HDSN 10-K & 10-Q changes, risk factors and insider trading

In July 2016, we were 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 and supply of refrigerants, compressed gases, cylinders and related items to US Military commands and installations, Federal civilian agencies and foreign militaries. Our contract with DLA expires in July 2026. ForIn theOctober years ended December 31, 2024, 2023 and 2022,2025, the DLA accountedawarded fora 15%,new 18%five-year contract with a five-year renewal option to the Company (the “2025 DLA Contract”). Following issuance of the new contract, a competitor filed a bid protest at the U.S. Court of Federal Claims, challenging the DLA’s evaluation of proposals and 8%the ofcontract ouraward revenues.to Thethe lossCompany. ofIn response, the DLA asis areviewing customerits couldevaluation haveto adetermine materialwhether adversecorrective effectaction onis our financial positionnecessary and resultshas ofrescinded operations.the 2025 DLA Contract award during this process. While the bid protest and corrective action is pending, the Company will continue providing logistics support under its existing contract which runs through July 2026.

Our business and prospects are largely dependent upon continued regulation of the use and disposition of refrigerants. Changes in government regulations relating to the emission of refrigerants into the atmosphere could have a material adverse effect on us. Failure by government authorities to otherwise continue to enforce existing regulations or significant relaxation of regulatory requirements could also adversely affect demand for and supply of our services and products.

On JuneDecember 6,16, 2024,2025, the Company’s subsidiary Hudson Technologies Company completed the acquisition of substantially all the business assets of USADenver United Suppliers of America,Refrigerants Inc. (d/b/a USA Refrigerants) (“USA Refrigerants”) and B&B Jobber Services, Inc. (collectively, the “USA Refrigerants Acquisition”). The consideration for the USA Refrigerants AcquisitionInc. acquisition was approximately $20.7$2.2 million in cash, paid at the closing, and provides for a further contingent payment of up to $2.0 million payable, to the extent earned, approximately 1817 and 29 months from the closing date.

USARefrigerants RefrigerantsInc. is a leading refrigerant distributor and distributes, reclaims and packages refrigerant gases for a variety of end uses. Potential benefits of the USARefrigerants, RefrigerantsInc. Acquisition include (i) providing a broader customer network which will provide the Company with increased access to refrigerant for reclamation and strengthen the Company’s refrigerant distribution capabilities; (ii) adding incremental access to recovered pounds of refrigerants for sale for future periods to support the growth in reclamation; and (iii) enhancing the Company’s geographic footprint in the United States.

Year ended December 31, 20242025 as compared to the year ended December 31, 20232024 Revenues for the year ended December 31, 20242025 were $237.1$246.6 million, aan decreaseincrease of $51.9$9.5 million or 18%4% from the $289.0$237.1 million reported during the comparable 20232024 period. The decreaseincrease was primarily attributable to higher sales volumes which was partially offset by lower average selling prices of certainrefrigerant refrigerantssold sold.during the period.

NetGross incomeprofit and gross margin for the year ended December 31, 20242025, waswere $24.4$62.1 million,million and 25.2% respectively, a decrease of $27.8$3.6 million and 2.5% respectively from the $52.2$65.7 million ofand net income27.7% reported during the comparable 20232024 period,period. The decrease of $3.6 million gross profit and the decline in gross margin were primarily due to lower salesaverage selling prices offor certain refrigerants sold,refrigerants, and higher SG&Afreight costs, as described above.costs.

At December 31, 2024,2025, the Company had working capital, which represents current assets less current liabilities, of $147.7$146.2 million, ana increasedecrease of $1.3$1.5 million from the working capital of $146.4$147.7 million at December 31, 2023.2024. The increasedecrease in working capital is primarily attributable to athe risedecrease in cash.cash and increase in accounts payable due to higher inventory purchases at year end.

InventoryInventories and trade receivables are principal components of current assets. At December 31, 2024,2025, the Company had inventoryinventories of $96.2$135.9 million, aan decreaseincrease of $58.3$39.7 million from $154.5$96.2 million at December 31, 2023.2024. 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 (virginwith newly manufactured production currently in the process of being phased down) and HFO refrigerants.

