10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 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: 001-13458

SCOTT’S LIQUID GOLD-INC.

(Exact name of registrant as specified in its charter)

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

Registrant’s telephone number, including area code: (303) 373-4860

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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  ☒

As of August 12, 2021, the registrant had 12,627,963 shares of its common stock, $0.10 par value per share, outstanding.

CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, in addition to historical information. All statements, other than statements of historical facts, included in this Report that address activities, events, or developments with respect to our financial condition, results of operations, or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. You can typically identify forward-looking statements by the use of words, such as “may,” “could,” “should,” “assume,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” and other similar words. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

The forward-looking statements contained in this Report are based on management’s current expectations and are subject to uncertainty and changes in circumstances. We cannot assure you that future developments affecting us will be those that we have anticipated. Forward-looking statements and our performance inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to:

•	duration and scope of the COVID-19 pandemic, government and other third-party responses to it and the consequences for the global economy, including to our business, employees, and the businesses of our suppliers, customers and manufacturers of our distributed products;
•	dependence on third-party vendors and on sales to major customers;
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•	regulations, economic conditions, and tariffs in the People’s Republic of China (“PRC”), as well as dependence on the efforts of our exclusive distributor in the PRC to market and sell our products there;
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•	conclusion of our distributorship agreement for Batiste Dry Shampoos;
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•	a continued shift in the retail market from food and drug stores to mass merchandisers, club stores, dollar stores, e-commerce retailers, and subscription services;
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•	competition from large consumer products companies in the United States;
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•	competitive factors, including any decrease in distribution of (i.e., retail stores carrying) our significant products;
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•	new competitive products and/or technological changes;
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•	the need for effective advertising of our products and limited resources available for such advertising;
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•	unfavorable economic conditions;
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•	changing consumer preferences and the continued acceptance of each of our significant products in the marketplace;
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•	the degree of success of any new product or product line introduction by us;
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•	the degree of success of the integration of product lines or businesses we may acquire;
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•	the degree of success of our conversion to outsourced manufacturing and dependence on third-party manufacturers;
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•	the availability of necessary raw materials, especially plastics including caps and bottles;
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•	potential increases in raw material prices;
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•	changes in the regulation of our products, including applicable environmental, U.S. and international Food and Drug Administration regulations and process-audit compliance;
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•	the loss of any executive officer or other personnel;
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•	future losses which could affect our liquidity;
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•	other matters discussed in this Report, including the risks described in the Risk Factors section of this Report and in our Annual Report on Form 10-K for the year ended December 31, 2020 and subsequent Quarterly Reports on Form 10-Q.
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We caution you that forward-looking statements are not guarantees of future performance and that actual results or performance may be materially different from those expressed or implied in the forward-looking statements. The forward-looking statements in this Report speak as of the filing date of this Report. Although we may from time to time voluntarily update our prior forward-looking statements, we undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this Report.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 4.	Controls and Procedures	21
PART II
Item 1A.	Risk Factors	22
Item 6.	Exhibits	22
ITEM  1.	FINANCIAL STATEMENTS.
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SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Net sales	$	8,451		$	6,083		$	17,884		$	13,937
Cost of sales		4,929			3,215			10,225			7,605
Gross Profit		3,522			2,868			7,659			6,332
Operating expenses:
Advertising		203			141			362			362
Selling		2,518			1,614			5,069			3,203
General and administrative		1,687			1,293			2,972			2,487
Intangible asset amortization		387			210			775			420
Total operating expenses		4,795			3,258			9,178			6,472
(Loss) income from operations		(1,273	)		(390	)		(1,519	)		(140	)
Interest income		-			2			-			3
Interest expense		(175	)		(74	)		(309	)		(78	)
Income from distribution agreement termination		-			350			-			350
(Loss) income before income taxes		(1,448	)		(112	)		(1,828	)		135
Income tax benefit		382			34			482			64
Net (loss) income	$	(1,066	)	$	(78	)	$	(1,346	)	$	199
Net (loss) income per common share
Basic	$	(0.08	)	$	(0.01	)	$	(0.11	)	$	0.02
Diluted	$	(0.08	)	$	(0.01	)	$	(0.11	)	$	0.02
Weighted average shares outstanding
Basic		12,618			12,462			12,618			12,462
Diluted		12,618			12,462			12,618			12,571

See accompanying notes to these Condensed Consolidated Financial Statements (Unaudited).

