10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended September 30, 2021

OR

◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 1-13412

Hudson Technologies, Inc.

(Exact name of registrant as specified in its charter)

New York (State or other jurisdiction of incorporation or organization) 13-3641539 (I.R.S. Employer Identification No.)

1 Blue Hill Plaza
P.O. Box 1541 Pearl River, New York (Address of principal executive offices)	10965 (Zip Code)
Registrant’s telephone number, including area code	(845) 735-6000

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

Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	HDSN	NASDAQ Capital Market

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 (Section 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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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:

Large accelerated filer	◻	Accelerated filer	◻
Non-accelerated filer	⌧	Smaller reporting company	⌧
		Emerging growth company	◻

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). ◻ Yes ⌧ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common stock, $0.01 par value	43,969,748 shares
Class	Outstanding at November 1, 2021

Hudson Technologies, Inc.

Index

Part	Item		Page
Part I.	Financial Information		3
	Item 1	- Financial Statements (unaudited)	3
		- Consolidated Balance Sheets	3
		- Consolidated Statements of Operations	4
		- Consolidated Statements of Stockholders’ Equity	5
		- Consolidated Statements of Cash Flows	7
		- Notes to the Consolidated Financial Statements	8
	Item 2	- Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3	- Quantitative and Qualitative Disclosures About Market Risk	33
	Item 4	- Controls and Procedures	33
Part II.	Other Information		34
	Item 1A	- Risk Factors	34
	Item 6	- Exhibits	35
	Signatures		36

2

Part I – FINANCIAL INFORMATION

Item 1 - Financial Statements

Hudson Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(Amounts in thousands, except for share and par value amounts)

	September 30,		December 31,
	2021		2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	9,503	$	1,348
Trade accounts receivable – net		22,131		9,806
Inventories – net		58,789		44,460
Prepaid expenses and other current assets		10,996		6,528
Total current assets		101,419		62,142
Property, plant and equipment, less accumulated depreciation		20,035		21,910
Goodwill		47,803		47,803
Intangible assets, less accumulated amortization		21,055		23,150
Right of use asset		6,652		6,559
Other assets		169		85
Total Assets	$	197,133	$	161,649
Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable	$	6,696	$	7,644
Accrued expenses and other current liabilities		16,298		8,080
Accrued payroll		2,940		1,394
Cylinder Deposit Liability		12,600		11,337
Short-term debt		7,000		2,000
Current maturities of long-term debt		5,248		7,314
Total current liabilities		50,782		37,769
Deferred tax liability		1,530		1,355
Long-term lease liabilities		3,635		3,927
Long-term debt, less current maturities		74,248		77,976
Total Liabilities		130,195		121,027
Commitments and contingencies
Stockholders’ equity:
Preferred stock, shares authorized 5,000,000: Series A Convertible preferred stock, $0.01 par value ($100 liquidation preference value); shares authorized 150,000; none issued or outstanding		—		—
Common stock, $0.01 par value; shares authorized 100,000,000; issued and outstanding 43,959,748 and 43,347,887, respectively		440		433
Additional paid-in capital		118,507		118,269
Accumulated deficit		(52,009)		(78,080)
Total Stockholders’ Equity		66,938		40,622
Total Liabilities and Stockholders’ Equity	$	197,133	$	161,649

See Accompanying Notes to the Consolidated Financial Statements.

3

Hudson Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(unaudited)

(Amounts in thousands, except for share and per share amounts)

	Three months				Nine months
	ended September 30,				ended September 30,
	2021		2020		2021		2020
Revenues	$	60,645	$	41,468	$	154,973	$	125,495
Cost of sales		36,967		32,512		100,329		95,511
Gross profit		23,678		8,956		54,644		29,984
Operating expenses:
Selling, general and administrative		6,072		6,162		19,586		20,184
Amortization		698		715		2,095		2,147
Total operating expenses		6,770		6,877		21,681		22,331
Operating income		16,908		2,079		32,963		7,653
Other (expense) income:
Net interest expense		(2,843)		(2,966)		(8,532)		(9,412)
Other income		2,475		1,000		2,470		1,011
Total other (expense)		(368)		(1,966)		(6,062)		(8,401)
Income (loss) before income taxes		16,540		113		26,901		(748)
Income tax expense (benefit)		670		74		830		(288)
Net income (loss)	$	15,870	$	39	$	26,071	$	(460)
Net income(loss) per common share – Basic	$	0.36	$	0.00	$	0.60	$	(0.01)
Net income (loss) per common share – Diluted	$	0.34	$	0.00	$	0.56	$	(0.01)
Weighted average number of shares outstanding – Basic		43,870,825		42,656,510		43,576,211		42,637,945
Weighted average number of shares outstanding – Diluted		46,964,522		43,680,265		46,412,691		42,637,945

See Accompanying Notes to the Consolidated Financial Statements.

4

Hudson Technologies, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity

(unaudited)

(Amounts in thousands, except for share amounts)

Three Months Ended September 30,

	Common Stock			Additional
				Paid-in		Accumulated
	Shares	Amount		Capital		Deficit		Total
Balance at July 1, 2020	42,628,560	$	426	$	117,890	$	(73,371)	$	44,945
Issuance of common stock for services	35,714		—		35		—		35
Stock compensation expense	—		—		191		—		191
Net Income	—		—		—		39		39
Balance at September 30, 2020	42,664,274	$	426	$	118,116	$	(73,332)	$	45,210
Balance at July 1, 2021	43,707,392		437		118,639		(67,879)		51,197
Issuance of common stock upon exercise of stock options	243,826		2		75		—		77
Excess tax benefits from exercise of stock options	—		—		(346)		—		(346)
Issuance of common stock for services	8,530		1		—		—		1
Stock compensation expense	—		—		139		—		139
Net income	—		—		—		15,870		15,870
Balance at September 30, 2021	43,959,748		440		118,507		(52,009)		66,938

See Accompanying Notes to the Consolidated Financial Statements.

5

Nine Months Ended September 30,

	Common Stock			Additional
				Paid-in		Accumulated
	Shares	Amount		Capital		Deficit		Total
Balance at January 1, 2020	42,628,560	$	426	$	117,557	$	(72,872)	$	45,111
Issuance of common stock for services	35,714		—		35		—		35
Stock compensation expense	—		—		524		—		524
Net loss	—		—		—		(460)		(460)
Balance at September 30, 2020	42,664,274	$	426	$	118,116	$	(73,332)	$	45,210
Balance at January 1, 2021	43,347,887		433		118,269		(78,080)		40,622
Issuance of common stock upon exercise of stock options	603,331		6		75		—		81
Excess tax benefits from exercise of stock options	—		—		(346)		—		(346)
Issuance of common stock for services	8,530		1		—		—		1
Stock compensation expense	—		—		509		—		509
Net income	—		—		—		26,071		26,071
Balance at September 30, 2021	43,959,748		440		118,507		(52,009)		66,938

See Accompanying Notes to the Consolidated Financial Statements.

6

Hudson Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

(Amounts in thousands)

	Nine months
	ended September 30,
	2021		2020
Cash flows from operating activities:
Net income (loss)	$	26,071	$	(460)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation		2,540		3,235
Amortization of intangible assets		2,095		2,147
Gain on insurance proceeds		—		(1,000)
Forgiveness of Payroll Protection Program Loan		(2,475)		—
Amortization of lease right of use asset, net		5		14
Lower of cost or net realizable value reserve		(2,024)		(3,622)
Allowance for doubtful accounts		23		724
Stock compensation expense		509		559
Amortization of deferred finance costs		841		843
Deferred tax expense		175		104
Changes in assets and liabilities:
Trade accounts receivable		(12,348)		(7,366)
Inventories		(12,305)		22,486
Prepaid and other assets		(4,771)		873
Income tax receivable		1,039		(351)
Accounts payable, accrued expenses and other current liabilities		8,649		1,664
Cash provided by operating activities		8,024		19,850
Cash flows from investing activities:
Additions to property, plant, and equipment		(665)		(996)
Proceeds from Insurance Policy		—		1,000
Cash (used in) provided by investing activities		(665)		4
Cash flows from financing activities:
Proceeds from issuance of common stock		(264)		—
Borrowing - Paycheck Protection Program		—		2,475
Borrowing of short-term debt		5,000		(14,000)
Repayment of long-term debt		(3,940)		(1,694)
Cash provided by (used in) financing activities		796		(13,219)
Increase in cash and cash equivalents		8,155		6,635
Cash and cash equivalents at beginning of period		1,348		2,600
Cash and cash equivalents at end of period	$	9,503	$	9,235
Supplemental Disclosure of Cash Flow Information:
Cash paid during period for interest	$	7,635	$	8,745
Refund received for income taxes – net	$	(278)	$	(41)

See Accompanying Notes to the Consolidated Financial Statements.

7

Hudson Technologies, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies

Business

Hudson Technologies, Inc., incorporated under the laws of New York on January 11, 1991, is a refrigerant services company providing innovative solutions to recurring problems within the refrigeration industry. The Company’s operations consist of one reportable segment. The Company operates principally through its wholly-owned subsidiary, Hudson Technologies Company, and Aspen Refrigerants (“Aspen” or “ARI”), a division of Hudson Technologies Company. Unless the context requires otherwise, references to the “Company”, “Hudson”, “we”, “us”, “our”, or similar pronouns refer to Hudson Technologies, Inc. and its subsidiaries.

The Company is a leading provider of sustainable refrigerant products and services to the Heating Ventilation Air Conditioning and Refrigeration (“HVACR”) industry. For nearly three decades, we have demonstrated our commitment to our customers and the environment by becoming one of the first in the United States and largest refrigerant reclaimers through multimillion dollar investments in the plants and advanced separation technology required to recover a wide variety of refrigerants and restoring them to Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”) standard for reuse as certified EMERALD Refrigerants™.

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

The Company’s SmartEnergy OPS® service is a web-based real time continuous monitoring service applicable to a facility’s refrigeration systems and other energy systems. The Company’s Chiller Chemistry® and Chill Smart® services are also predictive and diagnostic service offerings. As a component of the Company’s products and services, the Company also generates carbon offset projects.

During the year ended December 31, 2020 and continuing through the nine months ended September 30, 2021, the effects of a novel strain of coronavirus (“COVID-19”) pandemic and the related actions by governments around the world to attempt to contain the spread of the virus have materially impacted the global economy. While it is difficult to predict the full scale of the ongoing impact of the COVID-19 outbreak and business disruption, the Company has been taking actions to address the impact of the pandemic, such as working closely with our customers, reducing our expenses and monitoring liquidity. The impact of the pandemic and the corresponding actions were reflected into our judgments, assumptions and estimates to prepare the financial statements. As of the date of this filing, there has been no material impact on our ability to procure or distribute our products and services. However, if the duration of the COVID-19 pandemic is longer and the operational impact is greater than estimated, the judgments, assumptions and estimates will be updated and could result in different results in the future.

In preparing the accompanying consolidated financial statements, and in accordance with Accounting Standards Codification (“ASC”) 855-10 “Subsequent Events”, the Company’s management has evaluated subsequent events through the date that the financial statements were filed.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial information included in this quarterly report should be read in conjunction with the Company’s audited financial statements and related notes thereto for the year ended December 31, 2020. Operating results for the nine-month period ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. Certain comparative figures have been reclassified to conform to the current year presentation.

In the opinion of management, all estimates and adjustments considered necessary for a fair presentation have been included and all such adjustments were normal and recurring.

8

Consolidation

The consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, represent all companies of which Hudson directly or indirectly has majority ownership or otherwise controls. Significant intercompany accounts and transactions have been eliminated. The Company's consolidated financial statements include the accounts of wholly-owned subsidiaries Hudson Holdings, Inc. and Hudson Technologies Company. The Company does not present a statement of comprehensive income (loss) as its comprehensive income (loss) is the same as its net income (loss).

Fair Value of Financial Instruments

The carrying values of financial instruments including cash, trade accounts receivable and accounts payable approximate fair value at September 30, 2021 and December 31, 2020, because of the relatively short maturity of these instruments. The carrying value of debt approximates fair value, due to the variable rate nature of the debt, as of September 30, 2021 and December 31, 2020. See Note 2 for further details.

Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash investments and trade accounts receivable. The Company maintains its temporary cash investments in highly-rated financial institutions and, at times, the balances exceed FDIC insurance coverage. The Company's trade accounts receivable are primarily due from companies throughout the United States. The Company reviews each customer's credit history before extending credit.

The Company establishes an allowance for doubtful accounts based on factors associated with the credit risk of specific accounts, historical trends, and other information. The carrying value of the Company’s accounts receivable is reduced by the established allowance for doubtful accounts. The allowance for doubtful accounts includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve for the remaining accounts receivable balances. The Company adjusts its reserves based on factors that affect the collectability of the accounts receivable balances. At September 30, 2021, the Company had trade receivables of $23.8 million, and allowance for doubtful accounts of $1.7 million, resulting in net accounts receivable of $22.1 million.

For the nine month period ended September 30, 2021 there was one customer accounting for 10% of the Company’s revenues and at September 30, 2021 there were $3.0 million of accounts receivable from this customer. For the nine month period ended September 30, 2020 there was one customer accounting for 13% of the Company’s revenues and at September 30, 2020 there were $2.0 million of accounts receivable from this customer.

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

Cash and Cash Equivalents

Temporary investments with original maturities of ninety days or less are included in cash and cash equivalents.

Inventories

Inventories, consisting primarily of refrigerant products available for sale, are stated at the lower of cost, on a first-in first-out basis, or net realizable value. Where the market price of inventory is less than the related cost, the Company may be required to write down its inventory through a lower of cost or net realizable value adjustment, the impact of which would be reflected in cost of sales on the Consolidated Statements of Operations. Any such adjustment would be based on management’s judgment regarding future demand and market conditions and analysis of historical experience.

9

Property, Plant and Equipment

Property, plant and equipment are stated at cost, including internally manufactured equipment. The cost to complete equipment that is under construction is not considered to be material to the Company's financial position. Provision for depreciation is recorded (for financial reporting purposes) using the straight-line method over the useful lives of the respective assets. Leasehold improvements are amortized on a straight-line basis over the shorter of economic life or terms of the respective leases. Costs of maintenance and repairs are charged to expense when incurred.

Due to the specialized nature of the Company's business, it is possible that the Company's estimates of equipment useful life periods may change in the future.

Goodwill

The Company has made acquisitions that included a significant amount of goodwill and other intangible assets. The Company applies the purchase method of accounting for acquisitions, which among other things, requires the recognition of goodwill (which represents the excess of the purchase price of the acquisition over the fair value of the net assets acquired and identified intangible assets). We test our goodwill for impairment on an annual basis (the first day of the fourth quarter) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an asset below its carrying value. Goodwill is tested for impairment at the reporting unit level. The Company has one reporting unit at September 30, 2021. Other intangible assets that meet certain criteria are amortized over their estimated useful lives.

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

There were no goodwill impairment losses recognized in 2020 or the nine months ended September 30, 2021.

Cylinder Deposit Liability

The cylinder deposit liability, which is included in Accrued expenses and other current liabilities on the Company’s Balance Sheet, represents the amount due to customers for the return of refillable cylinders. ARI charges its customers cylinder deposits upon the shipment of refrigerant gases that are contained in refillable cylinders. The amount charged to the customer by ARI approximates the cost of a new cylinder of the same size. Upon return of a cylinder, this liability is reduced.

Revenues and Cost of Sales

The Company’s products and services are primarily used in commercial air conditioning, industrial processing and refrigeration systems. Most of the Company’s revenues are realized from the sale of refrigerant and industrial gases and related products. The Company also generates revenue from refrigerant management services performed at a customer’s site and in-house. The Company conducts its business primarily within the US.

The Company applies the FASB’s guidance on revenue recognition, which requires the Company to recognize revenue in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services transferred to its customers. In most instances, the Company’s contract with a customer is the customer’s purchase order and the sales price to the customer is fixed. For certain customers, the Company may also enter into a sales agreement outlining a framework of terms and conditions applicable to future purchase orders received from that customer. Because the Company’s contracts with customers are typically for a single customer purchase order, the duration of the contract is usually less than one year. The Company’s performance obligations related to product sales are satisfied at a point in time, which may occur upon shipment of the product or receipt by the customer, depending on the terms of the arrangement.

The Company’s performance obligations related to reclamation and RefrigerantSide® services are generally satisfied at a point in time when service is performed. Accordingly revenues are recorded upon the shipment of the product, or in certain instances upon receipt by the customer, or the completion of the service.

10

In July 2016 the Company was awarded, as prime contractor, a five-year contract, including a five-year renewal option which has been exercised, by the United States Defense Logistics Agency (“DLA”) for the management, supply, and sale of refrigerants, compressed gases, cylinders and related services. Due to the contract containing multiple performance obligations, the Company assessed the arrangement in accordance with ASC 606. The Company determined that the sale of refrigerants and the management services provided under the contract each have stand-alone value. Accordingly, the performance obligations related to the sale of refrigerants is satisfied at a point in time, mainly when the customer receives and obtains control of the product. The performance obligation related to management service revenue is satisfied over time and revenue is recognized on a straight-line basis over the term of the arrangement as the management services are provided.

Cost of sales is recorded based on the cost of products shipped or services performed and related direct operating costs of the Company’s facilities. In general, the Company performs shipping and handling services for its customers in connection with the delivery of refrigerant and other products. The Company elected to implement ASC 606-10-25-18B, whereby the Company accounts for such shipping and handling as activities to fulfill the promise to transfer the good. To the extent that the Company charges its customers shipping fees, such amounts are included as a component of revenue and the corresponding costs are included as a component of cost of sales.

Income Taxes

The Company is taxed at statutory corporate income tax rates after adjusting income reported for financial statement purposes for certain items. Current income tax expense (benefit) reflects the tax results of revenues and expenses currently taxable or deductible. The Company utilizes the asset and liability method of accounting for deferred income taxes, which provides for the recognition of deferred tax assets or liabilities, based on enacted tax rates and laws, for the differences between the financial and income tax reporting bases of assets and liabilities.

The tax benefit associated with the Company’s net operating loss carry forwards (“NOLs”) is recognized to the extent that the Company expects to realize future taxable income. As a result of a prior “change in control”, as defined by the Internal Revenue Service, the Company’s ability to utilize its existing NOLs is subject to certain annual limitations. To the extent that the Company utilizes its NOLs, it will not pay tax on such income. However, to the extent that the Company’s net income, if any, exceeds the annual NOL limitation, it will pay income taxes based on the then existing statutory rates. In addition, certain states either do not allow or limit NOLs and as such the Company will be liable for certain state income taxes.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Further, starting in 2021, the 100% NOL utilization reverts back to the pre-CARES Act limitation of 80% of taxable income. The Company has evaluated its options under the carryback provision and filed a claim for refund, resulting in a cash benefit. Further, the CARES Act accelerates the refund of the alternative minimum tax credits to allow a full refund of any remaining credit amount in taxable years beginning in 2019. The credits were originally fully refundable in taxable years beginning in 2021. As a result, the Company has recorded a preliminary $47,000 tax benefit related to the alternative minimum tax refund in the quarter ended March 31, 2020 and an additional $380,000 in the quarter ended June 30, 2020. Finally, the CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020.

As of September 30, 2021, the Company had NOLs of approximately $29.8 million, of which none have an expiration date. As of September 30, 2021, the Company had state tax NOLs of approximately $16.5 million expiring in various years. We review the likelihood that we will realize the benefit of our deferred tax assets, and therefore the need for valuation allowances, on an annual basis in the fourth quarter of the year, and more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results are considered, along with all other available positive and negative evidence.

11

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence that is objective and verifiable, such as cumulative losses in recent years. We utilize a rolling twelve quarters of pre-tax income or loss adjusted for significant permanent book to tax differences, as well as non-recurring items, as a measure of our cumulative results in recent years. Based on our assessment as of December 31, 2018, 2019, 2020 and September 30, 2021, we concluded that due to the uncertainty that the deferred tax assets will not be fully realized in the future, we recorded a valuation allowance of approximately $11.3 million during 2018, and due to additional losses, increased the valuation allowance through 2019 and 2020 to $19.0 million. For the quarter ended September 30, 2021, and due to a net income position that resulted in the utilization of gross net operating losses of $16.3 million, the valuation allowance was reduced by ($4.9) million, resulting in an ending valuation allowance balance of $14.1 million as of September 30, 2021.

The Company evaluates uncertain tax positions, if any, by determining if it is more likely than not to be sustained upon examination by the taxing authorities. As of September 30, 2021 and December 31, 2020, the Company believes it had no uncertain tax positions.

Income (Loss) per Common and Equivalent Shares

If dilutive, common equivalent shares (common shares assuming exercise of options) utilizing the treasury stock method are considered in the presentation of diluted loss per share. The reconciliation of shares used to determine net loss per share is as follows (dollars in thousands, unaudited):

	Three Months				Nine Months
	ended September 30,				ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	15,870	$	39	$	26,071	$	(460)
Weighted average number of shares - basic		43,870,825		42,656,510		43,576,211		42,637,945
Weighted average number of shares – diluted		46,964,522		43,680,265		46,412,691		42,637,945

During the three month periods ended September 30, 2021 and 2020, certain options aggregating 28,276 and 7,043,259 shares, respectively, have been excluded from the calculation of diluted shares, due to the fact that their effect would be anti-dilutive.