At December 31, 2024,2025, the Company had trade receivables, net of credit losses, of $13.6$17.1 million, aan decreaseincrease of $11.6$3.5 million from $25.2$13.6 million at December 31, 2023,2024, mainly due to timing.increased sales. The Company typically generates its most significant revenue during the second and third quarters of any given year. The Company’s trade receivables are concentrated with various wholesalers, brokers, contractors and end-users within the refrigeration industry that are primarily located in the continental United States. The Company has historically financed its working capital requirements through cash flows from operations, debt, and the issuance of equity securities.

Net cash providedused byin operating activities for the year ended December 31, 20242025 was $91.8$3.2 million, when compared to the net cash provided by operating activities of $58.5$91.8 million for the comparable 20232024 period. The increasevariance is primarily due to increased inventory purchases, timing of accounts receivable, accounts payable and accrued expenses.

Net cash used in investing activities for 2024the year ended December 31, 2025 was $26.0$7.3 million when compared to the net cash used in investing activities of $3.6$26.0 million for the comparable 20232024 period, mainly due to the recent2025 acquisition of Refrigerants Inc and 2024 acquisition of USA Refrigerants as previously discussed and timing of capital expenditures related to capitalization of the Company’s ERP system.expenditures.

Net cash used in financing activities for 2024the year ended December 31, 2025 was $8.2$20.2 million, compared with net cash used in financing activities of $47.8$8.2 million for 2023. The change is primarily because in 2023, the Company paid off $47.2 million of its debt as compared to no debt repayment in 2024. During the year 2024,2025, the Company repurchased 1,244,076 shares2,890,240 of its common stock,stock atfor a$20.0 costmillion, compared with the repurchase of 1,244,076 shares for $8.1 million.million in 2024.

At December 31, 2024,2025, cash and cash equivalents were $70.1$39.5 million, or approximately $57.7$30.6 million higherlower than the $12.4$70.1 million of cash and cash equivalents at December 31, 2023.2024.

Under the terms of the Amended Wells Fargo Facility, the Borrowers: (i) immediately borrowed $15 million in the form of a “first in last out” term loan (the “FILO Tranche”) and (ii) maycould initially borrow from time to time, up to $75 million at any time consisting of revolving loans (the “Revolving Loans”) in a maximum amount up to the lesser of $75 million and a borrowing base that is calculated based on the outstanding amount of the Borrowers’ eligible receivables and eligible inventory, as described in the Amended Wells Fargo Facility. The Amended Wells Fargo Facility also containsinitially contained a sublimit of $9 million for swing line loans and $2 million for letters of credit. The Company currently has a $0.9$1.3 million letterof letters of credit outstanding. The FILO Tranche was repaid in full in July 2023 and may not be reborrowed.

Interest under the Amended Wells Fargo Facility is payable in arrears on the first day of each month. Interest charges with respect to Revolving Loans are computed on the actual principal amount of Revolving Loans outstanding at a rate per annum equal to (A) with respect to Base Rate loans, the sum of (i) a rate per annum equal to the higher of (1) 1.0%, (2) the federal funds rate plus 0.5%, (3) one month term SOFR plus 1.0%, and (4) the prime commercial lending rate of Wells Fargo, plus (ii) between 1.25% and 1.75% depending on average monthly undrawn availability and (B) with respect to SOFR loans, the sum of the applicable SOFR rate plus between 2.36% and 2.86% depending on average quarterly undrawn availability. Interest charges with respect to the FILO Tranche were computed on the actual principal amount of FILO Tranche loans outstanding at a rate per annum equal to (A) with respect to Base Rate FILO Tranche loans, the sum of (i) a rate per annum equal to the higher of (1) 1.0%, (2) the federal funds rate plus 0.5%, (3) one month term SOFR plus 1.0%, and (4) the prime commercial lending rate of Wells Fargo, plus (ii) 6.5% and (B) with respect to SOFR FILO Tranche loans, the sum of the applicable SOFR rate plus 7.50%. The Amended Wells Fargo Facility also includes a monthly unused line fee ranging from 0.35% to 0.75% per annum determined based upon the level of average Revolving Loans outstanding during the immediately preceding month measured against the total Revolving Loans that may be borrowed under the Amended Wells Fargo Facility.

On October 23, 2024, the Borrowers and the Company entered into a Second Amendment to Amended and Restated Credit Agreement dated October 23, 2024 (the “Second Amendment”) with Wells Fargo and the lenders under the Amended Wells Fargo Facility. The Second Amendment amendsamended the provision relating to permitted stock repurchases by the Company, to permit stock repurchases in an amount not to exceed $10 million per calendar year in each of 2024 and 2025 and $5 million in any calendar year thereafter during the term of the Amended Wells Fargo Facility, upon satisfaction of certain conditions, subject to an aggregate cap of $25 million.