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value amounts)

		December 31,
		2020
Assets
Current assets:
Cash and cash equivalents	20	$	5
Accounts receivable, net	4,723		4,512
Inventories, net	6,770		3,988
Income taxes receivable	513		535
Prepaid expenses	542		596
Other current assets	-		112
Total current assets	12,568		9,748
Property and equipment, net	12		18
Deferred tax asset	1,287		784
Goodwill	5,280		5,280
Intangible assets, net	14,014		14,703
Operating lease right-of-use assets	2,857		2,985
Other assets	38		38
Total assets	36,056	$	33,556
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	4,036	$	1,799
Accrued expenses	999		296
Current portion of long-term debt	1,000		1,000
Operating lease liabilities, current portion	245		249
Other current liabilities	67		67
Total current liabilities	6,347		3,411
Long-term debt, net of current portion and debt issuance costs	5,451		4,521
Operating lease liabilities, net of current	2,908		3,032
Other liabilities	129		127
Total liabilities	14,835		11,091
Shareholders’ equity:
Preferred stock, no par value, authorized 20,000 shares; no shares issued and outstanding	-		-
Common stock; 0.10 par value, authorized 50,000 shares; issued and outstanding 12,618 shares (2021) and 12,618 shares (2020)	1,262		1,262
Capital in excess of par	7,735		7,633
Retained earnings	12,224		13,570
Total shareholders’ equity	21,221		22,465
Total liabilities and shareholders’ equity	36,056	$	33,556

All values are in US Dollars.

See accompanying notes to these Condensed Consolidated Financial Statements (Unaudited).

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(in thousands)

	Common Stock
	Shares		Amount		Capital in Excess of Par		Retained Earnings			Total
Balance, December 31, 2020		12,618	$	1,262	$	7,633	$	13,570		$	22,465
Stock-based compensation		-		-		69		-			69
Net loss		-		-		-		(280	)		(280	)
Balance, March 31, 2021 (Unaudited)		12,618		1,262		7,702		13,290			22,254
Stock-based compensation						33					33
Net loss								(1,066	)		(1,066	)
Balance, June 30, 2021 (Unaudited)		12,618	$	1,262	$	7,735	$	12,224		$	21,221
Balance, December 31, 2019		12,462	$	1,246	$	7,250	$	15,121		$	23,617
Stock-based compensation		-		-		36		-			36
Net income		-		-		-		277			277
Balance, March 31, 2020 (Unaudited)		12,462		1,246		7,286		15,398			23,930
Stock-based compensation		-		-		35		-			35
Net loss		-		-		-		(78	)		(78	)
Balance, June 30, 2020 (Unaudited)		12,462	$	1,246	$	7,321	$	15,320		$	23,887

See accompanying notes to these Condensed Consolidated Financial Statements (Unaudited).

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Six Months Ended
	June 30,
	2021			2020
Cash flows from operating activities:
Net (loss) income	$	(1,346	)	$	199
Adjustments to reconcile net (loss) income to net cash provided (used) by operating activities:
Depreciation and amortization		905			522
Stock-based compensation		102			71
Deferred income taxes		(503	)		65
Change in operating assets and liabilities:
Accounts receivable		(211	)		156
Inventories		(2,782	)		2,905
Prepaid expenses and other assets		166			42
Income taxes receivable		22			322
Accounts payable, accrued expenses, and other liabilities		2,942			296
Total adjustments to net (loss) income		641			4,379
Net cash (used) provided by operating activities		(705	)		4,578
Cash flows from investing activities:
Purchase of software		(113	)		-
Purchase of property and equipment		-			(17	)
Proceeds from sale of property and equipment		-			500
Cash paid for leasehold improvements		-			(247	)
Reimbursement of leasehold improvements		-			110
Net cash (used in) provided by investing activities		(113	)		346
Cash flows from financing activities:
Proceeds from revolving credit facility		19,517			-
Repayments of revolving credit facility		(18,184	)		-
Repayments of term loan		(500	)		-
Payments for debt issuance costs		-			(141	)
Proceeds from PPP loan		-			600
Repayment of PPP loan		-			(600	)
Net cash provided by (used in) financing activities		833			(141	)
Net increase in cash and cash equivalents		15			4,783
Cash and cash equivalents, beginning of period		5			1,094
Cash and cash equivalents, end of period	$	20		$	5,877
Supplemental disclosures:
Cash paid during the period for interest	$	212		$	-

See accompanying notes to these Condensed Consolidated Financial Statements (Unaudited).