During the nine month periods ended September 30, 2021 and 2020, certain options aggregating 59,119 and 7,043,259 shares, respectively, have been excluded from the calculation of diluted shares, due to the fact that their effect would be anti-dilutive.

Estimates and Risks

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires the use of estimates and assumptions that affect the amounts reported in these financial statements and footnotes. The Company considers these accounting estimates to be critical in the preparation of the accompanying consolidated financial statements. The Company uses information available at the time the estimates are made. However, these estimates could change materially if different information or assumptions were used including potential impact of COVID-19 uncertainties. Additionally, these estimates may not ultimately reflect the actual amounts of the final transactions that occur. The Company utilizes both internal and external sources to evaluate potential current and future liabilities for various commitments and contingencies. In the event that the assumptions or conditions change in the future, the estimates could differ from the original estimates.

Several of the Company's accounting policies involve significant judgments, uncertainties and estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. To the extent that actual results differ from management's judgments and estimates, there could be a material adverse effect on the Company. On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its allowance for doubtful accounts, inventory reserves, goodwill and valuation allowance for the deferred tax assets relating to its NOLs and commitments and contingencies. With respect to trade accounts receivable, the Company estimates the necessary allowance for doubtful accounts based on both historical and anticipated trends of payment history and the ability of the customer to fulfill its obligations. For inventory, the Company evaluates both current and anticipated sales prices of its products to determine if a write down of inventory to net realizable value is necessary. In determining the Company’s valuation allowance for its deferred tax assets, the Company assesses its ability to generate taxable income in the future.

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The Company participates in an industry that is highly regulated, and changes in the regulations affecting its business could affect its operating results. Currently the Company purchases virgin hydrochlorofluorocarbon (“HCFC”) and hydrofluorocarbon (“HFC”) refrigerants and reclaimable, primarily HCFC, HFC and chlorofluorocarbon (“CFC”), refrigerants from suppliers and its customers.

To the extent that the Company is unable to source sufficient quantities of refrigerants or is unable to obtain refrigerants on commercially reasonable terms or experiences a decline in demand and/or price for refrigerants sold by the Company, the Company could realize reductions in revenue from refrigerant sales, which could have a material adverse effect on its operating results and its financial position. The process of sourcing refrigerants includes various procurement costs, such as freight, processing, insurance, and other costs, relating to the delivery of refrigerants. As a result of the recently noted global supply chain issues, the Company determined it could be exposed to incremental costs related to these refrigerant purchases. These costs represent the Company’s initial estimate that are possibly subject to finalization in future periods and are recorded in accrued expenses and other current liabilities on the consolidated balance sheet as of September 30, 2021.

The Company is subject to various legal proceedings. The Company assesses the merit and potential liability associated with each of these proceedings. In addition, the Company estimates potential liability, if any, related to these matters. To the extent that these estimates are not accurate, or circumstances change in the future, the Company could realize liabilities, which could have a material adverse effect on its operating results and its financial position.

Impairment of Long-lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost to sell.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope, and in November 2018, issued ASU No. 2018-19 and in April 2019, issued ASU No. 2019-04 and in May 2019, issued ASU No. 2019-05, and in November 2019, issued ASU No. 2019-11, which each amended the standard. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is still evaluating the impact of this ASU.

In March 2020, the FASB issued ASU 2020-04, which provides relief from accounting analysis and impacts that may otherwise be required for modifications to agreements necessitated by reference rate reform. It also provides optional expedients to enable the continuance of hedge accounting where certain hedging relationships are impacted by reference rate reform. This optional guidance is effective immediately, and available to be used through December 31, 2022. We are assessing the impact that reference rate reform and the related adoption of this guidance will have on our financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity”, which is intended to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20, Debt-Debt with Conversion and Other Options, for convertible instruments. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. We are currently in the process of evaluating the effects of the provisions of ASU 2020-06 on our financial statements.

Note 2 - Fair Value

ASC Subtopic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company often utilizes certain assumptions that market

13

participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy.

The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:

Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3: Valuations for assets and liabilities include certain unobservable inputs in the assumptions and projections used in determining the fair value assigned to such assets or liabilities.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Note 3 - Inventories

Inventories consist of the following:

	September 30,		December 31,
	2021		2020
	(unaudited)
(in thousands)
Refrigerant and cylinders	$	65,889	$	53,593
Less: net realizable value adjustments		(7,100)		(9,133)
Total	$	58,789	$	44,460

Note 4 - Property, plant and equipment

Elements of property, plant and equipment are as follows:

	September 30,		December 31,		Estimated
	2021		2020		Lives
(in thousands)	(unaudited)
Property, plant and equipment
- Land	$	1,255	$	1,255
- Land improvements		319		319	6-10 years
- Buildings		1,446		1,446	25-39 years
- Building improvements		3,099		3,072	25-39 years
- Cylinders		13,305		13,624	15-30 years
- Equipment		25,221		25,138	3-10 years
- Equipment under capital lease		315		315	5-7 years
- Vehicles		1,740		1,537	3-5 years
- Lab and computer equipment, software		3,103		3,103	2-8 years
- Furniture & fixtures		679		679	5-10 years
- Leasehold improvements		852		852	3-5 years
- Equipment under construction		1,615		944
Subtotal		52,949		52,284
Accumulated depreciation		32,914		30,374
Total	$	20,035	$	21,910

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Depreciation expense for the nine months ended September 30, 2021 and 2020 was $2.5 million and $3.2 million, respectively.

Note 5 - Leases

The Company has various lease agreements with terms up to 11 years, including leases of buildings and various equipment. Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

At inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of the Company’s lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. common area maintenance, charges, utilities and property taxes). The Company elected the package of practical expedients permitted under the transition guidance, which allows us to carry forward our historical lease classification, our assessment on whether a contract contains a lease, and our initial direct costs for any leases that existed prior to the adoption of the new standard. We also elected to combine lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of operations on a straight line basis over the lease term. The Company’s lease agreements do not contain any material residual value, guarantees or material restrictive covenants.

Operating leases are included in Right of use asset, Accrued expenses and other current liabilities, and Long-term lease liabilities on the consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred.

Operating lease expense of $2.5 million and $2.2 million, for the nine months ended September 30, 2021 and 2020, respectively, is included in Selling, general and administrative expenses on the consolidated statements of operations.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of September 30, 2021.

	September 30,
Maturity of Lease Payments	2021
	(unaudited)
(in thousands)
-2021 (remaining)	$	1,454
-2022		1,415
-2023		1,412
-2024		1,027
-Thereafter		2,932
Total undiscounted operating lease payments		8,240
Less imputed interest		(1,512)
Present value of operating lease liabilities	$	6,728

Balance Sheet Classification

	September 30,
	2021
Current lease liabilities (recorded in Accrued expenses and other current liabilities)	$	3,093
Long-term lease liabilities		3,635
Total operating lease liabilities	$	6,728

Other Information

	September 30,
	2021
Weighted-average remaining term for operating leases	4.31	years
Weighted-average discount rate for operating leases	8.22	%

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Cash Flows

Cash paid for amounts included in the present value of operating lease liabilities was $2.5 million during the nine months ended September 30, 2021 and is included in operating cash flows.

Note 6 - Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations accounted for under the purchase method of accounting.

There were no goodwill impairment losses recognized for the nine month period ended September 30, 2021 and year ended December 31, 2020. Based on the results of the impairment assessments of goodwill and intangible assets performed, management concluded that the fair value of the Company’s goodwill exceeds the carrying value and that there are no impairment indicators related to intangible assets.

At September 30, 2021 and December 31, 2020 the Company had $47.8 million of goodwill.

The Company’s other intangible assets consist of the following:

		September 30, 2021						December 31, 2020
		(unaudited)
	Amortization	Gross						Gross
	Period	Carrying		Accumulated				Carrying		Accumulated
(in thousands)	(in years)	Amount		Amortization			Net	Amount		Amortization			Net
Intangible assets with determinable lives
Covenant not to compete	6 - 10		1,270		1,002		268		1,270		937		333
Customer relationships	10 - 12		31,560		11,163		20,397		31,560		9,167		22,393
Above market leases	13		567		177		390		567		143		424
Total identifiable intangible assets		$	33,397	$	12,342	$	21,055	$	33,397	$	10,247	$	23,150

Amortization expense for the nine months ended September 30, 2021 and 2020 was $2.1 million for both periods. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

Note 7 - Share-based compensation

Share-based compensation represents the cost related to share-based awards, typically stock options or stock grants, granted to employees, non-employees, officers and directors. Share-based compensation is measured at grant date, based on the estimated aggregate fair value of the award on the grant date, and such amount is charged to compensation expense on a straight-line basis (net of estimated forfeitures) over the requisite service period. For the nine months periods ended September 30, 2021 and 2020, share-based compensation expense of $0.5 million and $0.6 million, respectively, are reflected in Selling, general and administrative expenses in the consolidated Statements of Operations.

Share-based awards have historically been made as stock options, and recently also as stock grants, issued pursuant to the terms of the Company’s stock option and stock incentive plans (collectively, the “Plans”), described below. The Plans may be administered by the Board of Directors or the Compensation Committee of the Board or by another committee appointed by the Board from among its members as provided in the Plans. Presently, the Plans are administered by the Company’s Compensation Committee of the Board of Directors. As of September 30, 2021 there were 3,739,235 shares of the Company’s common stock available under the Plans for issuance for future stock option grants or other stock based awards.

Stock option awards, which allow the recipient to purchase shares of the Company’s common stock at a fixed price, are typically granted at an exercise price equal to the Company’s stock price at the date of grant. Typically, the Company’s stock option awards have vested from immediately to two years from the grant date and have had a contractual term ranging from three to ten years. ISOs granted under the Plans may not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of persons holding 10% or more of the voting stock of the Company). Nonqualified options granted under the Plans may not be granted at a price less than the fair market value of the common stock. Options granted under the Plans expire not more than ten years from the date of grant (five years in the case of ISOs granted to persons holding 10% or more of the voting stock of the Company).

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Effective September 17, 2014, the Company adopted its 2014 Stock Incentive Plan (“2014 Plan”) pursuant to which 3,000,000 shares of common stock were reserved for issuance (i) upon the exercise of options, designated as either ISOs under the Code or nonqualified options, or (ii) as stock, deferred stock or other stock-based awards. ISOs may be granted under the 2014 Plan to employees and officers of the Company. Non-qualified options, stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2014 Plan is sooner terminated, the ability to grant options or other awards under the 2014 Plan will expire on September 17, 2024.

Effective June 7, 2018, the Company adopted its 2018 Stock Incentive Plan (“2018 Plan”) pursuant to which 4,000,000 shares of common stock were reserved for issuance (i) upon the exercise of options, designated as either ISOs under the Code or nonqualified options, or (ii) as stock, deferred stock or other stock-based awards. ISOs may be granted under the 2018 Plan to employees and officers of the Company. Non-qualified options, stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2018 Plan is sooner terminated, the ability to grant options or other awards under the 2018 Plan will expire on June 7, 2028.

Effective June 11, 2020, the Company adopted its 2020 Stock Incentive Plan (“2020 Plan”) pursuant to which 3,000,000 shares of common stock were reserved for issuance (i) upon the exercise of options, designated as either ISOs under the Code or nonqualified options, or (ii) as stock, deferred stock or other stock-based awards. ISOs may be granted under the 2020 Plan to employees and officers of the Company. Non-qualified options, stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2020 Plan is sooner terminated, the ability to grant options or other awards under the 2020 Plan will expire on June 11, 2030.

All stock options have been granted to employees and non-employees at exercise prices equal to or in excess of the market value on the date of the grant.

The Company determines the fair value of share-based awards at the grant date by using the Black-Scholes option-pricing model, and is incorporating the simplified method to compute expected lives of share-based awards. There were options to purchase 463,754 and 254,700 shares of common stock granted during the nine-month periods ended September 30, 2021 and 2020, respectively.

A summary of the activity for stock options issued under the Company’s Plans for the indicated periods is presented below:

		Weighted
		Average
		Exercise
Stock Option Plan Totals	Shares	Price
Outstanding at December 31, 2019	7,042,377	$	1.01
-Cancelled	—	$	—
-Exercised	(1,967,562)	$	0.91
-Granted	254,700	$	1.11
Outstanding at December 31, 2020	5,329,515	$	1.06
-Cancelled	(107,447)		2.11
-Exercised	(1,373,905)	$	1.23
-Granted	463,754	$	1.71
Outstanding at September 30, 2021, unaudited	4,311,917	$	1.04

The following is the weighted average contractual life in years and the weighted average exercise price at September 30, 2021 of:

		Weighted
		Average		Weighted
		Remaining		Average
	Number of	Contractual		Exercise
	Options	Life		Price
Options outstanding and vested	4,311,917	3.8	years	$	1.04

The intrinsic value of options outstanding at September 30, 2021 and December 31, 2020 were $10.7 million and $0.7 million, respectively.

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The intrinsic value of options unvested at September 30, 2021 and December 31, 2020 were $5,700 and $0, respectively.

The intrinsic value of options exercised during the nine months ended September 30, 2021 and 2020 were $2.1 million and $0, respectively.

Note 8 - Short-term and Long-term debt

Elements of short-term and long-term debt are as follows:

	September 30,		December 31,
	2021		2020
(in thousands)		(unaudited)
Short-term & long-term debt
Short-term debt:
- Revolving credit line	$	7,000	$	2,000
- Loan from Paycheck Protection Program- current		—		2,062
- Capital lease obligation- current		—		4
- Term loan facility – current		5,248		5,248
Subtotal		12,248		9,314
Long-term debt:
- Term loan facility- net of current portion of long-term debt		75,931		79,867
- Loan from Paycheck Protection Program- net of current portion		—		413
- Less: deferred financing costs on term loan		(1,683)		(2,304)
Subtotal		74,248		77,976
Total short-term & long-term debt	$	86,496	$	87,290

Revolving Credit Facility

On December 19, 2019, Hudson Technologies Company (“HTC”), Hudson Holdings, Inc. (“Holdings”) and Aspen Refrigerants, Inc. (“ARI”), as borrowers (collectively, the “Borrowers”), and Hudson Technologies, Inc. (the “Company”) as a guarantor, became obligated under a Credit Agreement (the “Wells Fargo Facility”) with Wells Fargo Bank, as administrative agent and lender (“Agent” or “Wells Fargo”) and such other lenders as may thereafter become a party to the Wells Fargo Facility.

Under the terms of the Wells Fargo Facility, the Borrowers may borrow, from time to time, up to $60 million at any time consisting of revolving loans in a maximum amount up to the lesser of $60 million and a borrowing base that is calculated based on the outstanding amount of the Borrowers’ eligible receivables and eligible inventory, as described in the Wells Fargo Facility. The Wells Fargo Facility also contains a sublimit of $5 million for swing line loans and $2 million for letters of credit.

Amounts borrowed under the Wells Fargo Facility were used by the Borrowers to repay existing revolving indebtedness under its prior revolving credit facility, repay certain principal amounts under the Term Loan Facility (as defined below), and may be used for working capital needs, certain permitted acquisitions, and to reimburse drawings under letters of credit.

Interest on loans under the Wells Fargo Facility is payable in arrears on the first day of each month. Interest charges with respect to loans are computed on the actual principal amount of loans outstanding during the month at a rate per annum equal to (A) with respect to Base Rate loans, the sum of (i) a rate per annum equal to the higher of (1) the federal funds rate plus 0.5%, (2) one month LIBOR plus 1.0%, and (3) the prime commercial lending rate of Wells Fargo, plus (ii) between 1.25% and 1.75% depending on average monthly undrawn availability and (B) with respect to LIBOR rate loans, the sum of the LIBOR rate plus between 2.25% and 2.75% depending on average monthly undrawn availability.

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In connection with the closing of the Wells Fargo Facility, the Company also entered into a Guaranty and Security Agreement, dated as of December 19, 2019 (the “Revolver Guaranty and Security Agreement”), pursuant to which the Company and certain subsidiaries unconditionally guaranteed the payment and performance of all obligations owing by the Borrowers to Wells Fargo, as Agent for the benefit of the revolving lenders. Pursuant to the Revolver Guaranty and Security Agreement, the Borrowers, the Company and certain other subsidiaries granted to the Agent, for the benefit of the Wells Fargo Facility lenders, a security interest in substantially all of their respective assets, including receivables, equipment, general intangibles (including intellectual property), inventory, subsidiary stock, real property, and certain other assets. The Revolver Guaranty and Security Agreement also provides that the Agent shall receive the right to dominion over certain of the Borrowers’ bank accounts in the event of an Event of Default under the Wells Fargo Facility, or if undrawn availability under the Wells Fargo Facility falls below $9 million at any time.

The Wells Fargo Facility contains a financial covenant requiring the Company to maintain at all times minimum liquidity (defined as availability under the Wells Fargo Facility plus unrestricted cash) of at least $5 million, of which at least $3 million must be derived from availability. The Wells Fargo Facility also contains a springing covenant, which takes effect only upon a failure to maintain undrawn availability of at least $7.5 million, requiring the Company to maintain a Fixed Charge Coverage Ratio (FCCR) of not less than 1.00 to 1.00, as of the end of each trailing period of twelve consecutive fiscal months commencing with the month prior to the triggering of the covenant. The FCCR (as defined in the Wells Fargo Facility) is the ratio of (a) EBITDA for such period, minus unfinanced capital expenditures made during such period, to (b) the aggregate amount of (i) interest expense required to be paid (other than interest paid-in-kind, amortization of financing fees, and other non-cash interest expense) during such period, (ii) scheduled principal payments (but excluding principal payments relating to outstanding revolving loans under the Wells Fargo Facility), (iii) all net federal, state, and local income taxes required to be paid during such period (provided, that any tax refunds received shall be applied to the period in which the cash outlay for such taxes was made), (iv) all restricted payments paid (as defined in the Wells Fargo Facility) during such period, and (v) to the extent not otherwise deducted from EBITDA for such period, all payments required to be made during such period in respect of any funding deficiency or funding shortfall with respect to any pension plan. The FCCR covenant ceases after the Borrowers have been in compliance therewith for two consecutive months.

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

On April 23, 2020, the Borrowers, the Company and its subsidiaries entered into a First Amendment to Credit Agreement with Wells Fargo (the “First Amendment”). The First Amendment authorized the Company and its subsidiaries to incur up to $2.5 million of indebtedness under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and contained other provisions relating to the treatment of such proceeds and any potential debt forgiveness, under the Wells Fargo Facility.

The commitments under the Wells Fargo Facility will expire and the full outstanding principal amount of the loans, together with accrued and unpaid interest, are due and payable in full on December 19, 2022, unless the commitments are terminated and the outstanding principal amount of the loans are accelerated sooner following an event of default.

Term Loan Facility

On October 10, 2017, HTC, Holdings, and ARI, as borrowers, and the Company, as guarantor, became obligated under a Term Loan Credit and Security Agreement (as amended, the “Term Loan Facility”) with U.S. Bank National Association, as administrative agent and collateral agent (“Term Loan Agent”) and funds advised by FS Investments and such other lenders as may thereafter become a party to the Term Loan Facility (the “Term Loan Lenders”).

Under the terms of the Term Loan Facility, the Borrowers immediately borrowed $105 million pursuant to a term loan (the “Term Loan”).

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The Term Loan matures on October 10, 2023. Interest on the Term Loan is generally payable on the earlier of the last day of the interest period applicable to such Eurodollar rate loan and the last day of the Term Loan Facility, as applicable. Interest is payable at the rate per annum of the Eurodollar Rate (as defined in the Term Loan Facility) plus 10.25%. The Borrowers have the option of paying 3.00% interest per annum in kind by adding such amount to the principal of the Term Loans during no more than five fiscal quarters during the term of the Term Loan Facility.

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

The Term Loan Facility contains a financial covenant requiring the Company to maintain a specified total leverage ratio (“TLR”), tested as of the last day of the fiscal quarter. The TLR (as defined in the Term Loan Facility) is the ratio of (a) funded debt as of such day to (b) EBITDA for the four consecutive fiscal quarters ending on the last day of such fiscal quarter. Funded debt (as defined in the Term Loan Facility) includes amounts borrowed under the Wells Fargo Facility and the Term Loan Facility as well as capitalized lease obligations and other indebtedness for borrowed money maturing more than one year from the date of creation thereof. As of September 30, 2021 and December 31, 2020, the TLR was approximately 2.35 to 1 and 5.84 to 1, respectively.

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

In connection with the closing of the Term Loan Facility, the Company also entered into a Guaranty and Suretyship Agreement, dated as of October 10, 2017 (the “Term Loan Guarantee”), pursuant to which the Company affirmed its unconditional guarantee of the payment and performance of all obligations owing by the Borrowers to the Term Loan Agent, as agent for the benefit of the Term Loan Lenders.

