our estimates.

(e) Cash and Restricted Cash

Cash and restricted cash consist of the following:


	December 31, 2023		December 31, 2022
Cash	$	3,677	$	49
Restricted Cash		250		-
	$	3,927	$	49

(f) Inventories Valuation

Inventories consist of raw materials and finished goods and are stated at the lower of cost (first-in, first-out method) or net realizable value, which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We specifically identify impairment write downs for slow moving and obsolete products and raw materials based upon, among other things, an assessment of historical and anticipated sales of our products. In the event that actual results differ from our estimates, the results of future periods may be impacted.

(g) Leases

Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease asset, unless the implicit rate is readily determinable. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.

Certain nonlease components, such as maintenance and other services provided by the lessor, are included in the valuation of the lease. Leases with an initial term of 12 months or less, which are not material to our financial statements, are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term. Lease agreements with lease and nonlease components are combined as a single lease component.

In accordance with our accounting policy for impairment of long-lived assets, operating lease right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group to which the operating lease right-of-use asset is assigned may not be recoverable. We evaluate the recoverability of the asset group based on forecasted undiscounted cash flows. See Note 7 “Leases” for additional information on our leases, including the operating lease right-of-use asset impairment charges recorded during the year ended December 31, 2023.

(h) Goodwill and Intangible Assets

Goodwill is subject to impairment tests at least annually or when events or changes in circumstances indicate that an asset may be impaired. Other intangible assets with finite lives, such as customer relationships, trade names, and formulas, are amortized over their estimated useful lives, generally ranging from 5 to 20 years. Amortization expense related to intangible assets is included in operating expenses on the Consolidated Statement of Operations.

Internal-use software costs recognized as an intangible asset relates to capitalizable costs of computer software obtained for internal-use as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-40-30-1. All other internal-use software costs are expensed as incurred by the Company. In the second quarter of 2022, our internal-use software was implemented for its intended use with an estimated useful life of five years. Amortization expense is recorded on a straight-line basis and is included in general and administrative expenses on the Consolidated Statements of Operations. During the year ended December 31, 2023, as part of our annual assessment of the recoverability of goodwill and intangible assets, we determined that the carrying value of the internal-use software would not be recoverable and recorded an impairment charge. See Note 5 “Goodwill and Intangible Assets” for additional information.

(i) Financial Instruments

Financial instruments which potentially subject us to concentrations of credit risk include cash and cash equivalents and accounts receivable. We maintain our cash balances in the form of bank demand deposits with financial institutions that we believe are creditworthy. We establish an allowance for doubtful accounts, which is generally not material to our financial statements, based upon factors surrounding the credit risk of specific customers, historical trends and other information. We have no significant financial instruments with off-balance sheet risk of accounting loss, such as foreign exchange contracts, option contracts or other foreign currency hedging arrangements.

The recorded amounts for cash and cash equivalents, restricted cash, receivables, other current assets, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these financial instruments.

(j) Income Taxes

Income taxes reflect the tax effects of transactions reported in the Consolidated 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 established 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 Consolidated Statements of Operations or accrued on the Consolidated Balance Sheets.

(k) 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 met in order to recognize revenue. If these criteria are not met, then the associated revenue is deferred until it is met. When consideration is received in advance of the delivery of goods or services, a contract liability is recorded. Our revenue contracts are identified when purchase orders are received and accepted from customers and represent a single performance obligation to sell our products to a customer.

Net sales reflect the transaction prices for contracts, which include products shipped at selling list prices reduced by variable consideration. Variable consideration includes estimates for expected customer allowances, promotional programs for consumers, and sales returns. Based on our customer-by-customer history, our variable consideration estimates are generally accurate and subsequent adjustments are generally immaterial.

Variable consideration is primarily comprised of customer allowances. Customer allowances primarily include reserves for trade promotions to support price features, displays, slotting fees, and other merchandising of our products to our customers. Promotional programs for consumers primarily include coupons, rebates, and certain other promotional programs, and do not represent a significant portion of variable consideration. The costs of customer allowances and promotional programs for consumers are estimated using either the expected value or most likely amount approach, depending on the nature of the allowance, using all reasonably available information, including our historical experience and current expectations. Customer allowances and promotional programs for consumers are reflected in the transaction price when sales are recorded. We may adjust our estimates based on actual results and consideration of other factors that cause allowances. In the event that actual results differ from our estimates, the results of future periods may be impacted.