For the yearyears ended December 31, 2024,2025, 2024 and 2023, the United States Defense Logistics Agency (the “DLA”) accounted for greater than 10% of the Company’s revenuesrevenue and over 10% of the outstanding accounts receivable at December 31, 2025 and 2024. ForRevenue from DLA totaled $38.2 million, $35.5 million and $53.0 million for the yearyears ended December 31, 2023,2025, 2024 and 2023. Accounts receivable from the DLA accountedwere for$4.3 greater than 10% of the Company’s revenuesmillion and over$3.5 10%million as of the outstanding accounts receivable at December 31, 2023.2025, Forand the2024, year ended December 31, 2022, no customer accounted for 10% of the Company’s revenues; however, the DLA accounted for over 10% of the outstanding accounts receivable at December 31, 2022.respectively.

Please refer to the Risk Factors in Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2025. There have been no material changes to such matters during the quarter ended MarchJune 31,30, 2026.

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 expireswas set to expire in July 2026.2026, but has been extended as described below.

In October 2025, the DLA awarded a new five-year contract with a five-year renewal option to the Company (the “2025 DLA Contract”). Following issuance of the new contract, a competitor filed a bid protest at the U.S. Court of Federal Claims, challenging the DLA’s evaluation of proposals and the contract award to the Company. In response, the DLA is reviewing its evaluation to determine whether corrective action is necessary and has rescinded the 2025 DLA Contract award duringand thiscommenced a re-bid process. WhileOn theMay bid27, protest and corrective action is pending,2026, the Company willreceived continuea providingbridge logisticsmodification supportfrom the DLA extending the expiration date of the existing DLA contract to November 29, 2026, with two additional three-month options to February 28, 2027 and May 29, 2027. The contract extension served as bridge under itsthe existingcurrent agreement while the DLA completed the rebidding process. On August 4, 2026, following the completion of the re-bidding process, the Company was re-awarded the previously disputed and rescinded agreement with the DLA. The initial term of the new DLA contract which runs through August 4, 2031 with the DLA holding a five-year option to extend the term through July 2026.31, 2036.

On December 16, 2025, the Company’s subsidiary Hudson Technologies Company completed the acquisition of substantially all the business assets of Denver Refrigerants Inc. (d/b/a Refrigerants Inc.). The consideration for the Refrigerants Inc. acquisition was approximately $2.2 million in cash, paid at the closing, and provides for a further contingent payment of up to $2.0 million payable, to the extent earned, approximately 17 and 29 months from the closing date.

Refrigerants Inc. is a leading refrigerant distributor and distributes, reclaims and packages refrigerant gases for a variety of end uses. Potential benefits of the Refrigerants,Refrigerants Inc. Acquisitionacquisition include (i) providing a broader customer network which will provide the Company with increased access to refrigerant for reclamation and strengthen the Company’s refrigerant distribution capabilities; (ii) adding incremental access to recovered pounds of refrigerants for sale for future periods to support the growth in reclamation; and (iii) enhancing the Company’s geographic footprint in the United States.

Three-month period ended MarchJune 31,30, 2026 as compared to the three-month period ended MarchJune 31,30, 2025 Revenues for the three-month period ended MarchJune 31,30, 2026 were $60.2$78.3 million, an increase of $4.9$5.5 million or 9%8% from the $55.3$72.8 million reported during the comparable 2025 period. The increase was primarily attributable to higher sales volumes which waswere partially offset by the mixlower average market prices of refrigerants sold during the period.sold.

Gross profit and gross margin for the three-month period ended MarchJune 31,30, 2026, were $11.8$20.7 million and 20%26% respectively, a decrease of $0.3$2.1 million and 2%5% respectively from the $12.1$22.8 million and 22%31% reported during the comparable 2025 period. The decrease of $0.2 million gross profit and the decline in gross margin were primarily due to thelower mixaverage sales price of refrigerants sold during the period.period and higher freight costs.

Selling, general and administrative (“SG&A”) expenses for the three-month period ended MarchJune 31,30, 2026 were $9.5$12.4 million, an increase of $1.3$3.1 million from the $8.2$9.3 million reported during the comparable 2025 period due to an increase in personnel costs, professional fees and IT expenses.