SCOTT’S LIQUID GOLD-INC. & SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(in thousands, except per share data)

Note 1.	Organization and Summary of Significant Accounting Policies
(a)	Company Background
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Scott’s Liquid Gold-Inc., a Colorado corporation was incorporated on February 15, 1954. Scott’s Liquid Gold-Inc. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our,” or “us”) develop, market and sell quality household and personal care products. We are also a distributor in the United States of personal care products manufactured by another company. Our business is comprised of two segments: household products and personal care products.

(b)	Principles of Consolidation

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

(c)	Basis of Presentation

The unaudited Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, and Condensed Consolidated Statements of Cash Flows included in this Report have been prepared by the Company. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at June 30, 2021 and results of operations and cash flows for all periods have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with our financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the period ended June 30, 2021 are not necessarily indicative of the operating results for the full year.

(d)	Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts in our financial statements of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, the realization of deferred tax assets, reserves for slow moving and obsolete inventory, customer returns and allowances, intangible asset useful lives and amortization method, fair value of assets acquired in business combinations, operating lease right-of-use assets and operating lease liabilities, and stock-based compensation. Actual results could differ from our estimates.

(e)	Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents.

(f)Inventories Valuation and Reserves

Inventories consist of raw materials and finished goods and are stated at the lower of cost (first-in, first-out method) or net realizable value, which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We estimate an inventory reserve, which is generally not material to our financial statements, for slow moving and obsolete products and raw materials based upon, among other things, an assessment of historical and anticipated sales of our products. In the event that actual results differ from our estimates, the results of future periods may be impacted.

Inventories were comprised of the following at:

	June 30, 2021			December 31, 2020
Finished goods	$	6,213		$	3,583
Raw materials		1,303			1,281
Impairment of inventories		(746	)		(876	)
	$	6,770		$	3,988

Our remaining raw materials balance is to be sold to contract manufacturing partners based on production demand.

(g)	Property and Equipment

Property and equipment are recorded at historical cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets ranging from three to 20 years. Office furniture and office machines are estimated to have useful lives of 10 to 20 years and three to five years, respectively. Maintenance and repairs are expensed as incurred. Improvements that extend the useful lives of the asset or provide improved efficiency are capitalized.

(h)	Leases

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

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

The Company evaluates reimbursable leasehold improvements based on whether improvements are indicative of a lessor or lessee asset. The Company concluded that all of its reimbursable leasehold improvement payments have qualified as lessor assets and, as such, have accounted for leasehold improvement payments as prepaid rent included in prepaid expenses on the condensed consolidated balance sheets.

(i)	Intangible Assets and Goodwill

Intangible assets consist of customer relationships, trade names, formulas, batching processes, internal-use software and a non-compete agreement.  The fair value of the intangible assets is amortized over their estimated useful lives and range from a period of five to 25 years. Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired.

Internal-use software costs recognized as an intangible asset relates to capitalizable costs of computer software obtained for internal-use as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-40-30-1. All other internal-use software costs are expensed as incurred by the Company. Amortization is recorded straight-line over the estimated useful life of the software once the software is ready for its intended use. As of June 30, 2021, our internal-use software was not ready for its intended use. The estimated useful life for internal-use software will be determined and periodically reassessed based on considerations for obsolescence, technology, competition, and other economic factors.

Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests, and in certain circumstances these assets are written down to fair value if impaired.

(j)	Financial Instruments

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

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

(k)	Purchase Accounting for Acquisitions

We apply the acquisition method of accounting for a business combination. In general, this methodology requires us to record assets acquired and liabilities assumed at their respective fair values at the date of acquisition. Any amount of the purchase price paid that is in excess of the estimated fair value of the net assets acquired is recorded as goodwill. For certain acquisitions, we also record a liability for contingent consideration based on estimated future business performance. We monitor our assumptions surrounding these estimated future cash flows and, if there is a significant change, would record an adjustment to the contingent consideration liability and a corresponding adjustment to either income or expense. We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses. These types of analyses require us to make assumptions and estimates regarding industry and economic factors, the profitability of future business strategies, discount rates and cash flow.