Sales returns are generally not material to our financial statements, and do not comprise a significant portion of variable consideration. Estimates for sales returns are based on, among other things, an assessment of historical trends, information from customers, and anticipated returns related to current sales activity. These estimates are established in the period of sale and reduce our revenue in that period.

Sales are recorded at the time that control of the products is transferred to customers. In evaluating the timing of the transfer of control of products to customers, we consider several indicators, including significant risks and rewards of products, our right to payment, and the legal title of the products. Based on the assessment of control indicators, sales are generally recognized when products are delivered to customers.

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.

Customer allowances for trade promotions and allowance for doubtful accounts at December 31 were as follows:


	2023		2022
Trade promotions	$	41	$	46
Allowance for doubtful accounts		9		9
	$	50	$	55

(l) Advertising Costs

We expense advertising costs as incurred.

(m) Stock-Based Compensation

We account for share based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant. We determine the estimated grant-date fair value of stock options with only service conditions using the Black-Scholes option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, including the estimated fair value of underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. We recognize compensation costs ratably over the vesting period using the straight-line method, which approximates the service period.

The Company issues restricted stock unit ("RSUs") awards with restrictions that lapse upon the passage of time (service vesting) and satisfaction of market conditions targeted to our Company’s stock price. For those RSU awards with only service vesting, the Company recognizes compensation cost on a straight-line basis over the service period. For awards with both market and service conditions, the Company starts recognizing compensation cost over the requisite service period, with the effect of the market conditions reflected in the calculation of the award's fair value at grant date. The Company values awards with only service vesting requirements based on the grant date share price. The Company values awards with market and service conditions using a Monte Carlo simulation. The Company determines the requisite service period for awards with both market and service conditions based on the longer of the explicit service period and the derived service period. Stock awards that contain market vesting conditions are included in the computations of diluted earnings per share reflecting the average number of shares that would be issued based on the highest 30-day average market price at the end during the reporting periods, if their effect is dilutive. If the condition is based on an average of market prices over some period of time, the corresponding average for the period is used.

(n) Operating Costs and Expenses Classification

Cost of sales includes costs associated with purchasing finished goods from contract manufacturers, labor, freight-in, quality control, repairs, maintenance, and other indirect costs. We classify freight-out as selling expenses. Other selling expenses consist primarily of costs for sales and sales support personnel, brokerage commissions and promotional costs. Freight-out costs included in selling expenses totaled $228 and $162, for the years ended December 31, 2023 and 2022, respectively.

General and administrative expenses consist primarily of wages and benefits associated with management and administrative support departments, business insurance costs, professional fees, office facility related expenses and other general support costs.

On April 29, 2021, the Company announced that Mark E. Goldstein, the President and Chief Executive Officer of the Company and a member of the Board of Directors, retired effective as of April 26, 2021. In connection with Mr. Goldstein’s retirement, the Company and Mr. Goldstein entered into a Separation Agreement, Waiver and Release (the “Separation Agreement”), pursuant to which the Company will pay Mr. Goldstein $720 in severance payments (equal to 18 months base salary) over a period of 30 months and reimbursement for the costs of continuing health benefits for a period of 18 months. Severance costs of $805 were recognized and are included in general and administrative expenses. Final payments associated with the Separation Agreement were satisfied in the fourth quarter of 2023. Accrued severance costs are included in accrued expenses on the Consolidated Balance Sheets as of December 31, 2022.

(o) Supplier Finance Programs

In September 2022, the FASB issued ASU No. 2022-04, “Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” This ASU requires a buyer that uses supplier finance programs to make annual disclosures about the programs’ key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated roll-forward information. The guidance was effective for the Company beginning on January 1, 2023, except for the roll-forward information, which is effective beginning on January 1, 2024. This guidance has not had and is not expected to have a material impact on the Company’s Consolidated Financial Statements.

During 2022, we entered into an agreement with a third-party financial institution and an agreement with an insurance agency which allows us to obtain extended payment terms for our insurance policies. The insurance policies can be canceled by the Company at any time with 10 days’ notice. The financial institution may cancel this agreement after providing 10 days’ notice if the Company does not pay any installment payment according to the terms of the agreement. We do not provide any forms of guarantees under these agreements. Payments of our obligations are included in cash flows from operating activities in the Consolidated Statements of Cash Flows. Outstanding confirmed amounts are $0 and $218 as of December 31, 2023 and December 31, 2022, respectively, which will be recognized on the Consolidated Financial Statements as payments are due.