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

On December 19, 2019, HTC, Holdings and ARI as borrowers and the Company as a guarantor, entered into a Waiver and Fourth Amendment to Term Loan Credit and Security Agreement (the “Fourth Amendment”) with U.S. Bank National Association, as collateral agent and administrative agent, and the various lenders thereunder.

The Fourth Amendment waived financial covenant defaults at June 30, 2019 and September 30, 2019 and amended the Term Loan Credit and Security Agreement dated October 10, 2017 (as previously amended, the “Term Loan Facility”) to reset the maximum Total Leverage Ratio covenant contained in the Term Loan Facility at the indicated dates as follows: (i) September 30, 2019 - 15.67:1.00; (ii) December 31, 2019 – 14.54:1.00; (iii) March 31, 2020 – 16.57:1.00; (iv) June 30, 2020 – 10.87:1.00; (v) September 30, 2020 – 8.89:1.00; (vi) December 31, 2020 – 8.89:1.00; (vii) March 31, 2021 – 7.75:1.00; (viii) June 30, 2021 – 7.03:1.00; (ix) September 30, 2021 – 6.08:1.00; and (x) December 31, 2021 – 5.36:1.00. The Fourth Amendment also reset the minimum liquidity requirement (consisting of cash plus undrawn availability on the Borrowers’ revolving loan facility) of $5 million, measured monthly. Furthermore, the Fourth Amendment added a minimum LTM Adjusted EBITDA covenant as of the indicated dates as follows: (i) September 30, 2019 - $7.887 million; (ii) December 31, 2019 – $7.954 million; (iii) March 31, 2020 – $7.359 million; (iv) June 30, 2020 – $11.745 million; (v) September 30, 2020 – $12.021 million; (vi) December 31, 2020 – $12.300 million; (vii) March 31, 2021 –$14.295 million; (viii) June 30, 2021 – $14.566 million; (ix) September 30, 2021 – $15.431 million; and (x) December 31, 2021 – $16.267 million.

The Fourth Amendment also (i) continues the limitation on acquisitions and dividends, (ii) required a principal repayment of $14,000,000 upon execution of the Fourth Amendment and (iii) increased the scheduled quarterly principal repayments to $562,000 effective March 31, 2020 and $1,312,000 effective December 31, 2020.

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The Fourth Amendment also terminated the exit fee payable to the term loan lenders, which would have been payable in full in cash upon the earlier to occur of (x) repayment in full of the term loans, or (y) any acceleration of the term loans. In lieu of the exit fee, the Fourth Amendment reinstated a prepayment premium equal to the following percentages of the principal amount prepaid, depending upon the date of prepayment: (i) through March 31, 2020 – 0.50%; (ii) from April 1, 2020 through March 31, 2021 – 2.50%; and (iii) from April 1, 2021 and thereafter – 5.00%.

The Fourth Amendment also added a new covenant providing that in the event of a breach of a financial covenant contained in the Term Loan Facility or any failure to make a required principal repayment (a “Trigger Event”), then on or prior to six months after a Trigger Event, the Company shall commence a process to (x) sell its businesses and/or assets, and/or (y) consummate a refinancing transaction with respect to the Term Loan Facility (a “Transaction”), in each case, subject to enumerated time milestones contained in the Fourth Amendment, and which requires that Transaction shall, in any event, be consummated on or prior to the eighteen (18) month anniversary of the Trigger Event.

As closing conditions to the execution and delivery of the Fourth Amendment, the Company was required to: (i) amend its Bylaws in a manner acceptable to the Term Loan Facility lenders; (ii) appoint two new independent directors to the board of directors (the “Special Directors”); and (iii) pay an amendment fee of 0.50% of the amount of the outstanding loans under the Term Loan Facility.

On April 23, 2020, HTC, Holdings and ARI as borrowers and the Company as a guarantor, entered into a Fifth Amendment to Term Loan Credit and Security Agreement (the “Fifth Amendment”) with U.S. Bank National Association, as collateral agent and administrative agent, and the various lenders thereunder. The Fifth Amendment authorized the Company and its subsidiaries to incur up to $2.5 million of indebtedness under the CARES Act and contained other provisions relating to the treatment of such proceeds and any potential debt forgiveness, under the Term Loan Facility.

The Company evaluated the Fourth and Fifth Amendments in accordance with the provisions of Accounting Standards Codification (“ASC”) 470, Debt, to determine if the Amendments were (1) a troubled debt restructuring, and if not, (2) a modification or an extinguishment of debt. The Company concluded that the Fourth Amendment was a troubled debt restructuring for accounting purposes due to the removal of the exit fee; as such, the Company capitalized an additional $0.5 million of deferred financing costs, which are being amortized over the remaining term. The future undiscounted cash flows of the term loan, as amended, exceeded the carrying value, and accordingly, no gain was recognized and no adjustment was made to the carrying value of the debt.

The Company was in compliance with all covenants, under the Wells Fargo Facility and the Term Loan Facility, as amended, as of September 30, 2021.

The Company’s ability to comply with these covenants in future quarters may be affected by events beyond the Company’s control, including general economic conditions, weather conditions, regulations and refrigerant pricing. Therefore, we cannot make any assurance that we will continue to be in compliance during future periods.

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

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CARES Act Loan

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

Vehicle and Equipment Loans

The Company has from time to time entered into various vehicle and equipment loans. These loans were payable in 60 monthly payments through July 2021 and bore interest ranging from 0.0% to 8.3%. All such loans have been repaid in full at September 30, 2021.

Capital Lease Obligations

The Company rents certain equipment with a de minimis net book value at September 30, 2021 under leases which have been classified as capital leases.

Scheduled maturities of the Company’s long-term debt and capital lease obligations are as follows:

Years ended September 30,	Amount
(in thousands)
-2022	$	5,248
-2023		5,248
-2024		70,683
Total	$	81,179

Note 9 – Related Party Transactions

Stephen P. Mandracchia served as Vice President – Legal and Regulatory and Secretary of the Company through May 3, 2019 and since that date served the Company in a consulting role through August 31, 2020. From May 6, 2019 through December 31, 2019, Mr. Mandracchia received a monthly consulting fee of $10,000 and such fee was increased to $12,000 per month effective January 1, 2020. Mr. Mandracchia is the brother-in-law of the deceased Kevin J. Zugibe, the Company’s former Chairman of the Board and Chief Executive Officer. Effective September 1, 2020, Mr. Mandracchia became a member of the Company’s Board of Directors.

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Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements, contained in this section and elsewhere in this Form 10-Q, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, changes in the laws and regulations affecting the industry, changes in the demand and price for refrigerants (including unfavorable market conditions adversely affecting the demand for, and the price of refrigerants), the Company’s ability to source refrigerants, regulatory and economic factors, seasonality, competition, litigation, the nature of supplier or customer arrangements that become available to the Company in the future, adverse weather conditions, possible technological obsolescence of existing products and services, possible reduction in the carrying value of long-lived assets, estimates of the useful life of its assets, potential environmental liability, customer concentration, the ability to obtain financing, the ability to meet financial covenants under our financing facilities, any delays or interruptions in bringing products and services to market, the timely availability of any requisite permits and authorizations from governmental entities and third parties as well as factors relating to doing business outside the United States, including changes in the laws, regulations, policies, and political, financial and economic conditions, including inflation, interest and currency exchange rates, of countries in which the Company may seek to conduct business, the Company’s ability to successfully integrate any assets it acquires from third parties into its operations, the impact of the current COVID-19 pandemic, and other risks detailed in the Company’s Form 10-K for the year ended December 31, 2020, and in the Company’s other subsequent filings with the Securities and Exchange Commission (“SEC”). The words “believe”, “expect”, “anticipate”, “may”, “plan”, “should” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

Overview

The Company is a leading provider of sustainable refrigerant products and services to the Heating Ventilation Air Conditioning and Refrigeration (“HVACR”) industry. For nearly three decades, we have demonstrated our commitment to our customers and the environment by becoming one of the United States’ largest refrigerant reclaimers through multimillion dollar investments in the plants and advanced separation technology required to recover a wide variety of refrigerants and restoring them to Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”) standard for reuse as certified EMERALD Refrigerants™.

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

Sales of refrigerants continue to represent a significant majority of the Company’s revenues.

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

AIM Act

On September 23, 2021, the United States Environmental Protection Agency (“EPA”) issued the final rule establishing the framework to allocate allowances for virgin production and consumption of HFCs. The EPA is responsible for the administration of the HFC phase down enacted by Congress under the American Innovation and Manufacturing Act of 2020 (the “AIM Act”).

The AIM Act directs the EPA to address the reduction in virgin HFCs and provides authority to do so in three respects:

1) phase down the production and consumption of listed HFCs,

2) manage these HFCs and their substitutes, and

3) facilitate the transition to next-generation technologies.

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Congress also required that EPA shall consider ways to promote reclamation in all phases of its implementation of the AIM Act. The final rule introduces a stepdown of 10% from baseline levels and a subsequent allowance rule must establish a cumulative 40% reduction in the baseline for 2024. Hudson received an allocation allowance for calendar year 2022 equal to approximately 3 million Metric Tons Exchange Value Equivalents, or 1% of the total HFC consumption, with allowances for 2023 and beyond to be determined at a later date. Reclamation will be critical to maintaining necessary HFC supply levels to ensure an orderly phasedown.

Impact of COVID-19 Pandemic

During the year ended December 31, 2020 and continuing through the nine months ended September 30, 2021, the effects of a novel strain of coronavirus (“COVID-19”) pandemic and the related actions by governments around the world to attempt to contain the spread of the virus have materially impacted the global economy.

In response to the COVID-19 outbreak and business disruption, we have four primary priorities:

● To ensure the health and safety of Hudson employees

● To keep our products in supply and to maintain the quality and safety of our products

● To best serve our customers across all channels as they adapt to the shifting demands of consumers during the crisis

● To best position ourselves to emerge strong when this crisis ends

We operate in a “critical infrastructure industry” and are an essential business as defined by the United States government as we procure, process, service and deliver refrigerants to the government and wholesale and retail organizations, which also service both residential homes and commercial institutions throughout the United States. While the conditions in the United States and the economy have been impacted, we have been effectively running our operations, including the following:

- Keeping all plants open, while maintaining proper safety standards

- Directing all office personnel to work remotely, efficiently and safely

- Maintaining ongoing relationships and business with existing customers and vendors in the supply chain

As of the date of this filing, we have activated our contingency plans. We have deployed national and regional teams to monitor the rapidly evolving situation and recommend risk mitigation actions; we have implemented travel restrictions; and we are following social distancing practices. We are endeavoring to follow guidance from authorities and health officials including, but not limited to, requiring associates to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitization routines at system facilities.

During times of crisis, business continuity and adapting to the needs of our customers is critical. We have developed systemwide knowledge-sharing routines and processes which include the management of any supply chain challenges. As of the date of this filing, there has been no material impact on our ability to procure or distribute our products and services. We are moving with speed to best serve our customers impacted by COVID-19 and to ensure adequate inventory levels in key channels. We have shifted to more remote and paperless options for customer payments and receipts, including ACH payments.

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Critical Accounting Policies

The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Several of the Company's accounting policies involve significant judgments, uncertainties and estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. To the extent that actual results differ from management's judgments and estimates, there could be a material adverse effect on the Company. On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its inventory reserves, and valuation allowance for the deferred tax assets relating to its net operating loss carry forwards (“NOLs”) and goodwill and intangible assets.

Inventory

For inventory, the Company evaluates both current and anticipated sales prices of its products to determine if a write down of inventory to net realizable value is necessary. Net realizable value represents the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion and disposal. The determination if a write-down to net realizable value is necessary is primarily affected by the market prices for the refrigerant gases we sell. Commodity prices generally are affected by a wide range of factors beyond our control, including weather, seasonality, the availability and adequacy of supply, government regulation and policies and general political and economic conditions. At any time, our inventory levels may be substantial.

Goodwill

The Company has made acquisitions that included a significant amount of goodwill and other intangible assets. The Company applies the purchase method of accounting for acquisitions, which among other things, requires the recognition of goodwill (which represents the excess of the purchase price of the acquisition over the fair value of the net assets acquired and identified intangible assets). We test our goodwill for impairment on an annual basis (the first day of the fourth quarter) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an asset below its carrying value. Other intangible assets that meet certain criteria are amortized over their estimated useful lives.

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

There were no goodwill impairment losses recognized in 2020 or the nine months ended September 30, 2021.

Other Intangibles

Intangibles with determinable lives are amortized over the estimated useful lives of the assets currently ranging from 6 to 13 years. The Company reviews these useful lives annually to determine that they reflect future realizable value.

Income Taxes

The Company is taxed at statutory corporate income tax rates after adjusting income reported for financial statement purposes for certain items. Current income tax expense (benefit) reflects the tax results of revenues and expenses currently taxable or deductible. The Company utilizes the asset and liability method of accounting for deferred income taxes, which provides for the recognition of deferred tax assets or liabilities, based on enacted tax rates and laws, for the differences between the financial and income tax reporting bases of assets and liabilities.

The tax benefit associated with the Company’s net operating loss carry forwards (“NOLs”) is recognized to the extent that the Company expects to realize future taxable income. To the extent that the Company utilizes its NOLs, it will not pay tax on such income. However, to the extent that the Company’s net income, if any, exceeds the annual NOL limitation, it will pay income taxes based on the then

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existing statutory rates. In addition, certain states either do not allow or limit NOLs and as such the Company will be liable for certain state income taxes.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Further, starting in 2021, the 100% NOL utilization reverts back to the pre-CARES Act limitation of 80% of taxable income. The Company has evaluated its options under the carryback provision and filed a claim for refund, resulting in a cash benefit. Further, the CARES Act accelerates the refund of the alternative minimum tax credits to allow a full refund of any remaining credit amount in taxable years beginning in 2019. The credits were originally fully refundable in taxable years beginning in 2021. As a result, the Company has recorded a preliminary $47,000 tax benefit related to the alternative minimum tax refund in the quarter ended March 31, 2020 and an additional $380,000 in the quarter ended June 30, 2020. Finally, the CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020.

As of September 30, 2021, the Company had NOLs of approximately $29.8 million, of which none have an expiration date. As of September 30, 2021, the Company had state tax NOLs of approximately $16.5 million expiring in various years. We review the likelihood that we will realize the benefit of our deferred tax assets, and therefore the need for valuation allowances, on an annual basis in the fourth quarter of the year, and more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results are considered, along with all other available positive and negative evidence.

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence that is objective and verifiable, such as cumulative losses in recent years. We utilize a rolling twelve quarters of pre-tax income or loss adjusted for significant permanent book to tax differences, as well as non-recurring items, as a measure of our cumulative results in recent years. Based on our assessment as of December 31, 2018, 2019, 2020 and September 30, 2021, we concluded that due to the uncertainty that the deferred tax assets will not be fully realized in the future, we recorded a valuation allowance of approximately $11.3 million during 2018, and due to additional losses, increased the valuation allowance through 2019 and 2020 to $19.0 million. For the quarter ended September 30, 2021, and due to a net income position that resulted in the utilization of gross net operating losses of $16.3 million, the valuation allowance was reduced by ($4.9) million, resulting in an ending valuation allowance balance of $14.1 million as of September 30, 2021.

The Company evaluates uncertain tax positions, if any, by determining if it is more likely than not to be sustained upon examination by the taxing authorities. As of September 30, 2021 and December 31, 2020, the Company believes it had no uncertain tax positions.

Results of Operations

Three-month period ended September 30, 2021 as compared to the three-month period ended September 30, 2020

Revenues for the three-month period ended September 30, 2021 were $60.6 million, an increase of $19.1 million or 46.0% from the $41.5 million reported during the comparable 2020 period.  The increase was mainly attributable to higher selling prices of certain refrigerants sold, partially offset by reduced volume. Starting in late March 2020, the COVID-19 virus pandemic negatively impacted our economy, including the closures to public venues, such as office buildings, gyms, schools and universities across the U.S., which negatively impacted our end markets and overall demand for refrigerants.

Cost of sales for the three-month period ended September 30, 2021 was $37.0 million or 61% of sales. The cost of sales for the three-month period ended September 30, 2020 was $32.5 million or 78% of sales. The reduction in the cost of sales percentage from 78% to 61% is primarily due to higher selling prices and lower costs of certain refrigerants sold during the third quarter of 2021 when compared to the third quarter of 2020. Gross margin for the three-month period ended September 30, 2021 was positively impacted by the sell down of tiers of lower cost refrigerant inventory.

Selling, general and administrative (“SG&A”) expenses for the three-month period ended September 30, 2021 were $6.1 million, a decrease of $0.1 million from the $6.2 million reported during comparable 2020 period.

Amortization expense for both of the three-month periods ended September 30, 2021 and 2020 was $0.7 million.

Other expense for the three-month period ended September 30, 2021 was $0.4 million, compared to the $2.0 million of other expense reported during the comparable 2020 period. Interest expense was lower due to reduced debt resulting from the Company paying down

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principal of its term loan debt. Other income for the three-month period ended September 30, 2021 was $2.5 million related to the forgiveness of the PPP Loan. Other income for the three-month period ended September 30, 2020 was $1.0 million relating to the receipt of key man life insurance proceeds from the unexpected passing of Kevin J. Zugibe, Chairman of the Board and Chief Executive Officer of the Company at that time.

The income tax expense for the three-month period ended September 30, 2021 was $0.7 million compared to the income tax expense of $0.1 million for the three-month period ended September 30, 2020. Income tax expense for federal and state income tax purposes was determined by applying statutory income tax rates to pre-tax income after adjusting for certain items. As discussed previously, we concluded that due to the uncertainty that the deferred tax assets will not be fully realized in the future, we recorded a full valuation allowance as of September 30, 2021.

Net income for the three-month period ended September 30, 2021 was $15.9 million, a increase of $15.9 million from the $0.0 million of net income reported during the comparable 2020 period. The increase in net income was primarily due to increased revenues, reduced cost of certain refrigerants and interest expense, as previously discussed.

Nine month period ended September 30, 2021 as compared to the nine month period ended September 30, 2020

Revenues for the nine month period ended September 30, 2021 were $155.0 million, an increase of $29.5 million or 23.5% from the $125.5 million reported during the comparable 2020 period. The increase was mainly attributable to higher selling prices of certain refrigerants sold, partially offset by reduced volume. Starting in late March 2020, the COVID-19 virus pandemic negatively impacted our economy, including the closures to public venues, such as office buildings, gyms, schools and universities across the U.S., which negatively impacted our end markets and overall demand for refrigerants.

Cost of sales for the nine-month period ended September 30, 2021 was $100.3 million or 65% of sales. The cost of sales for the nine-month period ended September 30, 2020 was $95.5 million or 76% of sales. The reduction in the cost of sales percentage from 76% to 65% is primarily due to higher selling prices and lower costs of certain refrigerants sold during the first nine months of 2021 when compared to the first nine months of 2020. Gross margin for the nine-month period ended September 30, 2021 was positively impacted by the sell down of tiers of lower cost refrigerant inventory.

Selling, general and administrative (“SG&A”) expenses for the nine-month period ended September 30, 2021 were $19.6 million, a decrease of $0.6 million from the $20.2 million reported during the comparable 2020 period. The reduction in SG&A was primarily due to reduced non-recurring professional fees.

Amortization expense for both nine-month periods ended September 30, 2021 and 2020 was $2.1 million.

Other expense for the nine-month period ended September 30, 2021 was $6.1 million, compared to the $8.4 million of other expense reported during the comparable 2020 period. Interest expense was lower due to reduced debt resulting from the Company paying down principal of its term loan debt. Other income for the nine-month period ended September 30, 2021 was $2.5 million related to the forgiveness of the PPP Loan. Other income for the nine-month period ended September 30, 2020 was $1.0 million relating to the receipt of key man life insurance proceeds from the unexpected passing of Kevin J. Zugibe, Chairman of the Board and Chief Executive Officer of the Company at that time.

The income tax expense for the nine-month period ended September 30, 2021 was $0.8 million compared to income tax benefit of $0.3 million for the nine month period ended September 30, 2020. For 2021 and 2020, income tax expense for federal and state income tax purposes was determined by applying statutory income tax rates to pre-tax income after adjusting for certain items. As discussed previously, we concluded that due to the uncertainty that the deferred tax assets will not be fully realized in the future, we have recorded a full valuation allowance as of September 30, 2021.

Net income for the nine-month period ended September 30, 2021 was $26.1 million, an increase of $26.6 million from the $0.5 million of net loss reported during the comparable 2020 period, primarily due to higher revenues, reduced SG&A, and reduced interest expense, as described above.

Liquidity and Capital Resources

At September 30, 2021, the Company had working capital, which represents current assets less current liabilities, of $50.6 million, an increase of $26.2 million from the working capital of $24.4 million at December 31, 2020. The increase in working capital is primarily attributable to timing of borrowings, accounts receivable and inventory.