If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future. If the contingent consideration paid for any of our acquisitions differs from the amount initially recorded, we would record either income or expense associated with the change in liability.

(l)	Income Taxes

Income taxes reflect the tax effects of transactions reported in the Condensed Consolidated Financial Statements and consist of taxes currently payable plus deferred income taxes related to certain income and expenses recognized in different periods for financial and income tax reporting purposes. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. A valuation allowance is established when it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which related temporary differences become deductible. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Taxes are reported based on tax positions that meet a more-likely-than-not standard and that are measured at the amount that is more-likely-than-not to be realized. Differences between financial and tax reporting which do not meet this threshold are required to be recorded as unrecognized tax benefits or expense. We classify penalty and interest expense related to income tax liabilities as an income tax expense. There are no significant interest and penalties recognized in the Condensed Consolidated Statements of Income or accrued on the Condensed Consolidated Balance Sheets.

The effective tax rate for the six months ended June 30, 2021 and 2020 was 26.4% and (47.4%) respectively, which can differ from the statutory income tax rate due to permanent book-to-tax differences. The Company continues to evaluate the realizability of the deferred tax asset, if the Company is not able to return to profitability or meet future forecasted goals, the Company may realize a valuation allowance in future periods.

On March 27, 2020, President Trump signed into U.S. federal law the CARES Act, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. In particular, under the CARES Act, NOLs arising in 2018, 2019, and 2020 taxable years may be carried back to each of the preceding five years to generate a refund. The tax impact of the carryback of 2019 losses was recorded in the first quarter income tax provision. We are analyzing the different aspects of the CARES Act to determine whether any other provisions may impact us.

(m)	Revenue Recognition

Our revenue recognition policy is significant because the amount and timing of revenue is a key component of our results of operations. Certain criteria are required to be met in order to recognize revenue. If these criteria are not met, then the associated revenue is deferred until it is met. When consideration is received in advance of the delivery of goods or services, a contract liability is recorded. Our revenue contracts are identified when purchase orders are received and accepted from customers and represent a single performance obligation to sell our products to a customer.

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

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

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

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

We have also established an allowance for doubtful accounts. We estimate this allowance based upon, among other things, an assessment of the credit risk of specific customers and historical trends. We believe our allowance for doubtful accounts is adequate to absorb any losses which may arise. In the event that actual losses differ from our estimates, the results of future periods may be impacted.

Customer allowances for trade promotions and allowance for doubtful accounts are included in net accounts receivable on the condensed consolidated balance sheets and were as follows at:

	2021		2020
Trade promotions	$	1,648	$	2,153
Allowance for doubtful accounts		14		183
	$	1,662	$	2,336
(n)	Advertising Costs
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We expense advertising costs as incurred.

(o)	Stock-Based Compensation

We account for share based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant. We determine the estimated grant-date fair value of stock options with only service conditions using the Black-Scholes option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding the

components of the model, including the estimated fair value of underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. We recognize compensation costs ratably over the vesting period using the straight-line method, which approximates the service period.

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

(p)	Operating Costs and Expenses Classification

Cost of sales includes costs associated with manufacturing and distribution including labor, materials, freight-in, purchasing and receiving, quality control, repairs, maintenance, and other indirect costs, as well as warehousing and distribution costs. We classify freight-out as selling expenses. Other selling expenses consist primarily of costs for sales and sales support personnel, brokerage commissions, and promotional costs. Freight-out costs included in selling expenses totaled $969 and $619 for the three months ended June 30, 2021 and 2020, respectively, and totaled $2,026 and $1,306 for the six months ended June 30, 2021 and 2020, respectively.

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

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

(q)	Recently Issued Accounting Standards

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public companies, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. We continue to assess the impact of this guidance.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). The purpose of ASU 2020-04 is to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This guidance primarily provides temporary optional expedients which simplify the accounting for contract modifications to existing debt agreements expected to arise from the market transition from LIBOR to alternative reference rates. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply amendments prospectively through December 31, 2022. The optional expedients were available to be used upon issuance of this guidance but we have not yet applied the guidance because we have not yet modified any of our existing contracts for reference rate reform. The Company is currently assessing the impact of ASU 2020-04 on our Condensed Consolidated Financial Statements.