(p) Recently Issued Accounting Standards

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740) Improvements to Income Tax Disclosures" ("ASU 2023-09") enhancing the transparency and decision usefulness of income tax disclosures. ASU 2023-09 addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-09 are applied on a prospective basis, though retrospective application is permitted. We are in the process of evaluating its impact on our Consolidated Financial Statements and related disclosures.

Other recent accounting pronouncements and guidance issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.

Note 3. Discontinued Operations

Neoteric Cosmetics, Inc.

On September 15, 2023, we entered into and consummated a Stock Purchase Agreement with Neoteric Beauty Holdings, LLC, a Delaware limited liability company, pursuant to which the Company agreed to sell 100% of the outstanding stock of our wholly owned subsidiary Neoteric Cosmetics, Inc. ("Neoteric") to the Neoteric Buyer. Neoteric owned and operated the Denorex®, Zincon®, and Neoteric Diabetic Skin Care® brands. The closing consideration paid to the Company was $1,750, with an initial deposit of $175 paid on September 5, 2023. The operations of the Neoteric brands have been classified as income from discontinued operations for all periods presented. As part of the Stock Purchase Agreement, we agreed to maintain at least $250 in accounts at our primary bank for a period of nine months following closing which is designated as restricted cash on the Consolidated Balance Sheets. Concurrent with the entry into the Stock Purchase Agreement, the Company entered into a transition services agreement with the Neoteric Buyer where both parties would perform certain identified services related to the operations of the brands contemplated in the Stock Purchase Agreement. This transition services agreement has a term of 90 days which can be extended by the Neoteric Buyer for up to three additional 30 day periods or extended as consented by both parties.

Alpha® Skin Care

Effective June 30, 2023, we entered into, and in July 2023 we closed, a purchase agreement with a buyer, pursuant to which we agreed to sell all of our right, title and interest in and to certain assets of the Alpha® Skin Care brand. The Company received payments of $2,500 and $200 in July 2023 and August 2023, respectively, representing total consideration for the sale of the Alpha Skin Care brand in the amount of $2,700. The operations of Alpha® have been classified as income from discontinued operations for all periods presented. Concurrent with the entry into the Alpha® Purchase Agreement, the Company entered into a transition services agreement with the buyer where both parties would perform certain identified services related to the operations of the brands contemplated in the Alpha® Purchase Agreement. This transition services agreement had a term of 90 days which could be extended by the buyer for up to three additional 30 day periods or extended as consented by both parties, and concluded in accordance with the end of its term during the first quarter of 2024.

BIZ®

Effective June 30, 2023, we entered into, and in July 2023 we closed, a purchase agreement with a buyer, pursuant to which we agreed to sell all of our right, title and interest in and to certain assets of the BIZ® brand. The transactions contemplated by the BIZ® Purchase Agreement were consummated on July 7, 2023. The total consideration paid to us was $1,000, plus an amount equal to the value of the BIZ® inventory, valued at $946 as of the effective date of the agreement, subject to post-close adjustment. The operations of BIZ® have been classified as income from discontinued operations for all periods presented. Concurrent with the entry into the BIZ® Purchase Agreement, the Company entered into a transition services agreement with the buyer where both parties would perform certain identified services related to the operations of the brands contemplated in the BIZ® Purchase Agreement. This transition services agreement had a term of 90 days which could be extended by the buyer for up to three additional 30 day periods or extended as consented by both parties, and was concluded in accordance with the end of its term on December 31, 2023.

Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor Restore

On January 23, 2023, we entered into an asset purchase agreement with a buyer, pursuant to which we agreed to sell all of our right, title and interest in and to certain assets of the Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor Restore product lines. The total consideration paid to us was $800, plus an amount equal to the value of the Scott's Liquid Gold® Wood Care and Scott's Liquid Gold® Floor Restore inventory of $1,136, subject to post-close adjustment. The Company may continue to use the name “Scott’s Liquid Gold” and “SLG” in a manner consistent with all past and current practices for a period of eighteen months following the closing date of the asset purchase agreement, at which point the Company may only use the aforementioned names in connection with retaining records and other historical documentation. Concurrent with the entry into the asset purchase agreement, the Company entered into a transition services agreement with the buyer where both parties would perform certain identified services related to the operations of the brands contemplated in the asset purchase agreement, and was concluded in accordance with the end of its term on July 22, 2023.