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Inventory and trade receivables are principal components of current assets. At September 30, 2021, the Company had inventories of $58.8 million, an increase of $14.3 million from $44.5 million at December 31, 2020. The increase in the inventory balance is primarily due to the timing and availability of inventory purchases and the sale of refrigerants. The Company’s ability to sell and replace its inventory on a timely basis and the prices at which it can be sold are subject, among other things, to current market conditions and the nature of supplier or customer arrangements and the Company’s ability to source CFC and HCFC based refrigerants (which are no longer being produced) and HFC refrigerants (which are currently in the process of being phased down). At September 30, 2021, the Company had trade receivables, net of allowance for doubtful accounts, of $22.1 million, an increase of $12.3 million from $9.8 million at December 31, 2020, mainly due to increased sales. The Company’s trade receivables are concentrated with various wholesalers, brokers, contractors and end-users within the refrigeration industry that are primarily located in the continental United States. The Company has historically financed its working capital requirements through cash flows from operations, the issuance of debt and equity securities, and bank borrowings.

Net cash provided by operating activities for the nine-month period ended September 30, 2021 was $8.0 million, when compared to net cash provided by operating activities of $19.9 million for the comparable 2020 period. The variance is primarily due to timing of accounts receivable and inventory balances as we increased sales and replenished inventory during 2021.

Net cash used in investing activities for the nine-month period ended September 30, 2021 was $0.7 million compared with net cash provided by investing activities of $0.0 million for the comparable 2020 period. As mentioned previously, the Company received $1.0 million of insurance proceeds during the third quarter of 2020 pursuant to the unexpected passing of its founder and CEO at that time.

Net cash provided by financing activities for the nine-month period ended September 30, 2021 was $0.8 million compared with net cash used in financing activities of $13.2 million for the comparable 2020 period. The variance is mainly due to borrowings under the revolving credit facility to purchase inventory during 2021.

At September 30, 2021, cash and cash equivalents were $9.5 million, or approximately $8.2 million higher than the $1.3 million of cash and cash equivalents at December 31, 2020.

Revolving Credit Facility

On December 19, 2019, Hudson Technologies Company (“HTC”), Hudson Holdings, Inc. (“Holdings”) and Aspen Refrigerants, Inc. (“ARI”), as borrowers (collectively, the “Borrowers”), and Hudson Technologies, Inc. (the “Company”) as a guarantor, became obligated under a Credit Agreement (the “Wells Fargo Facility”) with Wells Fargo Bank, as administrative agent and lender (“Agent” or “Wells Fargo”) and such other lenders as may thereafter become a party to the Wells Fargo Facility.

Under the terms of the Wells Fargo Facility, the Borrowers may borrow, from time to time, up to $60 million at any time consisting of revolving loans in a maximum amount up to the lesser of $60 million and a borrowing base that is calculated based on the outstanding amount of the Borrowers’ eligible receivables and eligible inventory, as described in the Wells Fargo Facility. The Wells Fargo Facility also contains a sublimit of $5 million for swing line loans and $2 million for letters of credit.

Amounts borrowed under the Wells Fargo Facility were used by the Borrowers to repay existing revolving indebtedness under its prior revolving credit facility, repay certain principal amounts under the Term Loan Facility (as defined below), and may be used for working capital needs, certain permitted acquisitions, and to reimburse drawings under letters of credit.

Interest on loans under the Wells Fargo Facility is payable in arrears on the first day of each month. Interest charges with respect to loans are computed on the actual principal amount of loans outstanding during the month at a rate per annum equal to (A) with respect to Base Rate loans, the sum of (i) a rate per annum equal to the higher of (1) the federal funds rate plus 0.5%, (2) one month LIBOR plus 1.0%, and (3) the prime commercial lending rate of Wells Fargo, plus (ii) between 1.25% and 1.75% depending on average monthly undrawn availability and (B) with respect to LIBOR rate loans, the sum of the LIBOR rate plus between 2.25% and 2.75% depending on average monthly undrawn availability.

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In connection with the closing of the Wells Fargo Facility, the Company also entered into a Guaranty and Security Agreement, dated as of December 19, 2019 (the “Revolver Guaranty and Security Agreement”), pursuant to which the Company and certain subsidiaries unconditionally guaranteed the payment and performance of all obligations owing by the Borrowers to Wells Fargo, as Agent for the benefit of the revolving lenders. Pursuant to the Revolver Guaranty and Security Agreement, the Borrowers, the Company and certain other subsidiaries granted to the Agent, for the benefit of the Wells Fargo Facility lenders, a security interest in substantially all of their respective assets, including receivables, equipment, general intangibles (including intellectual property), inventory, subsidiary stock, real property, and certain other assets. The Revolver Guaranty and Security Agreement also provides that the Agent shall receive the right to dominion over certain of the Borrowers’ bank accounts in the event of an Event of Default under the Wells Fargo Facility, or if undrawn availability under the Wells Fargo Facility falls below $9 million at any time.

The Wells Fargo Facility contains a financial covenant requiring the Company to maintain at all times minimum liquidity (defined as availability under the Wells Fargo Facility plus unrestricted cash) of at least $5 million, of which at least $3 million must be derived from availability. The Wells Fargo Facility also contains a springing covenant, which takes effect only upon a failure to maintain undrawn availability of at least $7.5 million, requiring the Company to maintain a Fixed Charge Coverage Ratio (FCCR) of not less than 1.00 to 1.00, as of the end of each trailing period of twelve consecutive fiscal months commencing with the month prior to the triggering of the covenant. The FCCR (as defined in the Wells Fargo Facility) is the ratio of (a) EBITDA for such period, minus unfinanced capital expenditures made during such period, to (b) the aggregate amount of (i) interest expense required to be paid (other than interest paid-in-kind, amortization of financing fees, and other non-cash interest expense) during such period, (ii) scheduled principal payments (but excluding principal payments relating to outstanding revolving loans under the Wells Fargo Facility), (iii) all net federal, state, and local income taxes required to be paid during such period (provided, that any tax refunds received shall be applied to the period in which the cash outlay for such taxes was made), (iv) all restricted payments paid (as defined in the Wells Fargo Facility) during such period, and (v) to the extent not otherwise deducted from EBITDA for such period, all payments required to be made during such period in respect of any funding deficiency or funding shortfall with respect to any pension plan. The FCCR covenant ceases after the Borrowers have been in compliance therewith for two consecutive months.

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

On April 23, 2020, the Borrowers, the Company and its subsidiaries entered into a First Amendment to Credit Agreement with Wells Fargo (the “First Amendment”). The First Amendment authorized the Company and its subsidiaries to incur up to $2.5 million of indebtedness under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and contained other provisions relating to the treatment of such proceeds and any potential debt forgiveness, under the Wells Fargo Facility.

The commitments under the Wells Fargo Facility will expire and the full outstanding principal amount of the loans, together with accrued and unpaid interest, are due and payable in full on December 19, 2022, unless the commitments are terminated and the outstanding principal amount of the loans are accelerated sooner following an event of default.

Term Loan Facility

On October 10, 2017, HTC, Holdings, and ARI, as borrowers, and the Company, as guarantor, became obligated under a Term Loan Credit and Security Agreement (as amended, the “Term Loan Facility”) with U.S. Bank National Association, as administrative agent and collateral agent (“Term Loan Agent”) and funds advised by FS Investments and such other lenders as may thereafter become a party to the Term Loan Facility (the “Term Loan Lenders”).

Under the terms of the Term Loan Facility, the Borrowers immediately borrowed $105 million pursuant to a term loan (the “Term Loan”).

The Term Loan matures on October 10, 2023. Interest on the Term Loan is generally payable on the earlier of the last day of the interest period applicable to such Eurodollar rate loan and the last day of the Term Loan Facility, as applicable. Interest is payable at the rate per annum of the Eurodollar Rate (as defined in the Term Loan Facility) plus 10.25%. The Borrowers have the option of paying 3.00% interest per annum in kind by adding such amount to the principal of the Term Loans during no more than five fiscal quarters during the term of the Term Loan Facility.

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

The Term Loan Facility contains a financial covenant requiring the Company to maintain a specified total leverage ratio (“TLR”), tested as of the last day of the fiscal quarter. The TLR (as defined in the Term Loan Facility) is the ratio of (a) funded debt as of such day to (b) EBITDA for the four consecutive fiscal quarters ending on the last day of such fiscal quarter. Funded debt (as defined in the Term Loan Facility) includes amounts borrowed under the Wells Fargo Facility and the Term Loan Facility as well as capitalized lease obligations and other indebtedness for borrowed money maturing more than one year from the date of creation thereof. As of September 30, 2021 and December 31, 2020, the TLR was approximately 2.35 to 1 and 5.84 to 1, respectively.

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

In connection with the closing of the Term Loan Facility, the Company also entered into a Guaranty and Suretyship Agreement, dated as of October 10, 2017 (the “Term Loan Guarantee”), pursuant to which the Company affirmed its unconditional guarantee of the payment and performance of all obligations owing by the Borrowers to the Term Loan Agent, as agent for the benefit of the Term Loan Lenders.

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

On December 19, 2019, HTC, Holdings and ARI as borrowers and the Company as a guarantor, entered into a Waiver and Fourth Amendment to Term Loan Credit and Security Agreement (the “Fourth Amendment”) with U.S. Bank National Association, as collateral agent and administrative agent, and the various lenders thereunder.

The Fourth Amendment waived financial covenant defaults at June 30, 2019 and September 30, 2019 and amended the Term Loan Credit and Security Agreement dated October 10, 2017 (as previously amended, the “Term Loan Facility”) to reset the maximum Total Leverage Ratio covenant contained in the Term Loan Facility at the indicated dates as follows: (i) September 30, 2019 - 15.67:1.00; (ii) December 31, 2019 – 14.54:1.00; (iii) March 31, 2020 – 16.57:1.00; (iv) June 30, 2020 – 10.87:1.00; (v) September 30, 2020 – 8.89:1.00; (vi) December 31, 2020 – 8.89:1.00; (vii) March 31, 2021 – 7.75:1.00; (viii) June 30, 2021 – 7.03:1.00; (ix) September 30, 2021 – 6.08:1.00; and (x) December 31, 2021 – 5.36:1.00. The Fourth Amendment also reset the minimum liquidity requirement (consisting of cash plus undrawn availability on the Borrowers’ revolving loan facility) of $5 million, measured monthly. Furthermore, the Fourth Amendment added a minimum LTM Adjusted EBITDA covenant as of the indicated dates as follows: (i) September 30, 2019 - $7.887 million; (ii) December 31, 2019 – $7.954 million; (iii) March 31, 2020 – $7.359 million; (iv) June 30, 2020 – $11.745 million; (v) September 30, 2020 – $12.021 million; (vi) December 31, 2020 – $12.300 million; (vii) March 31, 2021 –$14.295 million; (viii) June 30, 2021 – $14.566 million; (ix) September 30, 2021 – $15.431 million; and (x) December 31, 2021 – $16.267 million.

The Fourth Amendment also (i) continues the limitation on acquisitions and dividends, (ii) required a principal repayment of $14,000,000 upon execution of the Fourth Amendment and (iii) increased the scheduled quarterly principal repayments to $562,000 effective March 31, 2020 and $1,312,000 effective December 31, 2020.

The Fourth Amendment also terminated the exit fee payable to the term loan lenders, which would have been payable in full in cash upon the earlier to occur of (x) repayment in full of the term loans, or (y) any acceleration of the term loans. In lieu of the exit fee, the Fourth Amendment reinstated a prepayment premium equal to the following percentages of the principal amount prepaid, depending upon the date of prepayment: (i) through March 31, 2020 – 0.50%; (ii) from April 1, 2020 through March 31, 2021 – 2.50%; and (iii) from April 1, 2021 and thereafter – 5.00%.

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The Fourth Amendment also added a new covenant providing that in the event of a breach of a financial covenant contained in the Term Loan Facility or any failure to make a required principal repayment (a “Trigger Event”), then on or prior to six months after a Trigger Event, the Company shall commence a process to (x) sell its businesses and/or assets, and/or (y) consummate a refinancing transaction with respect to the Term Loan Facility (a “Transaction”), in each case, subject to enumerated time milestones contained in the Fourth Amendment, and which requires that Transaction shall, in any event, be consummated on or prior to the eighteen (18) month anniversary of the Trigger Event.

As closing conditions to the execution and delivery of the Fourth Amendment, the Company was required to: (i) amend its Bylaws in a manner acceptable to the Term Loan Facility lenders; (ii) appoint two new independent directors to the board of directors (the “Special Directors”); and (iii) pay an amendment fee of 0.50% of the amount of the outstanding loans under the Term Loan Facility.

On April 23, 2020, HTC, Holdings and ARI as borrowers and the Company as a guarantor, entered into a Fifth Amendment to Term Loan Credit and Security Agreement (the “Fifth Amendment”) with U.S. Bank National Association, as collateral agent and administrative agent, and the various lenders thereunder. The Fifth Amendment authorized the Company and its subsidiaries to incur up to $2.5 million of indebtedness under the CARES Act and contained other provisions relating to the treatment of such proceeds and any potential debt forgiveness, under the Term Loan Facility.

The Company evaluated the Fourth and Fifth Amendments in accordance with the provisions of Accounting Standards Codification (“ASC”) 470, Debt, to determine if the Amendments were (1) a troubled debt restructuring, and if not, (2) a modification or an extinguishment of debt. The Company concluded that the Fourth Amendment was a troubled debt restructuring for accounting purposes due to the removal of the exit fee; as such, the Company capitalized an additional $0.5 million of deferred financing costs, which are being amortized over the remaining term. The future undiscounted cash flows of the term loan, as amended, exceeded the carrying value, and accordingly, no gain was recognized and no adjustment was made to the carrying value of the debt.

The Company was in compliance with all covenants, under the Wells Fargo Facility and the Term Loan Facility, as amended, as of September 30, 2021.

The Company’s ability to comply with these covenants in future quarters may be affected by events beyond the Company’s control, including general economic conditions, weather conditions, regulations and refrigerant pricing. Therefore, we cannot make any assurance that we will continue to be in compliance during future periods.

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

CARES Act Loan

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

Inflation

Inflation has not historically had a material impact on the Company’s operations.

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Reliance on Suppliers and Customers

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

For the nine month period ended September 30, 2021 there was one customer accounting for 10% of the Company’s revenues and at September 30, 2021 there were $3.0 million of accounts receivable from this customer. For the nine month period ended September 30, 2020 there was one customer accounting for 13% of the Company’s revenues and at September 30, 2020 there were $2.0 million of accounts receivable from this customer.

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

Seasonality and Weather Conditions and Fluctuations in Operating Results

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

Off-Balance Sheet Arrangements

None.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope, and in November 2018, issued ASU No. 2018-19 and in April 2019, issued ASU No. 2019-04 and in May 2019, issued ASU No. 2019-05, and in November 2019, issued ASU No. 2019-11, which each amended the standard. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is still evaluating the impact of this ASU.

In March 2020, the FASB issued ASU 2020-04, which provides relief from accounting analysis and impacts that may otherwise be required for modifications to agreements necessitated by reference rate reform. It also provides optional expedients to enable the continuance of hedge accounting where certain hedging relationships are impacted by reference rate reform. This optional guidance is effective immediately, and available to be used through December 31, 2022. We are assessing the impact that reference rate reform and the related adoption of this guidance will have on our financial statements.

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In August 2020, the FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity”, which is intended to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20, Debt-Debt with Conversion and Other Options, for convertible instruments. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. We are currently in the process of evaluating the effects of the provisions of ASU 2020-06 on our financial statements.

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

We are exposed to market risk from fluctuations in interest rates on the Wells Fargo Facility and on the Term Loan Facility. The Wells Fargo Facility is a $60,000,000 secured facility with a $7,000,000 outstanding balance as of September 30, 2021. The Term Loan Facility has a balance of $81,178,500 as of September 30, 2021. Future interest rate changes on our borrowing under the Term Loan Facility and the Wells Fargo Facility may have an impact on our consolidated results of operations.

If the loan bearing interest rate changed by 1%, the annual effect on interest expense would be approximately $0.9 million as of September 30, 2021.

Refrigerant Market

We are also exposed to market risk from fluctuations in the demand, price and availability of refrigerants. To the extent that the Company is unable to source sufficient quantities of refrigerants or is unable to obtain refrigerants on commercially reasonable terms or experiences a decline in demand and/or price for refrigerants sold by the Company, the Company could realize reductions in revenue from refrigerant sales or write-downs of inventory, which could have a material adverse effect on our consolidated results of operations.

Item 4 - Controls and Procedures

Disclosure Controls and Procedures

The Company, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Because of the inherent limitations in all control systems, any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Furthermore, the Company’s controls and procedures can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control and misstatements due to error or fraud may occur and not be detected on a timely basis.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our principal executive officer and principal financial officer concluded there were no such changes.

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PART II – OTHER INFORMATION

Item 1A – Risk Factors

Please refer to the Risk Factors Section in Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2020. There have been no material changes to such matters during the quarter ended September 30, 2021 except as follows:

Mandatory COVID-19 vaccination of employees could impact our workforce and have a material adverse effect on our business and results of operations.

On September 9, 2021, President Biden announced a proposed new rule requiring all employers with at least 100 employees to require that their employees be fully vaccinated or tested weekly. On November 4, 2021, the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”) issued an emergency regulation to carry out this mandate, which takes effect December 5, 2021 with covered employers required to begin testing for employees who have not received all doses required for primary vaccination no later than January 4, 2022.

As a company with more than 100 employees, we will be subject to the OSHA regulation concerning COVID-19 vaccination. At this time, it is not possible to predict with certainty the exact impact that the proposed new regulation or any future Company’s vaccine requirement will have on us or on our workforce. The new regulation may result in employee attrition, which could materially adversely affect future revenues and costs, which could have a material adverse effect on our business and results of operations.

Furthermore, as of September 13, 2021, all personnel working at Department of Defense (“DoD”) facilities, including Hudson Technologies employees, must comply with DoD’s process to attest to vaccination status. Pursuant to the DoD mandate, this is required for physical access to DoD buildings and leased spaces in non-DoD buildings where official agency business is performed. Additionally, pursuant to Executive Order 14042, all U.S. based employees of Hudson Technologies and most of its suppliers, industry partners and contractors working directly or indirectly on covered government contracts, or working at a facility where those contracts are performed, administered, or otherwise supported, must be fully vaccinated, or have an approved medical or religious accommodation. This includes employees who telework. Contractors that are not working directly or indirectly on covered government contracts but who work at a facility where covered contracts are performed, administered, or otherwise supported are strongly encouraged to be fully vaccinated. We are in the process of executing this executive order across our workforce. It is uncertain to what extent compliance with the vaccine mandate may result in workforce attrition for us or our suppliers. If attrition is significant, our operations and ability to execute on our contracts could be adversely affected.

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Item 6 - Exhibits

Exhibit Number	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Inline Interactive Data Files Pursuant to Rule 405 of Regulation S-T
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	HUDSON TECHNOLOGIES, INC.
By:	/s/ Brian F. Coleman	November 15, 2021
	Brian F. Coleman	Date
	Chairman of the Board, President and Chief Executive Officer

By:	/s/ Nat Krishnamurti	November 15, 2021
	Nat Krishnamurti	Date
	Chief Financial Officer

36

EX-31.1

Exhibit 31.1:

Hudson Technologies, Inc.

Certification of Principal Executive Officer

I, Brian F. Coleman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hudson Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2021

/s/ Brian F. Coleman

Brian F. Coleman

Chief Executive Officer and Chairman of the Board

EX-31.2

Exhibit 31.2:

Hudson Technologies, Inc.