Note 2.	Stock-Based Compensation

During the six months ended June 30, 2021 and 2020, respectively, we did not grant any options to acquire shares of our common stock or any restricted stock units. No restricted stock units vested during the six months ended June 30, 2021.

Compensation cost related to stock options totaled $32 and $40 in the six months ended June 30, 2021 and 2020, respectively. Approximately $55 of total unrecognized compensation costs related to non-vested stock options is expected to be recognized over the next two years, depending on the vesting provisions of the options. There was no tax benefit from recording the non-cash expense as it relates to the options granted to employees, as these were qualified stock options which are not normally tax deductible.

Compensation cost related to RSUs totaled $70 and $31 for the six months ended June 30, 2021 and 2020, respectively. Approximately $181 of total unrecognized compensation costs related to non-vested RSUs is expected to be recognized ratably until on or around November 14, 2022.

Note 3.	Earnings per Share

Per share data is determined by using the weighted average number of common shares outstanding. Common equivalent shares are considered only for diluted earnings per share, unless considered anti-dilutive. Common equivalent shares, determined using the treasury stock method, result from stock options with exercise prices that are below the average market price of the common stock.

Basic earnings per share include no dilution and are computed by dividing income available to common shareholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflect the potential of securities that could share in our earnings.

A reconciliation of the weighted average number of common shares outstanding (in thousands) is as follows. The dilutive effect of stock options and RSUs are excluded for periods in which the Company has a net loss because the impact is anti-dilutive.

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Common shares outstanding, beginning of the period		12,618		12,462		12,618		12,462
Weighted average common shares issued		-		-		-		-
Weighted average number of common shares outstanding		12,618		12,462		12,618		12,462
Dilutive effect of common share equivalents		-		-		-		109
Diluted weighted average number of common shares outstanding		12,618		12,462		12,618		12,571

Common stock equivalents (in thousands) that have been excluded from the calculation of earnings per share because they would have been anti-dilutive:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Stock options		15		258		15		258
Note 4.	Segment Information
---	---

We operate in two different segments: household products and personal care products. We have chosen to organize our business around these segments based on differences in the products sold. Accounting policies for our segments are the same as those described in Note 1. We evaluate segment performance based on segment income or loss from operations.

The following provides information on our segments for the three and six months ended June 30:

	Three Months Ended June 30, 2021
	Household Products			Personal Care Products			Total
Net sales	$	3,754		$	4,697		$	8,451
(Loss) Income from operations		(972	)		(301	)		(1,273	)
Capital and intangible asset expenditures		114			-			114
Depreciation and amortization		297			155			452
	Three Months Ended June 30, 2020
---	---	---	---	---	---	---	---	---
	Household Products		Personal Care Products			Total
Net sales	$	2,272	$	3,811		$	6,083
Income from operations		202		(592	)		(390	)
Depreciation and amortization		137		156			293
	Six Months Ended June 30, 2021
---	---	---	---	---	---	---	---	---	---
	Household Products			Personal Care Products			Total
Net sales	$	8,199		$	9,685		$	17,884
(Loss) Income from operations		(1,465	)		(54	)		(1,519	)
Capital and intangible asset expenditures		114			-			114
Depreciation and amortization		595			310			905
	Six Months Ended June 30, 2020
---	---	---	---	---	---	---	---	---
	Household Products		Personal Care Products			Total
Net sales	$	4,404	$	9,533		$	13,937
(Loss) Income from operations		253		(393	)		(140	)
Capital and intangible asset expenditures		17		-			17
Depreciation and amortization		209		313			522
Note 5.	Acquisition
---	---

On June 25, 2020, we entered into an Asset Purchase Agreement (the “CR Brands Purchase Agreement”) with CR Brands, Inc., a Delaware corporation (“CR Brands”), and Sweep Acquisition Company, a Delaware corporation (“Sweep” and together with CR Brands, “Sellers”), pursuant to which we agreed to purchase from Sellers substantially all of the assets, properties, rights and interests of Sellers primarily used in the business of designing, formulating, marketing and selling laundry care products to retail and wholesale customers under the BIZ® and Dryel® brand names. The transactions contemplated by the CR Brands Purchase Agreement were consummated on July 1, 2020 (the “CR Brands Acquisition”).  The Company concluded that the CR Brands Acquisition qualified as a business combination under ASC 805. The total cash consideration paid for the CR Brands Acquisition was $10,529. The CR Brands Acquisition included contingent consideration we valued at $35.