Amortization expense for the three-month periods ended MarchJune 31,30, 2026 and 2025 was $0.9 million and $0.8 million, respectively.

InterestNet interest income for the three-month period ended MarchJune 31,30, 2026 was $0.1$0.0 million, compared to thenet interest income of $0.6$0.7 million reported during the comparable 2025 period.

The Company’s income tax expense for the three-month period ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 was $1.3$2.5 million and $0.9$3.2 million, respectively. The Company’s effective tax rate for the three-month period ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 was 79.3%27.6% and 24.5%,18.8%, respectively. The increase in the effective tax rate was primarily due to discrete tax items recognized during the period, including non-deductible equity-based compensation and other discrete items. For the three-month period ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, 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 discrete items.

The net income for the three-month period ended MarchJune 31,30, 2026 was $0.3$4.9 million, a decrease of $2.5$5.3 million from the $2.8$10.2 million of net income reported during the comparable 2025 period,period primarily due to higher SG&A costs and lower gross margin, as described above.

At MarchJune 31,30, 2026, the Company had working capital, which represents current assets less current liabilities, of $143.0$150.6 million, aan decreaseincrease of $3.2$4.4 million from the working capital of $146.2 million at December 31, 2025. The decreaseincrease in working capital is primarily attributable to the decrease in cash and increase in accounts payable due to higher inventory purchases at year end.receivable.

Inventories and trade receivables are principal components of current assets. At MarchJune 31,30, 2026, the Company had inventories of $130.7$128.1 million, a decrease of $5.2$7.8 million from $135.9 million at December 31, 2025. 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 (with newly manufactured production currently in the process of being phased down) and HFO refrigerants.

At MarchJune 31,30, 2026, the Company had trade receivables, net of allowance for credit losses, of $33.5$43.3 million, an increase of $16.4$26.2 million from $17.1 million at December 31, 2025, mainly due to seasonal timing. The Company typically generates its most significant revenue during the second and third quarters of any given year. The Company’s trade receivables are concentrated with various wholesalers, brokers, contractors and end-users within the refrigeration industry that are primarily located in the continental United States. The Company has historically financed its working capital requirements through cash flows from operations, debt, and the issuance of equity securities.

Net cash used in operating activities for the three-monthsix-month period ended MarchJune 31,30, 2026 was $12.8$6.0 million, compared to net cash provided by operating activities of $14.2$20.6 million for the comparable 2025 period. This change is primarily driven by the timing of inventories, lower of cost net reserve, trade receivable,receivables, accounts payable and accrued expenses.

Net cash used in investing activities for the three-monthsix-month period ended MarchJune 31,30, 2026 was $1.1$1.7 million compared with net cash used in investing activities of $1.4$1.9 million for the comparable 2025 period, mainly due to timing of capital expenditures related to capitalization of the Company’s new ERP system.

Net cash used in financing activities for the three-monthsix-month period ended MarchJune 31,30, 2026 was $6.2$6.3 million compared with net cash used in financing activities of $1.8$4.5 million for the comparable 2025 period. The variance is mainly due to the excess tax on benefits from the exercise of options for $3.7 million and the repurchase of 416,480 shares of Company common stock, at a cost of $2.5 million for the period ended MarchJune 31,30, 2026.

At MarchJune 31,30, 2026, cash and cash equivalents were $19.4$25.6 million, or approximately $20.1$13.9 million lower than the $39.5 million of cash and cash equivalents at December 31, 2025.

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

At MarchJune 31,30, 2026, the Company had borrowing availability of approximately $40 million from the Amended Wells Fargo Facility and no balance was outstanding.

The Company was in compliance with all covenants under the Amended Wells Fargo Facility as of MarchJune 31,30, 2026.

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 HCFCHCFC, HFC, and HFCHFO 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 three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, the United States Defense Logistics Agency (the “DLA”) accounted for greater than 10% of the Company’s revenue and 8%9% and 23% of the outstanding accounts receivable at MarchJune 31,30, 2026 and December 31, 2025. Revenue from the DLA totaled $7.7$15.8 million and $9.4$17.7 million for the three-monthsix-month periods ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025. Accounts receivable from the DLA totaled $2.7$4.1 million and $4.3 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. One additional customer represented 20% of accounts receivable at June 30, 2026.