Certification of Principal Financial Officer

I, Nat Krishnamurti, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hudson Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2021

/s/ Nat Krishnamurti

Nat Krishnamurti

Chief Financial Officer

EX-32.1

Exhibit 32.1:

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hudson Technologies, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian F. Coleman, as Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Brian F. Coleman

Brian F. Coleman

Chief Executive Officer and Chairman of the Board

November 15, 2021

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hudson Technologies, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nat Krishnamurti, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Nat Krishnamurti

Nat Krishnamurti

Chief Financial Officer

November 15, 2021

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	Sep. 30, 2021	Nov. 01, 2021
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	1-13412
Entity Registrant Name	HUDSON TECHNOLOGIES INC /NY
Entity Incorporation, State or Country Code	NY
Entity Tax Identification Number	13-3641539
Entity Address, Address Line One	1 Blue Hill Plaza
Entity Address, Address Line Two	P.O. Box 1541
Entity Address, City or Town	Pearl River
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10965
City Area Code	845
Local Phone Number	735-6000
Title of 12(b) Security	Common stock, $0.01 par value
Security Exchange Name	NASDAQ
Trading Symbol	HDSN
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		43,969,748
Entity Central Index Key	0000925528
Document Period End Date	Sep. 30, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Amendment Flag	false

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Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 9,503	$ 1,348
Trade accounts receivable - net	22,131	9,806
Inventories - net	58,789	44,460
Prepaid expenses and other current assets	10,996	6,528
Total current assets	101,419	62,142
Property, plant and equipment, less accumulated depreciation	20,035	21,910
Goodwill	47,803	47,803
Intangible assets, less accumulated amortization	21,055	23,150
Right of use asset	6,652	6,559
Other assets	169	85
Total Assets	197,133	161,649
Current liabilities:
Trade accounts payable	6,696	7,644
Accrued expenses and other current liabilities	16,298	8,080
Accrued payroll	2,940	1,394
Cylinder Deposit Liability	12,600	11,337
Short-term debt	7,000	2,000
Current maturities of long-term debt	5,248	7,314
Total current liabilities	50,782	37,769
Deferred tax liability	1,530	1,355
Long-term lease liabilities	3,635	3,927
Long-term debt, less current maturities	74,248	77,976
Total Liabilities	130,195	121,027
Commitments and contingencies
Stockholders' equity:
Preferred stock, shares authorized 5,000,000: Series A Convertible preferred stock, $0.01 par value ($100 liquidation preference value); shares authorized 150,000; none issued or outstanding
Common stock, $0.01 par value; shares authorized 100,000,000; issued and outstanding 43,959,748 and 43,347,887, respectively	440	433
Additional paid-in capital	118,507	118,269
Accumulated deficit	(52,009)	(78,080)
Total Stockholders' Equity	66,938	40,622
Total Liabilities and Stockholders' Equity	$ 197,133	$ 161,649

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, issued	43,959,748	43,347,887
Common stock, outstanding	43,959,748	43,347,887
Preferred Stock
Preferred stock, shares authorized	5,000,000	5,000,000
Series A Convertible Preferred Stock
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, liquidation preference value	$ 100	$ 100
Preferred stock, shares authorized	150,000	150,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0

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Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Consolidated Statements of Operations
Revenues	$ 60,645	$ 41,468	$ 154,973	$ 125,495
Cost of sales	36,967	32,512	100,329	95,511
Gross profit	23,678	8,956	54,644	29,984
Operating expenses:
Selling, general and administrative	6,072	6,162	19,586	20,184
Amortization	698	715	2,095	2,147
Total operating expenses	6,770	6,877	21,681	22,331
Operating income	16,908	2,079	32,963	7,653
Other (expense) income:
Net interest expense	(2,843)	(2,966)	(8,532)	(9,412)
Other income	2,475	1,000	2,470	1,011
Total other (expense)	(368)	(1,966)	(6,062)	(8,401)
Income (loss) before income taxes	16,540	113	26,901	(748)
Income tax expense (benefit)	670	74	830	(288)
Net income (loss)	$ 15,870	$ 39	$ 26,071	$ (460)
Net income (loss) per common share - Basic	$ 0.36	$ 0.00	$ 0.60	$ (0.01)
Net income (loss) per common share - Diluted	$ 0.34	$ 0.00	$ 0.56	$ (0.01)
Weighted average number of shares outstanding - Basic	43,870,825	42,656,510	43,576,211	42,637,945
Weighted average number of shares outstanding - Diluted	46,964,522	43,680,265	46,412,691	42,637,945

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Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2019	$ 426	$ 117,557	$ (72,872)	$ 45,111
Balance (in shares) at Dec. 31, 2019	42,628,560
Issuance of common stock for services		35		35
Issuance of common stock for services (in shares)	35,714
Stock compensation expense		524		524
Net Income (loss)			(460)	(460)
Balance at Sep. 30, 2020	$ 426	118,116	(73,332)	45,210
Balance (in shares) at Sep. 30, 2020	42,664,274
Balance at Dec. 31, 2019	$ 426	117,557	(72,872)	$ 45,111
Balance (in shares) at Dec. 31, 2019	42,628,560
Issuance of common stock upon exercise of stock options (in shares)				1,967,562
Balance at Dec. 31, 2020	$ 433	118,269	(78,080)	$ 40,622
Balance (in shares) at Dec. 31, 2020	43,347,887
Balance at Jun. 30, 2020	$ 426	117,890	(73,371)	44,945
Balance (in shares) at Jun. 30, 2020	42,628,560
Issuance of common stock for services		35		35
Issuance of common stock for services (in shares)	35,714
Stock compensation expense		191		191
Net Income (loss)			39	39
Balance at Sep. 30, 2020	$ 426	118,116	(73,332)	45,210
Balance (in shares) at Sep. 30, 2020	42,664,274
Balance at Dec. 31, 2020	$ 433	118,269	(78,080)	40,622
Balance (in shares) at Dec. 31, 2020	43,347,887
Issuance of common stock for services	$ 1			1
Issuance of common stock for services (in shares)	8,530
Stock compensation expense		509		509
Issuance of common stock upon exercise of stock options	$ 6	75		$ 81
Issuance of common stock upon exercise of stock options (in shares)	603,331			1,373,905
Excess tax benefits from exercise of stock options		(346)		$ (346)
Net Income (loss)			26,071	26,071
Balance at Sep. 30, 2021	$ 440	118,507	(52,009)	66,938
Balance (in shares) at Sep. 30, 2021	43,959,748
Balance at Jun. 30, 2021	$ 437	118,639	(67,879)	51,197
Balance (in shares) at Jun. 30, 2021	43,707,392
Issuance of common stock for services	$ 1			1
Issuance of common stock for services (in shares)	8,530
Stock compensation expense		139		139
Issuance of common stock upon exercise of stock options	$ 2	75		77
Issuance of common stock upon exercise of stock options (in shares)	243,826
Excess tax benefits from exercise of stock options		(346)		(346)
Net Income (loss)			15,870	15,870
Balance at Sep. 30, 2021	$ 440	$ 118,507	$ (52,009)	$ 66,938
Balance (in shares) at Sep. 30, 2021	43,959,748

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities:
Net income (loss)	$ 26,071	$ (460)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation	2,540	3,235
Amortization of intangible assets	2,095	2,147
Gain on insurance proceeds		(1,000)
Forgiveness of Payroll Protection Program Loan	(2,475)
Amortization of lease right of use asset, net	5	14
Lower of cost or net realizable value reserve	(2,024)	(3,622)
Allowance for doubtful accounts	23	724
Stock compensation expense	509	559
Amortization of deferred finance costs	841	843
Deferred tax expense	175	104
Changes in assets and liabilities:
Trade accounts receivable	(12,348)	(7,366)
Inventories	(12,305)	22,486
Prepaid and other assets	(4,771)	873
Income tax receivable	1,039	(351)
Accounts payable, accrued expenses and other current liabilities	8,649	1,664
Cash provided by operating activities	8,024	19,850
Cash flows from investing activities:
Additions to property, plant, and equipment	(665)	(996)
Proceeds from Insurance Policy		1,000
Cash (used in) provided by investing activities	(665)	4
Cash flows from financing activities:
Proceeds from issuance of common stock	(264)
Borrowing - Paycheck Protection Program		2,475
Borrowing of short-term debt	5,000	(14,000)
Repayment of long-term debt	(3,940)	(1,694)
Cash provided by (used in) financing activities	796	(13,219)
Increase in cash and cash equivalents	8,155	6,635
Cash and cash equivalents at beginning of period	1,348	2,600
Cash and cash equivalents at end of period	9,503	9,235
Supplemental Disclosure of Cash Flow Information:
Cash paid during period for interest	7,635	8,745
Refund received for income taxes - net	$ (278)	$ (41)

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 1 - Summary of Significant Accounting Policies

Business

Hudson Technologies, Inc., incorporated under the laws of New York on January 11, 1991, is a refrigerant services company providing innovative solutions to recurring problems within the refrigeration industry. The Company’s operations consist of one reportable segment. The Company operates principally through its wholly-owned subsidiary, Hudson Technologies Company, and Aspen Refrigerants (“Aspen” or “ARI”), a division of Hudson Technologies Company. Unless the context requires otherwise, references to the “Company”, “Hudson”, “we”, “us”, “our”, or similar pronouns refer to Hudson Technologies, Inc. and its subsidiaries.

The Company is a leading provider of sustainable refrigerant products and services to the Heating Ventilation Air Conditioning and Refrigeration (“HVACR”) industry. For nearly three decades, we have demonstrated our commitment to our customers and the environment by becoming one of the first in the United States and largest refrigerant reclaimers through multimillion dollar investments in the plants and advanced separation technology required to recover a wide variety of refrigerants and restoring them to Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”) standard for reuse as certified EMERALD Refrigerants™.

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

The Company’s SmartEnergy OPS® service is a web-based real time continuous monitoring service applicable to a facility’s refrigeration systems and other energy systems. The Company’s Chiller Chemistry® and Chill Smart® services are also predictive and diagnostic service offerings. As a component of the Company’s products and services, the Company also generates carbon offset projects.

During the year ended December 31, 2020 and continuing through the nine months ended September 30, 2021, the effects of a novel strain of coronavirus (“COVID-19”) pandemic and the related actions by governments around the world to attempt to contain the spread of the virus have materially impacted the global economy. While it is difficult to predict the full scale of the ongoing impact of the COVID-19 outbreak and business disruption, the Company has been taking actions to address the impact of the pandemic, such as working closely with our customers, reducing our expenses and monitoring liquidity. The impact of the pandemic and the corresponding actions were reflected into our judgments, assumptions and estimates to prepare the financial statements. As of the date of this filing, there has been no material impact on our ability to procure or distribute our products and services. However, if the duration of the COVID-19 pandemic is longer and the operational impact is greater than estimated, the judgments, assumptions and estimates will be updated and could result in different results in the future.

In preparing the accompanying consolidated financial statements, and in accordance with Accounting Standards Codification (“ASC”) 855-10 “Subsequent Events”, the Company’s management has evaluated subsequent events through the date that the financial statements were filed.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial information included in this quarterly report should be read in conjunction with the Company’s audited financial statements and related notes thereto for the year ended December 31, 2020. Operating results for the nine-month period ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. Certain comparative figures have been reclassified to conform to the current year presentation.

In the opinion of management, all estimates and adjustments considered necessary for a fair presentation have been included and all such adjustments were normal and recurring.

Consolidation

The consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, represent all companies of which Hudson directly or indirectly has majority ownership or otherwise controls. Significant intercompany accounts and transactions have been eliminated. The Company's consolidated financial statements include the accounts of wholly-owned subsidiaries Hudson Holdings, Inc. and Hudson Technologies Company. The Company does not present a statement of comprehensive income (loss) as its comprehensive income (loss) is the same as its net income (loss).

Fair Value of Financial Instruments

The carrying values of financial instruments including cash, trade accounts receivable and accounts payable approximate fair value at September 30, 2021 and December 31, 2020, because of the relatively short maturity of these instruments. The carrying value of debt approximates fair value, due to the variable rate nature of the debt, as of September 30, 2021 and December 31, 2020. See Note 2 for further details.

Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash investments and trade accounts receivable. The Company maintains its temporary cash investments in highly-rated financial institutions and, at times, the balances exceed FDIC insurance coverage. The Company's trade accounts receivable are primarily due from companies throughout the United States. The Company reviews each customer's credit history before extending credit.

The Company establishes an allowance for doubtful accounts based on factors associated with the credit risk of specific accounts, historical trends, and other information. The carrying value of the Company’s accounts receivable is reduced by the established allowance for doubtful accounts. The allowance for doubtful accounts includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve for the remaining accounts receivable balances. The Company adjusts its reserves based on factors that affect the collectability of the accounts receivable balances. At September 30, 2021, the Company had trade receivables of $23.8 million, and allowance for doubtful accounts of $1.7 million, resulting in net accounts receivable of $22.1 million.

For the nine month period ended September 30, 2021 there was one customer accounting for 10% of the Company’s revenues and at September 30, 2021 there were $3.0 million of accounts receivable from this customer. For the nine month period ended September 30, 2020 there was one customer accounting for 13% of the Company’s revenues and at September 30, 2020 there were $2.0 million of accounts receivable from this customer.

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

Cash and Cash Equivalents

Temporary investments with original maturities of ninety days or less are included in cash and cash equivalents.

Inventories

Inventories, consisting primarily of refrigerant products available for sale, are stated at the lower of cost, on a first-in first-out basis, or net realizable value. Where the market price of inventory is less than the related cost, the Company may be required to write down its inventory through a lower of cost or net realizable value adjustment, the impact of which would be reflected in cost of sales on the Consolidated Statements of Operations. Any such adjustment would be based on management’s judgment regarding future demand and market conditions and analysis of historical experience.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, including internally manufactured equipment. The cost to complete equipment that is under construction is not considered to be material to the Company's financial position. Provision for depreciation is recorded (for financial reporting purposes) using the straight-line method over the useful lives of the respective assets. Leasehold improvements are amortized on a straight-line basis over the shorter of economic life or terms of the respective leases. Costs of maintenance and repairs are charged to expense when incurred.

Due to the specialized nature of the Company's business, it is possible that the Company's estimates of equipment useful life periods may change in the future.

Goodwill

The Company has made acquisitions that included a significant amount of goodwill and other intangible assets. The Company applies the purchase method of accounting for acquisitions, which among other things, requires the recognition of goodwill (which represents the excess of the purchase price of the acquisition over the fair value of the net assets acquired and identified intangible assets). We test our goodwill for impairment on an annual basis (the first day of the fourth quarter) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an asset below its carrying value. Goodwill is tested for impairment at the reporting unit level. The Company has one reporting unit at September 30, 2021. Other intangible assets that meet certain criteria are amortized over their estimated useful lives.

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

There were no goodwill impairment losses recognized in 2020 or the nine months ended September 30, 2021.

Cylinder Deposit Liability

The cylinder deposit liability, which is included in Accrued expenses and other current liabilities on the Company’s Balance Sheet, represents the amount due to customers for the return of refillable cylinders. ARI charges its customers cylinder deposits upon the shipment of refrigerant gases that are contained in refillable cylinders. The amount charged to the customer by ARI approximates the cost of a new cylinder of the same size. Upon return of a cylinder, this liability is reduced.

Revenues and Cost of Sales

The Company’s products and services are primarily used in commercial air conditioning, industrial processing and refrigeration systems. Most of the Company’s revenues are realized from the sale of refrigerant and industrial gases and related products. The Company also generates revenue from refrigerant management services performed at a customer’s site and in-house. The Company conducts its business primarily within the US.

The Company applies the FASB’s guidance on revenue recognition, which requires the Company to recognize revenue in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services transferred to its customers. In most instances, the Company’s contract with a customer is the customer’s purchase order and the sales price to the customer is fixed. For certain customers, the Company may also enter into a sales agreement outlining a framework of terms and conditions applicable to future purchase orders received from that customer. Because the Company’s contracts with customers are typically for a single customer purchase order, the duration of the contract is usually less than one year. The Company’s performance obligations related to product sales are satisfied at a point in time, which may occur upon shipment of the product or receipt by the customer, depending on the terms of the arrangement.

The Company’s performance obligations related to reclamation and RefrigerantSide® services are generally satisfied at a point in time when service is performed. Accordingly revenues are recorded upon the shipment of the product, or in certain instances upon receipt by the customer, or the completion of the service.

In July 2016 the Company was awarded, as prime contractor, a five-year contract, including a five-year renewal option which has been exercised, by the United States Defense Logistics Agency (“DLA”) for the management, supply, and sale of refrigerants, compressed gases, cylinders and related services. Due to the contract containing multiple performance obligations, the Company assessed the arrangement in accordance with ASC 606. The Company determined that the sale of refrigerants and the management services provided under the contract each have stand-alone value. Accordingly, the performance obligations related to the sale of refrigerants is satisfied at a point in time, mainly when the customer receives and obtains control of the product. The performance obligation related to management service revenue is satisfied over time and revenue is recognized on a straight-line basis over the term of the arrangement as the management services are provided.

Cost of sales is recorded based on the cost of products shipped or services performed and related direct operating costs of the Company’s facilities. In general, the Company performs shipping and handling services for its customers in connection with the delivery of refrigerant and other products. The Company elected to implement ASC 606-10-25-18B, whereby the Company accounts for such shipping and handling as activities to fulfill the promise to transfer the good. To the extent that the Company charges its customers shipping fees, such amounts are included as a component of revenue and the corresponding costs are included as a component of cost of sales.

Income Taxes

The Company is taxed at statutory corporate income tax rates after adjusting income reported for financial statement purposes for certain items. Current income tax expense (benefit) reflects the tax results of revenues and expenses currently taxable or deductible. The Company utilizes the asset and liability method of accounting for deferred income taxes, which provides for the recognition of deferred tax assets or liabilities, based on enacted tax rates and laws, for the differences between the financial and income tax reporting bases of assets and liabilities.

The tax benefit associated with the Company’s net operating loss carry forwards (“NOLs”) is recognized to the extent that the Company expects to realize future taxable income. As a result of a prior “change in control”, as defined by the Internal Revenue Service, the Company’s ability to utilize its existing NOLs is subject to certain annual limitations. To the extent that the Company utilizes its NOLs, it will not pay tax on such income. However, to the extent that the Company’s net income, if any, exceeds the annual NOL limitation, it will pay income taxes based on the then existing statutory rates. In addition, certain states either do not allow or limit NOLs and as such the Company will be liable for certain state income taxes.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Further, starting in 2021, the 100% NOL utilization reverts back to the pre-CARES Act limitation of 80% of taxable income. The Company has evaluated its options under the carryback provision and filed a claim for refund, resulting in a cash benefit. Further, the CARES Act accelerates the refund of the alternative minimum tax credits to allow a full refund of any remaining credit amount in taxable years beginning in 2019. The credits were originally fully refundable in taxable years beginning in 2021. As a result, the Company has recorded a preliminary $47,000 tax benefit related to the alternative minimum tax refund in the quarter ended March 31, 2020 and an additional $380,000 in the quarter ended June 30, 2020. Finally, the CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020.

As of September 30, 2021, the Company had NOLs of approximately $29.8 million, of which none have an expiration date. As of September 30, 2021, the Company had state tax NOLs of approximately $16.5 million expiring in various years. We review the likelihood that we will realize the benefit of our deferred tax assets, and therefore the need for valuation allowances, on an annual basis in the fourth quarter of the year, and more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results are considered, along with all other available positive and negative evidence.

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence that is objective and verifiable, such as cumulative losses in recent years. We utilize a rolling twelve quarters of pre-tax income or loss adjusted for significant permanent book to tax differences, as well as non-recurring items, as a measure of our cumulative results in recent years. Based on our assessment as of December 31, 2018, 2019, 2020 and September 30, 2021, we concluded that due to the uncertainty that the deferred tax assets will not be fully realized in the future, we recorded a valuation allowance of approximately $11.3 million during 2018, and due to additional losses, increased the valuation allowance through 2019 and 2020 to $19.0 million. For the quarter ended September 30, 2021, and due to a net income position that resulted in the utilization of gross net operating losses of $16.3 million, the valuation allowance was reduced by ($4.9) million, resulting in an ending valuation allowance balance of $14.1 million as of September 30, 2021.

The Company evaluates uncertain tax positions, if any, by determining if it is more likely than not to be sustained upon examination by the taxing authorities. As of September 30, 2021 and December 31, 2020, the Company believes it had no uncertain tax positions.

Income (Loss) per Common and Equivalent Shares

If dilutive, common equivalent shares (common shares assuming exercise of options) utilizing the treasury stock method are considered in the presentation of diluted loss per share. The reconciliation of shares used to determine net loss per share is as follows (dollars in thousands, unaudited):

	Three Months				Nine Months
	ended September 30,				ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	15,870	$	39	$	26,071	$	(460)
Weighted average number of shares - basic		43,870,825		42,656,510		43,576,211		42,637,945
Weighted average number of shares – diluted		46,964,522		43,680,265		46,412,691		42,637,945

During the three month periods ended September 30, 2021 and 2020, certain options aggregating 28,276 and 7,043,259 shares, respectively, have been excluded from the calculation of diluted shares, due to the fact that their effect would be anti-dilutive.

During the nine month periods ended September 30, 2021 and 2020, certain options aggregating 59,119 and 7,043,259 shares, respectively, have been excluded from the calculation of diluted shares, due to the fact that their effect would be anti-dilutive.

Estimates and Risks

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires the use of estimates and assumptions that affect the amounts reported in these financial statements and footnotes. The Company considers these accounting estimates to be critical in the preparation of the accompanying consolidated financial statements. The Company uses information available at the time the estimates are made. However, these estimates could change materially if different information or assumptions were used including potential impact of COVID-19 uncertainties. Additionally, these estimates may not ultimately reflect the actual amounts of the final transactions that occur. The Company utilizes both internal and external sources to evaluate potential current and future liabilities for various commitments and contingencies. In the event that the assumptions or conditions change in the future, the estimates could differ from the original estimates.

Several of the Company's accounting policies involve significant judgments, uncertainties and estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. To the extent that actual results differ from management's judgments and estimates, there could be a material adverse effect on the Company. On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its allowance for doubtful accounts, inventory reserves, goodwill and valuation allowance for the deferred tax assets relating to its NOLs and commitments and contingencies. With respect to trade accounts receivable, the Company estimates the necessary allowance for doubtful accounts based on both historical and anticipated trends of payment history and the ability of the customer to fulfill its obligations. For inventory, the Company evaluates both current and anticipated sales prices of its products to determine if a write down of inventory to net realizable value is necessary. In determining the Company’s valuation allowance for its deferred tax assets, the Company assesses its ability to generate taxable income in the future.