Financial information associated with the CR Brands Acquisition is part of our household segment.

(a)	Purchase Price Allocation

The following summarizes the aggregate fair values of the assets acquired as part of the CR Brands Acquisition:

Inventories	$	1,279
Intangible assets		7,235
Goodwill		2,050
Total assets acquired	$	10,564

Intangible assets for the CR Brands Acquisition consist of the following:

	Intangible Assets		Useful Life
Customer relationships	$	4,500		9 years
Trade names		1,780		20 years
Formulas and batching processes		930		8 years
Non-compete		25		5 years
	$	7,235

In addition to the assets described above, the Company recorded a $35 liability associated with contingent consideration for the CR Brands Acquisition, which is presented in other liabilities on the consolidated balance sheets.

(b)	Pro Forma Results of Operations (Unaudited)

The following tables summarize selected unaudited pro forma condensed consolidated statements of operations data for the three and six months ended June 30, 2020, as if the CR Brands Acquisition had been completed on January 1, 2020.

	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Net sales	$	8,752	$	19,274
Net income		110		574

This selected unaudited pro forma condensed consolidated financial data is included only for the purpose of illustration and does not necessarily indicate what the operating results would have been if the CR Brands Acquisition had been completed on that date. Moreover, this information does not indicate what our future operating results will be. The information for 2020 prior to the CR Brands Acquisition is based on prior accounting records maintained by CR Brands. In some cases, CR Brands’ accounting policies may differ materially from accounting policies adopted by the Company following the CR Brands Acquisition.

The pro forma amounts above reflect the application of accounting policies and adjustment of the results of the CR Brands Acquisition to reflect: (1) the additional amortization that would have been charged to the acquired intangible assets; (2) additional interest expense relating to the borrowings on our Chase line of credit and UMB term loan and revolving credit facility, respectively; and (3) the tax impacts.

Note 6.	Goodwill and Intangible Assets

Goodwill and intangible assets, which are related to our acquisition of our Prell^®^, Denorex^®^, Kids N Pets^®^, BIZ^®^ and Dryel^®^ brands, consisted of the following:

	As of June 30, 2021						As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Intangible assets:
Customer relationships	$	10,852	$	2,842	$	8,010	$	10,852	$	2,296	$	8,556
Trade names		5,022		956		4,066		5,022		810		4,212
Formulas and batching processes		1,969		461		1,508		1,969		356		1,613
Internal-use software (not placed in service)		399		-		399		286		-		286
Non-compete agreement		66		35		31		66		30		36
		18,308		4,294		14,014		18,195		3,492		14,703
Goodwill						5,280						5,280
Total intangible assets					$	19,294					$	19,983

Amortization expense for the three months ended June 30, 2021 and 2020 was $401 and $224, respectively. Amortization expense for the six months ended June 30, 2021 and 2020 was $802 and $448, respectively.

Estimated amortization expense for 2021 and subsequent years is as follows:

Remainder of 2021		802
2022		1,601
2023		1,601
2024		1,600
2025		1,595
Thereafter		6,416
Total	$	13,615
Note 7.	Long-Term Debt and Line-of-Credit
---	---

On July 1, 2020, we entered into a Loan and Security Agreement, as amended (the “Loan Agreement”) with UMB Bank, N.A. (“UMB”) and we terminated our Credit Agreement, dated June 30, 2016, with JPMorgan Chase Bank, N.A., (as amended, the “Prior Credit Agreement”). Under the Loan Agreement we obtained a $3,000 term loan, with equal monthly payments fully amortized over three years, and interest at the LIBOR Rate + 4.50% with a floor of 5.50%, and a revolving credit facility, with a maximum commitment of $7,000 with interest at the LIBOR Rate + 3.75%, with a floor of 4.75%. The revolving credit facility will terminate on July 1, 2023, unless terminated earlier pursuant to the terms of the Loan Agreement. The loans are secured by all of the assets of the Company and all of its subsidiaries.