Additionally, the buyer will pay a royalty equal to 2% of gross sales for two years after the closing date (the "Scott's Liquid Gold® Royalty"). The Scott's Liquid Gold® Royalty resulted in recognition of a gain upon the sale of assets. Because the Scott's Liquid Gold® Royalty is variable consideration and is contingent on the outcome of future events that are largely outside of the Company’s control, the variable consideration from the Scott's Liquid Gold® Royalty was initially fully constrained and no amount was included in the results from discontinued operations. During the year ended December 31, 2023, we assessed the variable consideration and concluded that the volatility of external factors continue to exist and, as a result, consideration for the Scott's Liquid Gold® Royalty continues to be recognized as received from the buyer. The constraint on the variable consideration will be reassessed at each subsequent reporting period. We have reflected the operations of the Scott's Liquid Gold® product lines as discontinued operations.

Prell®

On December 15, 2022, we entered into an asset purchase agreement with a buyer, pursuant to which we agreed to sell to all of our right, title and interest in and to certain assets of the Prell® product line. The total consideration paid to us was $150, plus an amount equal to the value of the Prell® inventory of $330, subject to post-close adjustment. Additionally, the buyer will pay a royalty equal to 3% of collections on net sales for four years after the closing date (the “Prell® Royalty”). The Prell® Royalty resulted in recognition of a gain upon the sale of assets. Because the Prell® Royalty is variable consideration and is contingent on the outcome of future events that are largely outside of the Company’s control, the variable consideration from the Prell® Royalty was initially fully constrained and no amount was included in the results from discontinued operations. During the year ended December 31, 2023, we assessed the variable consideration and concluded that the volatility of external factors continue to exist and, as a result, consideration continues to be recognized as received from the buyer. The constraint on the variable consideration will be reassessed at each subsequent reporting period. We have reflected the operations of the Prell® product line as discontinued operations. Concurrent with the entry into the asset purchase agreement, the Company entered into a transition services agreement with the buyer where both parties would perform certain identified services related to the operations of the brands contemplated in the asset purchase agreement and was concluded in accordance with the end of its term on June 15, 2023.

Our Consolidated Balance Sheets and Consolidated Statements of Operations report discontinued operations separate from continuing operations. Our Consolidated Statements of Equity and Statements of Cash Flows combine the results of continuing and discontinued operations. A summary of financial information related to our discontinued operations is as follows:

Reconciliation of the Line Items Constituting Pretax Loss from Discontinued Operations to the After-Tax Loss from Discontinued Operations in the Consolidated Statements of Operations for the years ended December 31:


	2023
	Neoteric		Alpha®		BIZ®		Scott's Liquid Gold®		Prell®			Total
Net sales	$	2,173	$	851	$	2,283	$	114	$	6		$	5,427
Cost of sales		1,164		284		1,577		76		72			3,173
Gross profit		1,009		567		706		38		(66	)		2,254

Operating expenses:
Advertising


Colorado	84-0920811
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
8400 E. Crescent Parkway, Suite 450, Greenwood Village, CO	80111
(Address of principal executive offices)	(Zip Code)


Title of each class	Trading Symbol	Name of exchange on which registered
None	None	None


		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	3
Item 1B.	Unresolved Staff Comments	7
Item 1C.	Cybersecurity	7
Item 2.	Properties	8
Item 3.	Legal Proceedings	8
Item 4.	Mine Safety Disclosures	8
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9
Item 6.	RESERVED	9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 8.	Financial Statements and Supplementary Data	15
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	39
Item 9A.	Controls and Procedures	39
Item 9B.	Other Information	40
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	40
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	41
Item 11.	Executive Compensation	44
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 13.	Certain Relationships and Related Transactions, and Director Independence	48
Item 14.	Principal Accounting Fees and Services	48
PART IV
Item 15.	Exhibits and Financial Statement Schedules	49
Item 16.	Form 10-K Summary	50