The Company participates in an industry that is highly regulated, and changes in the regulations affecting its business could affect its operating results. Currently the Company purchases virgin hydrochlorofluorocarbon (“HCFC”) and hydrofluorocarbon (“HFC”) refrigerants and reclaimable, primarily HCFC, HFC and chlorofluorocarbon (“CFC”), refrigerants from suppliers and its customers.

To the extent that the Company is unable to source sufficient quantities of refrigerants or is unable to obtain refrigerants on commercially reasonable terms or experiences a decline in demand and/or price for refrigerants sold by the Company, the Company could realize reductions in revenue from refrigerant sales, which could have a material adverse effect on its operating results and its financial position. The process of sourcing refrigerants includes various procurement costs, such as freight, processing, insurance, and other costs, relating to the delivery of refrigerants. As a result of the recently noted global supply chain issues, the Company determined it could be exposed to incremental costs related to these refrigerant purchases. These costs represent the Company’s initial estimate that are possibly subject to finalization in future periods and are recorded in accrued expenses and other current liabilities on the consolidated balance sheet as of September 30, 2021.

The Company is subject to various legal proceedings. The Company assesses the merit and potential liability associated with each of these proceedings. In addition, the Company estimates potential liability, if any, related to these matters. To the extent that these estimates are not accurate, or circumstances change in the future, the Company could realize liabilities, which could have a material adverse effect on its operating results and its financial position.

Impairment of Long-lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost to sell.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope, and in November 2018, issued ASU No. 2018-19 and in April 2019, issued ASU No. 2019-04 and in May 2019, issued ASU No. 2019-05, and in November 2019, issued ASU No. 2019-11, which each amended the standard. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is still evaluating the impact of this ASU.

In March 2020, the FASB issued ASU 2020-04, which provides relief from accounting analysis and impacts that may otherwise be required for modifications to agreements necessitated by reference rate reform. It also provides optional expedients to enable the continuance of hedge accounting where certain hedging relationships are impacted by reference rate reform. This optional guidance is effective immediately, and available to be used through December 31, 2022. We are assessing the impact that reference rate reform and the related adoption of this guidance will have on our financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity”, which is intended to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20, Debt-Debt with Conversion and Other Options, for convertible instruments. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. We are currently in the process of evaluating the effects of the provisions of ASU 2020-06 on our financial statements.

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Fair Value

9 Months Ended

Sep. 30, 2021

Fair Value

Fair Value

Note 2 - Fair Value

ASC Subtopic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company often utilizes certain assumptions that market

participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy.

The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:

Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3: Valuations for assets and liabilities include certain unobservable inputs in the assumptions and projections used in determining the fair value assigned to such assets or liabilities.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

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Inventories

9 Months Ended

Sep. 30, 2021

Inventories

Inventories

Note 3 - Inventories

Inventories consist of the following:

	September 30,		December 31,
	2021		2020
	(unaudited)
(in thousands)
Refrigerant and cylinders	$	65,889	$	53,593
Less: net realizable value adjustments		(7,100)		(9,133)
Total	$	58,789	$	44,460

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Property, plant and equipment

9 Months Ended

Sep. 30, 2021

Property, plant and equipment

Property, plant and equipment

Note 4 - Property, plant and equipment

Elements of property, plant and equipment are as follows:

	September 30,		December 31,		Estimated
	2021		2020		Lives
(in thousands)	(unaudited)
Property, plant and equipment
- Land	$	1,255	$	1,255
- Land improvements		319		319	6-10 years
- Buildings		1,446		1,446	25-39 years
- Building improvements		3,099		3,072	25-39 years
- Cylinders		13,305		13,624	15-30 years
- Equipment		25,221		25,138	3-10 years
- Equipment under capital lease		315		315	5-7 years
- Vehicles		1,740		1,537	3-5 years
- Lab and computer equipment, software		3,103		3,103	2-8 years
- Furniture & fixtures		679		679	5-10 years
- Leasehold improvements		852		852	3-5 years
- Equipment under construction		1,615		944
Subtotal		52,949		52,284
Accumulated depreciation		32,914		30,374
Total	$	20,035	$	21,910

Depreciation expense for the nine months ended September 30, 2021 and 2020 was $2.5 million and $3.2 million, respectively.

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Leases

9 Months Ended

Sep. 30, 2021

Leases

Leases

Note 5 - Leases

The Company has various lease agreements with terms up to 11 years, including leases of buildings and various equipment. Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

At inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of the Company’s lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. common area maintenance, charges, utilities and property taxes). The Company elected the package of practical expedients permitted under the transition guidance, which allows us to carry forward our historical lease classification, our assessment on whether a contract contains a lease, and our initial direct costs for any leases that existed prior to the adoption of the new standard. We also elected to combine lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of operations on a straight line basis over the lease term. The Company’s lease agreements do not contain any material residual value, guarantees or material restrictive covenants.

Operating leases are included in Right of use asset, Accrued expenses and other current liabilities, and Long-term lease liabilities on the consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred.

Operating lease expense of $2.5 million and $2.2 million, for the nine months ended September 30, 2021 and 2020, respectively, is included in Selling, general and administrative expenses on the consolidated statements of operations.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of September 30, 2021.

	September 30,
Maturity of Lease Payments	2021
	(unaudited)
(in thousands)
-2021 (remaining)	$	1,454
-2022		1,415
-2023		1,412
-2024		1,027
-Thereafter		2,932
Total undiscounted operating lease payments		8,240
Less imputed interest		(1,512)
Present value of operating lease liabilities	$	6,728

Balance Sheet Classification

	September 30,
	2021
Current lease liabilities (recorded in Accrued expenses and other current liabilities)	$	3,093
Long-term lease liabilities		3,635
Total operating lease liabilities	$	6,728

Other Information

	September 30,
	2021
Weighted-average remaining term for operating leases	4.31	years
Weighted-average discount rate for operating leases	8.22	%

Cash Flows

Cash paid for amounts included in the present value of operating lease liabilities was $2.5 million during the nine months ended September 30, 2021 and is included in operating cash flows.

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Goodwill and intangible assets

9 Months Ended

Sep. 30, 2021

Goodwill and intangible assets

Goodwill and intangible assets

Note 6 - Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations accounted for under the purchase method of accounting.

There were no goodwill impairment losses recognized for the nine month period ended September 30, 2021 and year ended December 31, 2020. Based on the results of the impairment assessments of goodwill and intangible assets performed, management concluded that the fair value of the Company’s goodwill exceeds the carrying value and that there are no impairment indicators related to intangible assets.

At September 30, 2021 and December 31, 2020 the Company had $47.8 million of goodwill.

The Company’s other intangible assets consist of the following:

		September 30, 2021						December 31, 2020
		(unaudited)
	Amortization	Gross						Gross
	Period	Carrying		Accumulated				Carrying		Accumulated
(in thousands)	(in years)	Amount		Amortization			Net	Amount		Amortization			Net
Intangible assets with determinable lives
Covenant not to compete	6 - 10		1,270		1,002		268		1,270		937		333
Customer relationships	10 - 12		31,560		11,163		20,397		31,560		9,167		22,393
Above market leases	13		567		177		390		567		143		424
Total identifiable intangible assets		$	33,397	$	12,342	$	21,055	$	33,397	$	10,247	$	23,150

Amortization expense for the nine months ended September 30, 2021 and 2020 was $2.1 million for both periods. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

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Share-based compensation

9 Months Ended

Sep. 30, 2021

Share-based compensation

Share-based compensation

Note 7 - Share-based compensation

Share-based compensation represents the cost related to share-based awards, typically stock options or stock grants, granted to employees, non-employees, officers and directors. Share-based compensation is measured at grant date, based on the estimated aggregate fair value of the award on the grant date, and such amount is charged to compensation expense on a straight-line basis (net of estimated forfeitures) over the requisite service period. For the nine months periods ended September 30, 2021 and 2020, share-based compensation expense of $0.5 million and $0.6 million, respectively, are reflected in Selling, general and administrative expenses in the consolidated Statements of Operations.

Share-based awards have historically been made as stock options, and recently also as stock grants, issued pursuant to the terms of the Company’s stock option and stock incentive plans (collectively, the “Plans”), described below. The Plans may be administered by the Board of Directors or the Compensation Committee of the Board or by another committee appointed by the Board from among its members as provided in the Plans. Presently, the Plans are administered by the Company’s Compensation Committee of the Board of Directors. As of September 30, 2021 there were 3,739,235 shares of the Company’s common stock available under the Plans for issuance for future stock option grants or other stock based awards.

Stock option awards, which allow the recipient to purchase shares of the Company’s common stock at a fixed price, are typically granted at an exercise price equal to the Company’s stock price at the date of grant. Typically, the Company’s stock option awards have vested from immediately to two years from the grant date and have had a contractual term ranging from three to ten years. ISOs granted under the Plans may not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of persons holding 10% or more of the voting stock of the Company). Nonqualified options granted under the Plans may not be granted at a price less than the fair market value of the common stock. Options granted under the Plans expire not more than ten years from the date of grant (five years in the case of ISOs granted to persons holding 10% or more of the voting stock of the Company).

Effective September 17, 2014, the Company adopted its 2014 Stock Incentive Plan (“2014 Plan”) pursuant to which 3,000,000 shares of common stock were reserved for issuance (i) upon the exercise of options, designated as either ISOs under the Code or nonqualified options, or (ii) as stock, deferred stock or other stock-based awards. ISOs may be granted under the 2014 Plan to employees and officers of the Company. Non-qualified options, stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2014 Plan is sooner terminated, the ability to grant options or other awards under the 2014 Plan will expire on September 17, 2024.

Effective June 7, 2018, the Company adopted its 2018 Stock Incentive Plan (“2018 Plan”) pursuant to which 4,000,000 shares of common stock were reserved for issuance (i) upon the exercise of options, designated as either ISOs under the Code or nonqualified options, or (ii) as stock, deferred stock or other stock-based awards. ISOs may be granted under the 2018 Plan to employees and officers of the Company. Non-qualified options, stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2018 Plan is sooner terminated, the ability to grant options or other awards under the 2018 Plan will expire on June 7, 2028.

Effective June 11, 2020, the Company adopted its 2020 Stock Incentive Plan (“2020 Plan”) pursuant to which 3,000,000 shares of common stock were reserved for issuance (i) upon the exercise of options, designated as either ISOs under the Code or nonqualified options, or (ii) as stock, deferred stock or other stock-based awards. ISOs may be granted under the 2020 Plan to employees and officers of the Company. Non-qualified options, stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2020 Plan is sooner terminated, the ability to grant options or other awards under the 2020 Plan will expire on June 11, 2030.

All stock options have been granted to employees and non-employees at exercise prices equal to or in excess of the market value on the date of the grant.

The Company determines the fair value of share-based awards at the grant date by using the Black-Scholes option-pricing model, and is incorporating the simplified method to compute expected lives of share-based awards. There were options to purchase 463,754 and 254,700 shares of common stock granted during the nine-month periods ended September 30, 2021 and 2020, respectively.

A summary of the activity for stock options issued under the Company’s Plans for the indicated periods is presented below:

		Weighted
		Average
		Exercise
Stock Option Plan Totals	Shares	Price
Outstanding at December 31, 2019	7,042,377	$	1.01
-Cancelled	—	$	—
-Exercised	(1,967,562)	$	0.91
-Granted	254,700	$	1.11
Outstanding at December 31, 2020	5,329,515	$	1.06
-Cancelled	(107,447)		2.11
-Exercised	(1,373,905)	$	1.23
-Granted	463,754	$	1.71
Outstanding at September 30, 2021, unaudited	4,311,917	$	1.04

The following is the weighted average contractual life in years and the weighted average exercise price at September 30, 2021 of:

		Weighted
		Average		Weighted
		Remaining		Average
	Number of	Contractual		Exercise
	Options	Life		Price
Options outstanding and vested	4,311,917	3.8	years	$	1.04

The intrinsic value of options outstanding at September 30, 2021 and December 31, 2020 were $10.7 million and $0.7 million, respectively.

The intrinsic value of options unvested at September 30, 2021 and December 31, 2020 were $5,700 and $0, respectively.

The intrinsic value of options exercised during the nine months ended September 30, 2021 and 2020 were $2.1 million and $0, respectively.

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Short-term and Long-term debt

9 Months Ended

Sep. 30, 2021

Short-term and Long-term debt

Short-term and Long-term debt

Note 8 - Short-term and Long-term debt

Elements of short-term and long-term debt are as follows:

	September 30,		December 31,
	2021		2020
(in thousands)		(unaudited)
Short-term & long-term debt
Short-term debt:
- Revolving credit line	$	7,000	$	2,000
- Loan from Paycheck Protection Program- current		—		2,062
- Capital lease obligation- current		—		4
- Term loan facility – current		5,248		5,248
Subtotal		12,248		9,314
Long-term debt:
- Term loan facility- net of current portion of long-term debt		75,931		79,867
- Loan from Paycheck Protection Program- net of current portion		—		413
- Less: deferred financing costs on term loan		(1,683)		(2,304)
Subtotal		74,248		77,976
Total short-term & long-term debt	$	86,496	$	87,290

Revolving Credit Facility

On December 19, 2019, Hudson Technologies Company (“HTC”), Hudson Holdings, Inc. (“Holdings”) and Aspen Refrigerants, Inc. (“ARI”), as borrowers (collectively, the “Borrowers”), and Hudson Technologies, Inc. (the “Company”) as a guarantor, became obligated under a Credit Agreement (the “Wells Fargo Facility”) with Wells Fargo Bank, as administrative agent and lender (“Agent” or “Wells Fargo”) and such other lenders as may thereafter become a party to the Wells Fargo Facility.

Under the terms of the Wells Fargo Facility, the Borrowers may borrow, from time to time, up to $60 million at any time consisting of revolving loans in a maximum amount up to the lesser of $60 million and a borrowing base that is calculated based on the outstanding amount of the Borrowers’ eligible receivables and eligible inventory, as described in the Wells Fargo Facility. The Wells Fargo Facility also contains a sublimit of $5 million for swing line loans and $2 million for letters of credit.

Amounts borrowed under the Wells Fargo Facility were used by the Borrowers to repay existing revolving indebtedness under its prior revolving credit facility, repay certain principal amounts under the Term Loan Facility (as defined below), and may be used for working capital needs, certain permitted acquisitions, and to reimburse drawings under letters of credit.

Interest on loans under the Wells Fargo Facility is payable in arrears on the first day of each month. Interest charges with respect to loans are computed on the actual principal amount of loans outstanding during the month at a rate per annum equal to (A) with respect to Base Rate loans, the sum of (i) a rate per annum equal to the higher of (1) the federal funds rate plus 0.5%, (2) one month LIBOR plus 1.0%, and (3) the prime commercial lending rate of Wells Fargo, plus (ii) between 1.25% and 1.75% depending on average monthly undrawn availability and (B) with respect to LIBOR rate loans, the sum of the LIBOR rate plus between 2.25% and 2.75% depending on average monthly undrawn availability.

In connection with the closing of the Wells Fargo Facility, the Company also entered into a Guaranty and Security Agreement, dated as of December 19, 2019 (the “Revolver Guaranty and Security Agreement”), pursuant to which the Company and certain subsidiaries unconditionally guaranteed the payment and performance of all obligations owing by the Borrowers to Wells Fargo, as Agent for the benefit of the revolving lenders. Pursuant to the Revolver Guaranty and Security Agreement, the Borrowers, the Company and certain other subsidiaries granted to the Agent, for the benefit of the Wells Fargo Facility lenders, a security interest in substantially all of their respective assets, including receivables, equipment, general intangibles (including intellectual property), inventory, subsidiary stock, real property, and certain other assets. The Revolver Guaranty and Security Agreement also provides that the Agent shall receive the right to dominion over certain of the Borrowers’ bank accounts in the event of an Event of Default under the Wells Fargo Facility, or if undrawn availability under the Wells Fargo Facility falls below $9 million at any time.

The Wells Fargo Facility contains a financial covenant requiring the Company to maintain at all times minimum liquidity (defined as availability under the Wells Fargo Facility plus unrestricted cash) of at least $5 million, of which at least $3 million must be derived from availability. The Wells Fargo Facility also contains a springing covenant, which takes effect only upon a failure to maintain undrawn availability of at least $7.5 million, requiring the Company to maintain a Fixed Charge Coverage Ratio (FCCR) of not less than 1.00 to 1.00, as of the end of each trailing period of twelve consecutive fiscal months commencing with the month prior to the triggering of the covenant. The FCCR (as defined in the Wells Fargo Facility) is the ratio of (a) EBITDA for such period, minus unfinanced capital expenditures made during such period, to (b) the aggregate amount of (i) interest expense required to be paid (other than interest paid-in-kind, amortization of financing fees, and other non-cash interest expense) during such period, (ii) scheduled principal payments (but excluding principal payments relating to outstanding revolving loans under the Wells Fargo Facility), (iii) all net federal, state, and local income taxes required to be paid during such period (provided, that any tax refunds received shall be applied to the period in which the cash outlay for such taxes was made), (iv) all restricted payments paid (as defined in the Wells Fargo Facility) during such period, and (v) to the extent not otherwise deducted from EBITDA for such period, all payments required to be made during such period in respect of any funding deficiency or funding shortfall with respect to any pension plan. The FCCR covenant ceases after the Borrowers have been in compliance therewith for two consecutive months.

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

On April 23, 2020, the Borrowers, the Company and its subsidiaries entered into a First Amendment to Credit Agreement with Wells Fargo (the “First Amendment”). The First Amendment authorized the Company and its subsidiaries to incur up to $2.5 million of indebtedness under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and contained other provisions relating to the treatment of such proceeds and any potential debt forgiveness, under the Wells Fargo Facility.

The commitments under the Wells Fargo Facility will expire and the full outstanding principal amount of the loans, together with accrued and unpaid interest, are due and payable in full on December 19, 2022, unless the commitments are terminated and the outstanding principal amount of the loans are accelerated sooner following an event of default.

Term Loan Facility

On October 10, 2017, HTC, Holdings, and ARI, as borrowers, and the Company, as guarantor, became obligated under a Term Loan Credit and Security Agreement (as amended, the “Term Loan Facility”) with U.S. Bank National Association, as administrative agent and collateral agent (“Term Loan Agent”) and funds advised by FS Investments and such other lenders as may thereafter become a party to the Term Loan Facility (the “Term Loan Lenders”).

Under the terms of the Term Loan Facility, the Borrowers immediately borrowed $105 million pursuant to a term loan (the “Term Loan”).

The Term Loan matures on October 10, 2023. Interest on the Term Loan is generally payable on the earlier of the last day of the interest period applicable to such Eurodollar rate loan and the last day of the Term Loan Facility, as applicable. Interest is payable at the rate per annum of the Eurodollar Rate (as defined in the Term Loan Facility) plus 10.25%. The Borrowers have the option of paying 3.00% interest per annum in kind by adding such amount to the principal of the Term Loans during no more than five fiscal quarters during the term of the Term Loan Facility.

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

The Term Loan Facility contains a financial covenant requiring the Company to maintain a specified total leverage ratio (“TLR”), tested as of the last day of the fiscal quarter. The TLR (as defined in the Term Loan Facility) is the ratio of (a) funded debt as of such day to (b) EBITDA for the four consecutive fiscal quarters ending on the last day of such fiscal quarter. Funded debt (as defined in the Term Loan Facility) includes amounts borrowed under the Wells Fargo Facility and the Term Loan Facility as well as capitalized lease obligations and other indebtedness for borrowed money maturing more than one year from the date of creation thereof. As of September 30, 2021 and December 31, 2020, the TLR was approximately 2.35 to 1 and 5.84 to 1, respectively.

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

In connection with the closing of the Term Loan Facility, the Company also entered into a Guaranty and Suretyship Agreement, dated as of October 10, 2017 (the “Term Loan Guarantee”), pursuant to which the Company affirmed its unconditional guarantee of the payment and performance of all obligations owing by the Borrowers to the Term Loan Agent, as agent for the benefit of the Term Loan Lenders.

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

On December 19, 2019, HTC, Holdings and ARI as borrowers and the Company as a guarantor, entered into a Waiver and Fourth Amendment to Term Loan Credit and Security Agreement (the “Fourth Amendment”) with U.S. Bank National Association, as collateral agent and administrative agent, and the various lenders thereunder.

The Fourth Amendment waived financial covenant defaults at June 30, 2019 and September 30, 2019 and amended the Term Loan Credit and Security Agreement dated October 10, 2017 (as previously amended, the “Term Loan Facility”) to reset the maximum Total Leverage Ratio covenant contained in the Term Loan Facility at the indicated dates as follows: (i) September 30, 2019 - 15.67:1.00; (ii) December 31, 2019 – 14.54:1.00; (iii) March 31, 2020 – 16.57:1.00; (iv) June 30, 2020 – 10.87:1.00; (v) September 30, 2020 – 8.89:1.00; (vi) December 31, 2020 – 8.89:1.00; (vii) March 31, 2021 – 7.75:1.00; (viii) June 30, 2021 – 7.03:1.00; (ix) September 30, 2021 – 6.08:1.00; and (x) December 31, 2021 – 5.36:1.00. The Fourth Amendment also reset the minimum liquidity requirement (consisting of cash plus undrawn availability on the Borrowers’ revolving loan facility) of $5 million, measured monthly. Furthermore, the Fourth Amendment added a minimum LTM Adjusted EBITDA covenant as of the indicated dates as follows: (i) September 30, 2019 - $7.887 million; (ii) December 31, 2019 – $7.954 million; (iii) March 31, 2020 – $7.359 million; (iv) June 30, 2020 – $11.745 million; (v) September 30, 2020 – $12.021 million; (vi) December 31, 2020 – $12.300 million; (vii) March 31, 2021 –$14.295 million; (viii) June 30, 2021 – $14.566 million; (ix) September 30, 2021 – $15.431 million; and (x) December 31, 2021 – $16.267 million.

The Fourth Amendment also (i) continues the limitation on acquisitions and dividends, (ii) required a principal repayment of $14,000,000 upon execution of the Fourth Amendment and (iii) increased the scheduled quarterly principal repayments to $562,000 effective March 31, 2020 and $1,312,000 effective December 31, 2020.

The Fourth Amendment also terminated the exit fee payable to the term loan lenders, which would have been payable in full in cash upon the earlier to occur of (x) repayment in full of the term loans, or (y) any acceleration of the term loans. In lieu of the exit fee, the Fourth Amendment reinstated a prepayment premium equal to the following percentages of the principal amount prepaid, depending upon the date of prepayment: (i) through March 31, 2020 – 0.50%; (ii) from April 1, 2020 through March 31, 2021 – 2.50%; and (iii) from April 1, 2021 and thereafter – 5.00%.

The Fourth Amendment also added a new covenant providing that in the event of a breach of a financial covenant contained in the Term Loan Facility or any failure to make a required principal repayment (a “Trigger Event”), then on or prior to six months after a Trigger Event, the Company shall commence a process to (x) sell its businesses and/or assets, and/or (y) consummate a refinancing transaction with respect to the Term Loan Facility (a “Transaction”), in each case, subject to enumerated time milestones contained in the Fourth Amendment, and which requires that Transaction shall, in any event, be consummated on or prior to the eighteen (18) month anniversary of the Trigger Event.

As closing conditions to the execution and delivery of the Fourth Amendment, the Company was required to: (i) amend its Bylaws in a manner acceptable to the Term Loan Facility lenders; (ii) appoint two new independent directors to the board of directors (the “Special Directors”); and (iii) pay an amendment fee of 0.50% of the amount of the outstanding loans under the Term Loan Facility.

On April 23, 2020, HTC, Holdings and ARI as borrowers and the Company as a guarantor, entered into a Fifth Amendment to Term Loan Credit and Security Agreement (the “Fifth Amendment”) with U.S. Bank National Association, as collateral agent and administrative agent, and the various lenders thereunder. The Fifth Amendment authorized the Company and its subsidiaries to incur up to $2.5 million of indebtedness under the CARES Act and contained other provisions relating to the treatment of such proceeds and any potential debt forgiveness, under the Term Loan Facility.

The Company evaluated the Fourth and Fifth Amendments in accordance with the provisions of Accounting Standards Codification (“ASC”) 470, Debt, to determine if the Amendments were (1) a troubled debt restructuring, and if not, (2) a modification or an extinguishment of debt. The Company concluded that the Fourth Amendment was a troubled debt restructuring for accounting purposes due to the removal of the exit fee; as such, the Company capitalized an additional $0.5 million of deferred financing costs, which are being amortized over the remaining term. The future undiscounted cash flows of the term loan, as amended, exceeded the carrying value, and accordingly, no gain was recognized and no adjustment was made to the carrying value of the debt.

The Company was in compliance with all covenants, under the Wells Fargo Facility and the Term Loan Facility, as amended, as of September 30, 2021.

The Company’s ability to comply with these covenants in future quarters may be affected by events beyond the Company’s control, including general economic conditions, weather conditions, regulations and refrigerant pricing. Therefore, we cannot make any assurance that we will continue to be in compliance during future periods.

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

CARES Act Loan

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

Vehicle and Equipment Loans

The Company has from time to time entered into various vehicle and equipment loans. These loans were payable in 60 monthly payments through July 2021 and bore interest ranging from 0.0% to 8.3%. All such loans have been repaid in full at September 30, 2021.

Capital Lease Obligations

The Company rents certain equipment with a de minimis net book value at September 30, 2021 under leases which have been classified as capital leases.

Scheduled maturities of the Company’s long-term debt and capital lease obligations are as follows:

Years ended September 30,	Amount
(in thousands)
-2022	$	5,248
-2023		5,248
-2024		70,683
Total	$	81,179

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Related Party Transactions

9 Months Ended

Sep. 30, 2021

Related Party Transactions

Related Party Transactions

Note 9 – Related Party Transactions

Stephen P. Mandracchia served as Vice President – Legal and Regulatory and Secretary of the Company through May 3, 2019 and since that date served the Company in a consulting role through August 31, 2020. From May 6, 2019 through December 31, 2019, Mr. Mandracchia received a monthly consulting fee of $10,000 and such fee was increased to $12,000 per month effective January 1, 2020. Mr. Mandracchia is the brother-in-law of the deceased Kevin J. Zugibe, the Company’s former Chairman of the Board and Chief Executive Officer. Effective September 1, 2020, Mr. Mandracchia became a member of the Company’s Board of Directors.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Summary of Significant Accounting Policies

Business

Business

Hudson Technologies, Inc., incorporated under the laws of New York on January 11, 1991, is a refrigerant services company providing innovative solutions to recurring problems within the refrigeration industry. The Company’s operations consist of one reportable segment. The Company operates principally through its wholly-owned subsidiary, Hudson Technologies Company, and Aspen Refrigerants (“Aspen” or “ARI”), a division of Hudson Technologies Company. Unless the context requires otherwise, references to the “Company”, “Hudson”, “we”, “us”, “our”, or similar pronouns refer to Hudson Technologies, Inc. and its subsidiaries.

The Company is a leading provider of sustainable refrigerant products and services to the Heating Ventilation Air Conditioning and Refrigeration (“HVACR”) industry. For nearly three decades, we have demonstrated our commitment to our customers and the environment by becoming one of the first in the United States and largest refrigerant reclaimers through multimillion dollar investments in the plants and advanced separation technology required to recover a wide variety of refrigerants and restoring them to Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”) standard for reuse as certified EMERALD Refrigerants™.

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

The Company’s SmartEnergy OPS® service is a web-based real time continuous monitoring service applicable to a facility’s refrigeration systems and other energy systems. The Company’s Chiller Chemistry® and Chill Smart® services are also predictive and diagnostic service offerings. As a component of the Company’s products and services, the Company also generates carbon offset projects.

During the year ended December 31, 2020 and continuing through the nine months ended September 30, 2021, the effects of a novel strain of coronavirus (“COVID-19”) pandemic and the related actions by governments around the world to attempt to contain the spread of the virus have materially impacted the global economy. While it is difficult to predict the full scale of the ongoing impact of the COVID-19 outbreak and business disruption, the Company has been taking actions to address the impact of the pandemic, such as working closely with our customers, reducing our expenses and monitoring liquidity. The impact of the pandemic and the corresponding actions were reflected into our judgments, assumptions and estimates to prepare the financial statements. As of the date of this filing, there has been no material impact on our ability to procure or distribute our products and services. However, if the duration of the COVID-19 pandemic is longer and the operational impact is greater than estimated, the judgments, assumptions and estimates will be updated and could result in different results in the future.

In preparing the accompanying consolidated financial statements, and in accordance with Accounting Standards Codification (“ASC”) 855-10 “Subsequent Events”, the Company’s management has evaluated subsequent events through the date that the financial statements were filed.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial information included in this quarterly report should be read in conjunction with the Company’s audited financial statements and related notes thereto for the year ended December 31, 2020. Operating results for the nine-month period ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. Certain comparative figures have been reclassified to conform to the current year presentation.

In the opinion of management, all estimates and adjustments considered necessary for a fair presentation have been included and all such adjustments were normal and recurring.

Consolidation

Consolidation

The consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, represent all companies of which Hudson directly or indirectly has majority ownership or otherwise controls. Significant intercompany accounts and transactions have been eliminated. The Company's consolidated financial statements include the accounts of wholly-owned subsidiaries Hudson Holdings, Inc. and Hudson Technologies Company. The Company does not present a statement of comprehensive income (loss) as its comprehensive income (loss) is the same as its net income (loss).

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying values of financial instruments including cash, trade accounts receivable and accounts payable approximate fair value at September 30, 2021 and December 31, 2020, because of the relatively short maturity of these instruments. The carrying value of debt approximates fair value, due to the variable rate nature of the debt, as of September 30, 2021 and December 31, 2020. See Note 2 for further details.

Credit Risk

Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash investments and trade accounts receivable. The Company maintains its temporary cash investments in highly-rated financial institutions and, at times, the balances exceed FDIC insurance coverage. The Company's trade accounts receivable are primarily due from companies throughout the United States. The Company reviews each customer's credit history before extending credit.

The Company establishes an allowance for doubtful accounts based on factors associated with the credit risk of specific accounts, historical trends, and other information. The carrying value of the Company’s accounts receivable is reduced by the established allowance for doubtful accounts. The allowance for doubtful accounts includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve for the remaining accounts receivable balances. The Company adjusts its reserves based on factors that affect the collectability of the accounts receivable balances. At September 30, 2021, the Company had trade receivables of $23.8 million, and allowance for doubtful accounts of $1.7 million, resulting in net accounts receivable of $22.1 million.

For the nine month period ended September 30, 2021 there was one customer accounting for 10% of the Company’s revenues and at September 30, 2021 there were $3.0 million of accounts receivable from this customer. For the nine month period ended September 30, 2020 there was one customer accounting for 13% of the Company’s revenues and at September 30, 2020 there were $2.0 million of accounts receivable from this customer.

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

Cash and Cash Equivalents

Cash and Cash Equivalents

Temporary investments with original maturities of ninety days or less are included in cash and cash equivalents.

Inventories

Inventories

Inventories, consisting primarily of refrigerant products available for sale, are stated at the lower of cost, on a first-in first-out basis, or net realizable value. Where the market price of inventory is less than the related cost, the Company may be required to write down its inventory through a lower of cost or net realizable value adjustment, the impact of which would be reflected in cost of sales on the Consolidated Statements of Operations. Any such adjustment would be based on management’s judgment regarding future demand and market conditions and analysis of historical experience.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment are stated at cost, including internally manufactured equipment. The cost to complete equipment that is under construction is not considered to be material to the Company's financial position. Provision for depreciation is recorded (for financial reporting purposes) using the straight-line method over the useful lives of the respective assets. Leasehold improvements are amortized on a straight-line basis over the shorter of economic life or terms of the respective leases. Costs of maintenance and repairs are charged to expense when incurred.

Due to the specialized nature of the Company's business, it is possible that the Company's estimates of equipment useful life periods may change in the future.

Goodwill

Goodwill

The Company has made acquisitions that included a significant amount of goodwill and other intangible assets. The Company applies the purchase method of accounting for acquisitions, which among other things, requires the recognition of goodwill (which represents the excess of the purchase price of the acquisition over the fair value of the net assets acquired and identified intangible assets). We test our goodwill for impairment on an annual basis (the first day of the fourth quarter) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an asset below its carrying value. Goodwill is tested for impairment at the reporting unit level. The Company has one reporting unit at September 30, 2021. Other intangible assets that meet certain criteria are amortized over their estimated useful lives.

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

There were no goodwill impairment losses recognized in 2020 or the nine months ended September 30, 2021.

Cylinder Deposit Liability

Cylinder Deposit Liability

The cylinder deposit liability, which is included in Accrued expenses and other current liabilities on the Company’s Balance Sheet, represents the amount due to customers for the return of refillable cylinders. ARI charges its customers cylinder deposits upon the shipment of refrigerant gases that are contained in refillable cylinders. The amount charged to the customer by ARI approximates the cost of a new cylinder of the same size. Upon return of a cylinder, this liability is reduced.

Revenues and Cost of Sales

Revenues and Cost of Sales

The Company’s products and services are primarily used in commercial air conditioning, industrial processing and refrigeration systems. Most of the Company’s revenues are realized from the sale of refrigerant and industrial gases and related products. The Company also generates revenue from refrigerant management services performed at a customer’s site and in-house. The Company conducts its business primarily within the US.

The Company applies the FASB’s guidance on revenue recognition, which requires the Company to recognize revenue in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services transferred to its customers. In most instances, the Company’s contract with a customer is the customer’s purchase order and the sales price to the customer is fixed. For certain customers, the Company may also enter into a sales agreement outlining a framework of terms and conditions applicable to future purchase orders received from that customer. Because the Company’s contracts with customers are typically for a single customer purchase order, the duration of the contract is usually less than one year. The Company’s performance obligations related to product sales are satisfied at a point in time, which may occur upon shipment of the product or receipt by the customer, depending on the terms of the arrangement.

The Company’s performance obligations related to reclamation and RefrigerantSide® services are generally satisfied at a point in time when service is performed. Accordingly revenues are recorded upon the shipment of the product, or in certain instances upon receipt by the customer, or the completion of the service.

In July 2016 the Company was awarded, as prime contractor, a five-year contract, including a five-year renewal option which has been exercised, by the United States Defense Logistics Agency (“DLA”) for the management, supply, and sale of refrigerants, compressed gases, cylinders and related services. Due to the contract containing multiple performance obligations, the Company assessed the arrangement in accordance with ASC 606. The Company determined that the sale of refrigerants and the management services provided under the contract each have stand-alone value. Accordingly, the performance obligations related to the sale of refrigerants is satisfied at a point in time, mainly when the customer receives and obtains control of the product. The performance obligation related to management service revenue is satisfied over time and revenue is recognized on a straight-line basis over the term of the arrangement as the management services are provided.

Cost of sales is recorded based on the cost of products shipped or services performed and related direct operating costs of the Company’s facilities. In general, the Company performs shipping and handling services for its customers in connection with the delivery of refrigerant and other products. The Company elected to implement ASC 606-10-25-18B, whereby the Company accounts for such shipping and handling as activities to fulfill the promise to transfer the good. To the extent that the Company charges its customers shipping fees, such amounts are included as a component of revenue and the corresponding costs are included as a component of cost of sales.

Income Taxes

Income Taxes

The Company is taxed at statutory corporate income tax rates after adjusting income reported for financial statement purposes for certain items. Current income tax expense (benefit) reflects the tax results of revenues and expenses currently taxable or deductible. The Company utilizes the asset and liability method of accounting for deferred income taxes, which provides for the recognition of deferred tax assets or liabilities, based on enacted tax rates and laws, for the differences between the financial and income tax reporting bases of assets and liabilities.

The tax benefit associated with the Company’s net operating loss carry forwards (“NOLs”) is recognized to the extent that the Company expects to realize future taxable income. As a result of a prior “change in control”, as defined by the Internal Revenue Service, the Company’s ability to utilize its existing NOLs is subject to certain annual limitations. To the extent that the Company utilizes its NOLs, it will not pay tax on such income. However, to the extent that the Company’s net income, if any, exceeds the annual NOL limitation, it will pay income taxes based on the then existing statutory rates. In addition, certain states either do not allow or limit NOLs and as such the Company will be liable for certain state income taxes.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Further, starting in 2021, the 100% NOL utilization reverts back to the pre-CARES Act limitation of 80% of taxable income. The Company has evaluated its options under the carryback provision and filed a claim for refund, resulting in a cash benefit. Further, the CARES Act accelerates the refund of the alternative minimum tax credits to allow a full refund of any remaining credit amount in taxable years beginning in 2019. The credits were originally fully refundable in taxable years beginning in 2021. As a result, the Company has recorded a preliminary $47,000 tax benefit related to the alternative minimum tax refund in the quarter ended March 31, 2020 and an additional $380,000 in the quarter ended June 30, 2020. Finally, the CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020.

As of September 30, 2021, the Company had NOLs of approximately $29.8 million, of which none have an expiration date. As of September 30, 2021, the Company had state tax NOLs of approximately $16.5 million expiring in various years. We review the likelihood that we will realize the benefit of our deferred tax assets, and therefore the need for valuation allowances, on an annual basis in the fourth quarter of the year, and more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results are considered, along with all other available positive and negative evidence.

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence that is objective and verifiable, such as cumulative losses in recent years. We utilize a rolling twelve quarters of pre-tax income or loss adjusted for significant permanent book to tax differences, as well as non-recurring items, as a measure of our cumulative results in recent years. Based on our assessment as of December 31, 2018, 2019, 2020 and September 30, 2021, we concluded that due to the uncertainty that the deferred tax assets will not be fully realized in the future, we recorded a valuation allowance of approximately $11.3 million during 2018, and due to additional losses, increased the valuation allowance through 2019 and 2020 to $19.0 million. For the quarter ended September 30, 2021, and due to a net income position that resulted in the utilization of gross net operating losses of $16.3 million, the valuation allowance was reduced by ($4.9) million, resulting in an ending valuation allowance balance of $14.1 million as of September 30, 2021.

The Company evaluates uncertain tax positions, if any, by determining if it is more likely than not to be sustained upon examination by the taxing authorities. As of September 30, 2021 and December 31, 2020, the Company believes it had no uncertain tax positions.

Income (Loss) per Common and Equivalent Shares

Income (Loss) per Common and Equivalent Shares

If dilutive, common equivalent shares (common shares assuming exercise of options) utilizing the treasury stock method are considered in the presentation of diluted loss per share. The reconciliation of shares used to determine net loss per share is as follows (dollars in thousands, unaudited):

	Three Months				Nine Months
	ended September 30,				ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	15,870	$	39	$	26,071	$	(460)
Weighted average number of shares - basic		43,870,825		42,656,510		43,576,211		42,637,945
Weighted average number of shares – diluted		46,964,522		43,680,265		46,412,691		42,637,945

During the three month periods ended September 30, 2021 and 2020, certain options aggregating 28,276 and 7,043,259 shares, respectively, have been excluded from the calculation of diluted shares, due to the fact that their effect would be anti-dilutive.

During the nine month periods ended September 30, 2021 and 2020, certain options aggregating 59,119 and 7,043,259 shares, respectively, have been excluded from the calculation of diluted shares, due to the fact that their effect would be anti-dilutive.

Estimates and Risks

Estimates and Risks

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires the use of estimates and assumptions that affect the amounts reported in these financial statements and footnotes. The Company considers these accounting estimates to be critical in the preparation of the accompanying consolidated financial statements. The Company uses information available at the time the estimates are made. However, these estimates could change materially if different information or assumptions were used including potential impact of COVID-19 uncertainties. Additionally, these estimates may not ultimately reflect the actual amounts of the final transactions that occur. The Company utilizes both internal and external sources to evaluate potential current and future liabilities for various commitments and contingencies. In the event that the assumptions or conditions change in the future, the estimates could differ from the original estimates.

Several of the Company's accounting policies involve significant judgments, uncertainties and estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. To the extent that actual results differ from management's judgments and estimates, there could be a material adverse effect on the Company. On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its allowance for doubtful accounts, inventory reserves, goodwill and valuation allowance for the deferred tax assets relating to its NOLs and commitments and contingencies. With respect to trade accounts receivable, the Company estimates the necessary allowance for doubtful accounts based on both historical and anticipated trends of payment history and the ability of the customer to fulfill its obligations. For inventory, the Company evaluates both current and anticipated sales prices of its products to determine if a write down of inventory to net realizable value is necessary. In determining the Company’s valuation allowance for its deferred tax assets, the Company assesses its ability to generate taxable income in the future.

The Company participates in an industry that is highly regulated, and changes in the regulations affecting its business could affect its operating results. Currently the Company purchases virgin hydrochlorofluorocarbon (“HCFC”) and hydrofluorocarbon (“HFC”) refrigerants and reclaimable, primarily HCFC, HFC and chlorofluorocarbon (“CFC”), refrigerants from suppliers and its customers.

To the extent that the Company is unable to source sufficient quantities of refrigerants or is unable to obtain refrigerants on commercially reasonable terms or experiences a decline in demand and/or price for refrigerants sold by the Company, the Company could realize reductions in revenue from refrigerant sales, which could have a material adverse effect on its operating results and its financial position. The process of sourcing refrigerants includes various procurement costs, such as freight, processing, insurance, and other costs, relating to the delivery of refrigerants. As a result of the recently noted global supply chain issues, the Company determined it could be exposed to incremental costs related to these refrigerant purchases. These costs represent the Company’s initial estimate that are possibly subject to finalization in future periods and are recorded in accrued expenses and other current liabilities on the consolidated balance sheet as of September 30, 2021.