	% of Net Sales
	2023			2022
Customer 1		66.3	%		74.5	%
Customer 2		18.1	%		8.4	%


Three Months Ended	2023				2022
	High		Low		High		Low
March 31	$	0.30	$	0.17	$	1.60	$	1.02
June 30		0.27		0.18		1.07		0.70
September 30		0.45		0.25		0.81		0.33
December 31		1.04		0.28		0.37		0.19


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐


	For the Year Ended December 31, (in thousands)
							Increase / (Decrease)
	2023			2022			$			%
Net sales	$	3,403		$	2,980		$	423			14.2	%
Cost of sales		1,956			1,607			349			21.7	%
Gross profit		1,447			1,373			74			5.4	%
Gross margin		42.5	%		46.1	%

Operating expenses:
Advertising		330			641			(311	)		(48.5	%)
Selling		1,528			2,928			(1,400	)		(47.8	%)
General and administrative		3,053			3,059			(6	)		(0.2	%)
Intangible asset amortization		180			232			(52	)		(22.4	%)
Impairment of long-lived assets		1,471			4,427			(2,956	)		(66.8	%)
Total operating expenses		6,562			11,287			(4,725	)		(41.9	%)
Loss from operations		(5,115	)		(9,914	)		4,799			48.4	%

Interest income		68			-			68			100.0	%
Interest expense		(145	)		(141	)		(4	)		(2.8	%)
Loss before income taxes and discontinued operations		(5,192	)		(10,055	)		4,863			48.4	%
Income tax expense		(9	)		(63	)		54			85.7	%
Loss from continuing operations		(5,201	)		(10,118	)		4,917			48.6	%
Income from discontinued operations		5,581			1,267			4,314			340.5	%
Net income (loss)	$	380		$	(8,851	)	$	9,231			104.3	%


	2023								2022
	Operating lease right-of-use assets		Intangible Assets		Goodwill		Total		Operating lease right-of-use assets		Intangible Assets		Goodwill		Total
All-Purpose	$	-	$	-	$	-	$	-	$	-	$	2,717	$	1,710	$	4,427
Corporate		858		613		-		1,471		-		-		-		-
	$	858	$	613	$	-	$	1,471	$	-	$	2,717	$	1,710	$	4,427


	Page
Reports of Independent Registered Public Accounting Firms (PCAOB ID 572 and 166)	16
Consolidated Statements of Operations	19
Consolidated Balance Sheets	20
Consolidated Statements of Shareholders’ Equity	21
Consolidated Statements of Cash Flows	22
Notes to Consolidated Financial Statements	23


	Year Ended
	December 31,
	2023			2022
Net sales	$	3,403		$	2,980
Cost of sales		1,956			1,607
Gross profit		1,447			1,373

Operating expenses:
Advertising		330			641
Selling		1,528			2,928
General and administrative		3,053			3,059
Intangible asset amortization		180			232
Impairment of long-lived assets		1,471			4,427
Total operating expenses		6,562			11,287
Loss from operations		(5,115	)		(9,914	)

Interest income		68			-
Interest expense		(145	)		(141	)
Loss before income taxes and discontinued operations		(5,192	)		(10,055	)
Income tax expense		(9	)		(63	)
Loss from continuing operations		(5,201	)		(10,118	)
Income from discontinued operations		5,581			1,267
Net income (loss)	$	380		$	(8,851	)

Basic and diluted net loss per common shares:
Loss from continuing operations	$	(0.40	)	$	(0.79	)
Income from discontinued operations	$	0.43		$	0.09
Net income (loss)	$	0.03		$	(0.70	)

Weighted average shares outstanding:
Basic and diluted		12,927			12,758


	Common Stock
	Shares		Amount		Capital in Excess of Par		(Accumulated Deficit) Retained Earnings			Total
Balance, January 1, 2022		12,727	$	1,273	$	7,789	$	2,479		$	11,541
Stock-based compensation		-		-		89		-			89
Restricted stock unit vesting		70		7		34		-			41
Net loss		-		-		-		(8,851	)		(8,851	)
Balance, December 31, 2022		12,797	$	1,280	$	7,912	$	(6,372	)	$	2,820
Stock-based compensation		200		20		43		-			63
Restricted stock unit vesting		9		1		1		-			2
Net income		-		-		-		380			380
Balance, December 31, 2023		13,006	$	1,301	$	7,956	$	(5,992	)	$	3,265