The Company is subject to various legal proceedings. The Company assesses the merit and potential liability associated with each of these proceedings. In addition, the Company estimates potential liability, if any, related to these matters. To the extent that these estimates are not accurate, or circumstances change in the future, the Company could realize liabilities, which could have a material adverse effect on its operating results and its financial position.

Impairment of Long-lived Assets

Impairment of Long-lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost to sell.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope, and in November 2018, issued ASU No. 2018-19 and in April 2019, issued ASU No. 2019-04 and in May 2019, issued ASU No. 2019-05, and in November 2019, issued ASU No. 2019-11, which each amended the standard. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is still evaluating the impact of this ASU.

In March 2020, the FASB issued ASU 2020-04, which provides relief from accounting analysis and impacts that may otherwise be required for modifications to agreements necessitated by reference rate reform. It also provides optional expedients to enable the continuance of hedge accounting where certain hedging relationships are impacted by reference rate reform. This optional guidance is effective immediately, and available to be used through December 31, 2022. We are assessing the impact that reference rate reform and the related adoption of this guidance will have on our financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity”, which is intended to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20, Debt-Debt with Conversion and Other Options, for convertible instruments. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. We are currently in the process of evaluating the effects of the provisions of ASU 2020-06 on our financial statements.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2021

Summary of Significant Accounting Policies

Schedule of reconciliation of shares used to determine net loss per share

	Three Months				Nine Months
	ended September 30,				ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	15,870	$	39	$	26,071	$	(460)
Weighted average number of shares - basic		43,870,825		42,656,510		43,576,211		42,637,945
Weighted average number of shares – diluted		46,964,522		43,680,265		46,412,691		42,637,945

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Inventories (Tables)

9 Months Ended

Sep. 30, 2021

Inventories

Schedule of inventories

Inventories consist of the following:

	September 30,		December 31,
	2021		2020
	(unaudited)
(in thousands)
Refrigerant and cylinders	$	65,889	$	53,593
Less: net realizable value adjustments		(7,100)		(9,133)
Total	$	58,789	$	44,460

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Property, plant and equipment (Tables)

9 Months Ended

Sep. 30, 2021

Property, plant and equipment

Schedule of elements of property, plant and equipment

Elements of property, plant and equipment are as follows:

	September 30,		December 31,		Estimated
	2021		2020		Lives
(in thousands)	(unaudited)
Property, plant and equipment
- Land	$	1,255	$	1,255
- Land improvements		319		319	6-10 years
- Buildings		1,446		1,446	25-39 years
- Building improvements		3,099		3,072	25-39 years
- Cylinders		13,305		13,624	15-30 years
- Equipment		25,221		25,138	3-10 years
- Equipment under capital lease		315		315	5-7 years
- Vehicles		1,740		1,537	3-5 years
- Lab and computer equipment, software		3,103		3,103	2-8 years
- Furniture & fixtures		679		679	5-10 years
- Leasehold improvements		852		852	3-5 years
- Equipment under construction		1,615		944
Subtotal		52,949		52,284
Accumulated depreciation		32,914		30,374
Total	$	20,035	$	21,910

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Leases (Tables)

9 Months Ended

Sep. 30, 2021

Leases

Schedule of maturity of lease payments

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of September 30, 2021.

	September 30,
Maturity of Lease Payments	2021
	(unaudited)
(in thousands)
-2021 (remaining)	$	1,454
-2022		1,415
-2023		1,412
-2024		1,027
-Thereafter		2,932
Total undiscounted operating lease payments		8,240
Less imputed interest		(1,512)
Present value of operating lease liabilities	$	6,728

Schedule of balance sheet classification of lease liabilities

	September 30,
	2021
Current lease liabilities (recorded in Accrued expenses and other current liabilities)	$	3,093
Long-term lease liabilities		3,635
Total operating lease liabilities	$	6,728

Schedule of other information of operating leases

	September 30,
	2021
Weighted-average remaining term for operating leases	4.31	years
Weighted-average discount rate for operating leases	8.22	%

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Goodwill and intangible assets (Tables)

9 Months Ended

Sep. 30, 2021

Goodwill and intangible assets

Schedule of company's other intangible assets

The Company’s other intangible assets consist of the following:

		September 30, 2021						December 31, 2020
		(unaudited)
	Amortization	Gross						Gross
	Period	Carrying		Accumulated				Carrying		Accumulated
(in thousands)	(in years)	Amount		Amortization			Net	Amount		Amortization			Net
Intangible assets with determinable lives
Covenant not to compete	6 - 10		1,270		1,002		268		1,270		937		333
Customer relationships	10 - 12		31,560		11,163		20,397		31,560		9,167		22,393
Above market leases	13		567		177		390		567		143		424
Total identifiable intangible assets		$	33,397	$	12,342	$	21,055	$	33,397	$	10,247	$	23,150

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Share-based compensation (Tables)

9 Months Ended

Sep. 30, 2021

Share-based compensation

Schedule of company's stock option plan

A summary of the activity for stock options issued under the Company’s Plans for the indicated periods is presented below:

		Weighted
		Average
		Exercise
Stock Option Plan Totals	Shares	Price
Outstanding at December 31, 2019	7,042,377	$	1.01
-Cancelled	—	$	—
-Exercised	(1,967,562)	$	0.91
-Granted	254,700	$	1.11
Outstanding at December 31, 2020	5,329,515	$	1.06
-Cancelled	(107,447)		2.11
-Exercised	(1,373,905)	$	1.23
-Granted	463,754	$	1.71
Outstanding at September 30, 2021, unaudited	4,311,917	$	1.04

Schedule of weighted average contractual life and exercise price

The following is the weighted average contractual life in years and the weighted average exercise price at September 30, 2021 of:

		Weighted
		Average		Weighted
		Remaining		Average
	Number of	Contractual		Exercise
	Options	Life		Price
Options outstanding and vested	4,311,917	3.8	years	$	1.04

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Short-term and Long-term debt (Tables)

9 Months Ended

Sep. 30, 2021

Short-term and Long-term debt

Schedule of short-term and long-term debt

Elements of short-term and long-term debt are as follows:

	September 30,		December 31,
	2021		2020
(in thousands)		(unaudited)
Short-term & long-term debt
Short-term debt:
- Revolving credit line	$	7,000	$	2,000
- Loan from Paycheck Protection Program- current		—		2,062
- Capital lease obligation- current		—		4
- Term loan facility – current		5,248		5,248
Subtotal		12,248		9,314
Long-term debt:
- Term loan facility- net of current portion of long-term debt		75,931		79,867
- Loan from Paycheck Protection Program- net of current portion		—		413
- Less: deferred financing costs on term loan		(1,683)		(2,304)
Subtotal		74,248		77,976
Total short-term & long-term debt	$	86,496	$	87,290

Schedule of maturities of long-term debt and capital lease obligations

Scheduled maturities of the Company’s long-term debt and capital lease obligations are as follows:

Years ended September 30,	Amount
(in thousands)
-2022	$	5,248
-2023		5,248
-2024		70,683
Total	$	81,179

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Summary of Significant Accounting Policies - Summary of reconciliation of shares used to determine net loss per share (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Summary of Significant Accounting Policies
Net income (loss)	$ 15,870	$ 39	$ 26,071	$ (460)
Weighted average number of shares - basic	43,870,825	42,656,510	43,576,211	42,637,945
Weighted average number of shares - diluted	46,964,522	43,680,265	46,412,691	42,637,945

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Summary of Significant Accounting Policies - Additional Information (Details)		3 Months Ended				9 Months Ended		12 Months Ended
	Mar. 27, 2020	Sep. 30, 2021 USD ($) shares	Sep. 30, 2020 USD ($) shares	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Sep. 30, 2021 USD ($) segment shares	Sep. 30, 2020 USD ($) shares	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Significant Accounting Policies [Line Items]
Number of Reportable Segments | segment						1
Accounts receivable		$ 22,131,000				$ 22,131,000		$ 9,806,000
Allowance for doubtful accounts		1,700,000				1,700,000
Accounts Receivable, net		23,800,000				23,800,000
Goodwill impairment loss						0		0
Operating Loss Carryforwards		29,800,000				29,800,000
Deferred Tax Assets, Valuation Allowance								$ 19,000,000.0	$ 19,000,000.0	$ 11,300,000
Gross net operating losses		16,300,000				16,300,000
Reduction in valuation allowance		(4,900,000)				$ (4,900,000)
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount		$ 14,100,000
Options and warrants excluded from the calculation of diluted shares | shares		28,276	7,043,259			59,119	7,043,259
State and Local Jurisdiction [Member]
Significant Accounting Policies [Line Items]
Operating Loss Carryforwards		$ 16,500,000				$ 16,500,000
Customer Concentration Risk [Member] | One Customer | Revenue from Contract with Customer [Member]
Significant Accounting Policies [Line Items]
Concentration Risk, Percentage						10.00%	13.00%
Customer Concentration Risk [Member] | One Customer | Accounts Receivable
Significant Accounting Policies [Line Items]
Accounts Receivable, net		$ 3,000,000.0	$ 2,000,000.0			$ 3,000,000.0	$ 2,000,000.0
CARES Act
Significant Accounting Policies [Line Items]
Percent of taxable income offset for taxable years beginning before 2021	100.00%					80.00%
Preliminary tax benefit related to the alternative minimum tax refund					$ 47,000
Additional tax benefit related to the alternative minimum tax refund				$ 380,000

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Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Inventories
Refrigerant and cylinders	$ 65,889	$ 53,593
Less: net realizable value adjustments	(7,100)	(9,133)
Total	$ 58,789	$ 44,460

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Property, plant and equipment - Summary of Elements of property, plant and equipment (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 52,949	$ 52,284
Accumulated depreciation	32,914	30,374
Total	20,035	21,910
- Land
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	1,255	1,255
- Land improvements
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 319	319
- Land improvements | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	6 years
- Land improvements | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	10 years
- Buildings
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 1,446	1,446
- Buildings | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	25 years
- Buildings | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	39 years
- Building improvements
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 3,099	3,072
- Building improvements | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	25 years
- Building improvements | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	39 years
- Cylinders
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 13,305	13,624
- Cylinders | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	15 years
- Cylinders | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	30 years
- Equipment
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 25,221	25,138
- Equipment | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	3 years
- Equipment | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	10 years
- Equipment under capital lease
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 315	315
- Equipment under capital lease | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	5 years
- Equipment under capital lease | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	7 years
- Vehicles
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 1,740	1,537
- Vehicles | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	3 years
- Vehicles | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	5 years
- Lab and computer equipment, software
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 3,103	3,103
- Lab and computer equipment, software | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	2 years
- Lab and computer equipment, software | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	8 years
- Furniture & fixtures
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 679	679
- Furniture & fixtures | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	5 years
- Furniture & fixtures | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	10 years
- Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 852	852
- Leasehold improvements | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	3 years
- Leasehold improvements | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Estimated Lives	5 years
- Equipment under construction
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 1,615	$ 944

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Property, plant and equipment - Additional Information (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Property, plant and equipment
Depreciation	$ 2.5	$ 3.2

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Leases - Maturity of lease payments (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Leases
-2021 (remaining)	$ 1,454
-2022	1,415
-2023	1,412
-2024	1,027
-Thereafter	2,932
Total undiscounted operating lease payments	8,240
Less imputed interest	(1,512)
Present value of operating lease liabilities	$ 6,728

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Leases - Balance Sheet Classification and Other Information (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Balance Sheet Classification [Abstract]
Long-term lease liabilities	$ 3,635	$ 3,927
Total operating lease liabilities	$ 6,728
Other Information [Abstract]
Weighted-average remaining term for operating leases	4 years 3 months 21 days
Weighted-average discount rate for operating leases	8.22%
Accounts Payable and Accrued Liabilities [Member]
Balance Sheet Classification [Abstract]
Current lease liabilities (recorded in Accrued expenses and other current liabilities)	$ 3,093

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Leases - Additional Information (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Leases
Lessee, Operating Lease, Term of Contract	11 years
operating lease liabilities	$ 2.5
Selling, General and Administrative Expenses [Member]
Leases
Operating lease expense	$ 2.5	$ 2.2

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Goodwill and intangible assets - Company's other intangible assets (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 33,397	$ 33,397
Accumulated amortization	12,342	10,247
Net	21,055	23,150
Covenant not to compete [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,270	1,270
Accumulated amortization	1,002	937
Net	$ 268	333
Covenant not to compete [Member] | Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization Period (in years)	10 years
Covenant not to compete [Member] | Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization Period (in years)	6 years
Customer relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 31,560	31,560
Accumulated amortization	11,163	9,167
Net	$ 20,397	22,393
Customer relationships [Member] | Maximum
Finite-Lived Intangible Assets [Line Items]
Amortization Period (in years)	12 years
Customer relationships [Member] | Minimum
Finite-Lived Intangible Assets [Line Items]
Amortization Period (in years)	10 years
Above market leases [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization Period (in years)	13 years
Gross Carrying Amount	$ 567	567
Accumulated amortization	177	143
Net	$ 390	$ 424

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Goodwill and intangible assets - Additional Information (Details) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Goodwill and intangible assets
Goodwill impairment loss	$ 0		$ 0
Goodwill	47,803,000		$ 47,803,000
Amortization of Intangible Assets	$ 2,095,000	$ 2,147,000

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Share-based compensation - Summary of Status of Company's Stock Option Plan (Details) - $ / shares	9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Shares
Outstanding at beginning of period	5,329,515	7,042,377	7,042,377
-Cancelled	(107,447)		0
-Exercised	(1,373,905)		(1,967,562)
-Granted	463,754	254,700	254,700
Outstanding at end of period	4,311,917		5,329,515
Weighted Average Exercise Price
Outstanding at beginning of period	$ 1.06	$ 1.01	$ 1.01
-Cancelled	2.11		0
-Exercised	1.23		0.91
-Granted	1.71		1.11
Outstanding at end of period	$ 1.04		$ 1.06

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Share-based compensation - Weighted Average Contractual Life and Exercise Price (Details)	9 Months Ended
	Sep. 30, 2021 $ / shares shares
Number of Options
Options outstanding and vested | shares | shares	4,311,917
Weighted Average Remaining Contractual Life
Weighted Average Remaining Contractual Life Options outstanding and vested	3 years 9 months 18 days
Weighted Average Exercise Price
Weighted Average Exercise Price, Options outstanding and vested | $ / shares | $ / shares	$ 1.04

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Share-based compensation - Additional Information (Details) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Jun. 11, 2020	Jun. 07, 2018	Sep. 17, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share based compensation expense	$ 500,000	$ 600,000
Common stock reserved for issuance	3,739,235
Options granted	463,754	254,700	254,700
Stock option vesting period	2 years
Share-based compensation arrangement by share based payment award percentage of fair market Person holding more then 10% voting stock	110.00%
Intrinsic value of options outstanding	$ 10,700,000		$ 700,000
Intrinsic value of options unvested	5,700		$ 0
Intrinsic value of options exercised	$ 2,100,000	$ 0
Minimum
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Contractual term	3 years
Maximum
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Contractual term	10 years
2014 Stock Incentive Plan
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Common stock reserved for issuance						3,000,000
2018 Stock Incentive Plan
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Common stock reserved for issuance					4,000,000
2020 Stock Incentive Plan
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Common stock reserved for issuance				3,000,000

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Short-term and long-term debt (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Short-term debt:
- Revolving credit line	$ 7,000	$ 2,000
- Loan from Paycheck Protection Program- current	0	2,062
- Capital lease obligation- current	0	4
- Term loan facility - current	5,248	5,248
Subtotal	12,248	9,314
Long-term debt:
- Term loan facility- net of current portion of long-term debt	75,931	79,867
- Loan from Paycheck Protection Program- net of current portion	0	413
- Less: deferred financing costs on term loan	(1,683)	(2,304)
Subtotal	74,248	77,976
Total short-term & long-term debt	$ 86,496	$ 87,290

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Short-term and long-term debt - Maturities of long-term debt and capital lease obligations (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Short-term and Long-term debt
-2022	$ 5,248
-2023	5,248
-2024	70,683
Total	$ 81,179

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Short-term and long-term debt - Additional Information (Details) - USD ($)			1 Months Ended										3 Months Ended	9 Months Ended	12 Months Ended
	Apr. 23, 2020	Dec. 19, 2019	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Sep. 30, 2021	Sep. 30, 2021	Dec. 31, 2020	Oct. 10, 2017
Forgiveness of loan														$ (2,475,000)
Paycheck Protection Program [Member] | CARES Act Loan [Member]
Debt Instrument, Interest Rate, Stated Percentage	1.00%
Unsecured loan	$ 2,475,000
Term of unforgiven loan	2 years
Deferral term of unforgiven loan	9 months
Forgiveness of loan													$ 2,475,000
TLR [Member]
Total Leverage Ratio														2.35%	5.84%
Term Loan Facility [Member]
Percent per annum				10.25%									10.25%	10.25%
First Amendment
Line of Credit Facility, Maximum Borrowing Capacity	$ 2,500,000
Fourth Amendment
Principal repayment		$ 14,000,000
Total Leverage Ratio			5.36%	6.08%	7.03%	7.75%	8.89%	8.89%	10.87%	16.57%	14.54%	15.67%
Minimum Aggregate Undrawn Availability Excess Cash Flow Calculation		$ 5,000,000
Last twelve months adjusted earnings before interest, tax, depreciation and amortization			$ 16,267,000	$ 15,431,000	$ 14,566,000	$ 14,295,000	$ 12,300,000	$ 12,021,000.000	$ 11,745,000	$ 7,359,000	$ 7,954,000	$ 7,887,000
Threshold period after trigger event the entity shall commence transaction														6 months
Threshold period after trigger event the entity shall consummate transaction		18 months
Fourth Amendment | Effective March 31, 2020 [Member]
Principal repayment		$ 562,000
Fourth Amendment | Effective December 31, 2020 [Member]
Principal repayment		$ 1,312,000
Fourth Amendment | Through March 31, 2020 [Member]
Amendment fee (as a percent)		0.50%
Fourth Amendment | From April 1, 2020 through March 31, 2021 [Member]
Amendment fee (as a percent)		2.50%
Fourth Amendment | From April 1, 2021 and thereafter [Member]
Amendment fee (as a percent)		5.00%
Fifth Amendment To Term Loan Credit And Security Agreement [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 2,500,000
Maximum | Term Loan Facility [Member]
Debt Instrument, Interest Rate, Stated Percentage				3.00%									3.00%	3.00%
Vehicle and Equipment Loans
Line of Credit Facility, Expiration Period														60 months
Vehicle and Equipment Loans | Minimum
Credit facility effective rate of interest				0.00%									0.00%	0.00%
Vehicle and Equipment Loans | Maximum
Credit facility effective rate of interest				8.30%									8.30%	8.30%
Term Loan
Debt Instrument, Face Amount																$ 105,000,000
Term Loan | Fourth Amendment
Amendment fee (as a percent)		0.50%
Deferred Financing Costs		$ 500,000
Domestic Rate Loans [Member] | Amended And Restated Revolving Credit And Security Agreement | London Interbank Offered Rate Daily Libor [Member]
Debt Instrument, Basis Spread on Variable Rate		1.00%
Domestic Rate Loans [Member] | Amended And Restated Revolving Credit And Security Agreement | Federal Funds Purchased [Member]
Debt Instrument, Basis Spread on Variable Rate		0.50%
Domestic Rate Loans [Member] | Minimum | Amended And Restated Revolving Credit And Security Agreement
Additional interest percentage		1.25%
Domestic Rate Loans [Member] | Maximum | Amended And Restated Revolving Credit And Security Agreement
Additional interest percentage		1.75%
Eurodollar Rate Loans [Member] | Minimum | Amended And Restated Revolving Credit And Security Agreement | Euro Dollar
Debt Instrument, Basis Spread on Variable Rate		2.25%
Eurodollar Rate Loans [Member] | Maximum | Amended And Restated Revolving Credit And Security Agreement | Euro Dollar
Debt Instrument, Basis Spread on Variable Rate		2.75%
Wells Fargo | Amended And Restated Revolving Credit And Security Agreement
Line of Credit Facility, Maximum Borrowing Capacity		$ 60,000,000
Wells Fargo | Swing Line Loan [Member]
Line of Credit Facility, Maximum Borrowing Capacity		5,000,000
Wells Fargo | Letter of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity		2,000,000
Wells Fargo | Revolving Credit Facility
Minimum amount to be derived from availability		3,000,000
Minimum aggregate undrawn loan availability		$ 7,500,000
Wells Fargo | Revolving Credit Facility | FCCR [Member]
Fixed Charges Coverage Ratio		1.00
Period for FCCR covenant		2 months
Revolver Guaranty and Security Agreement | Wells Fargo
Right to dominion over certain borrower's bank accounts														$ 9,000,000

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Related Party Transactions (Details) - USD ($)		8 Months Ended
	Jan. 01, 2020	Dec. 31, 2019
Stephen P. Mandracchia
Related Party Transaction [Line Items]
Monthly consulting fee	$ 12,000	$ 10,000