The Loan Agreement requires compliance with affirmative, negative, and financial covenants, as determined on a monthly basis. The Loan Agreement also contains covenants typical of transactions of this type, including among others, limitations on the our ability to: create, incur or assume any indebtedness or lien on our assets; pay dividends or make other distributions; redeem, retire or acquire outstanding common stock, options, warrants or other rights; make fundamental changes to our corporate structure or business; make investments or sell assets; or engage in certain other activities as set forth in the Loan Agreement.

On August 13, 2021, we entered into the Third Amendment to the Loan and Security Agreement (“Third Amendment”), effective May 1, 2021, which, among other things, amends our tangible net worth and cumulative cash flow after debt service requirements, as well as the timing in which the minimum fixed charge coverage ratio is applicable.

The Company was in compliance with the Loan Agreement financial covenants as of June 30, 2021.

As of June 30, 2021, our term loan and revolving credit facility had an outstanding balance of $2,083 and $4,755, respectively, with an all-in interest rate of 6.75% and 7.50%, respectively. Unamortized loan costs were $387 as of June 30, 2021.

As of June 30, 2021, the total principal payments due on our outstanding debt were as follows:

	Revolving Credit Facility		Term Loan		Total
Remainder of 2021	$	-	$	500	$	500
2022		-		1,000		1,000
2023		4,755		583		5,338
Total minimum principal payments	$	4,755	$	2,083	$	6,838
Note 8.	Leases
---	---

We have entered into leases for our corporate headquarters and office equipment with remaining lease terms up to 10 years. Some of these leases include both lease and nonlease components, which are accounted for as a single lease component as we have elected the practical expedient to combine these components for all leases. As most of the leases do not provide an implicit rate, we calculated the right-of-use assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date. We currently do not have any finance leases outstanding.

On March 11, 2020, we executed an office lease for a new corporate headquarters. As of that date, we had the right to control the use of the asset, which qualified as an operating lease. There were no initial direct costs associated with our new office lease and our deposit is fully refundable.

Information related to leases was as follows:

	Three Months Ended June 30, 2021			Six Months Ended June 30, 2021
Operating lease information:
Operating lease cost	$	105		$	210
Operating cash flows from operating leases		105		$	210
Net assets obtained in exchange for new operating lease liabilities		-			-
Weighted average remaining lease term in years		9.40			9.40
Weighted average discount rate		5.1	%		5.1	%

Future minimum annual lease payments are as follows:

Remainder of 2021	$	206
2022		399
2023		406
2024		413
2025		420
Thereafter		2,166
Total minimum lease payments	$	4,010
Less imputed interest		(857	)
Total operating lease liability	$	3,153

Note 9.Subsequent Events

On August 13, 2021, we entered into the Third Amendment to the Loan and Security Agreement, effective May 1, 2021.

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020. This Item 2 contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Please refer to "Item 1A. Risk Factors" in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of the uncertainties, risks and assumptions associated with these statements.

Executive Overview

Our Business

Scott’s Liquid Gold-Inc. exists to positively impact consumers’ lives in the markets we serve while creating shareholder value. We develop, market, and sell high-quality, high-value household and personal care products nationally and internationally to mass merchandisers, drugstores, supermarkets, hardware stores, e-commerce retailers, other retail outlets, and to wholesale distributors.

Distribution Agreement with Church & Dwight

Our distribution agreement with Church & Dwight Co., Inc. and our subsidiary, Neoteric Cosmetics, Inc., will not be extended beyond its existing expiration date of December 31, 2021 (the “Expiration Date”).  As a result, the distribution agreement will expire on its own terms as of the Expiration Date and the Company will cease to distribute Batiste Dry Shampoo products. Unless offset by increased sales of our other products, the conclusion of this distribution agreement will have a material impact on our net sales and result of operations beginning in 2022. Net sales of Batiste were $5,327 and $8,797 for the years ended December 31, 2020 and 2019, respectively.

COVID-19 Pandemic

In 2020, the global economy began experiencing a downturn related to the impacts of the COVID-19 global pandemic. While many businesses resumed operations towards the end of the second quarter of 2020, the effects of the pandemic have continued into 2021 and the duration of the impact still remains uncertain. We expect to see continued volatility in the economic markets and government responses to the COVID-19 pandemic. These changing conditions and governmental responses could have impacts on our operating results for the remainder of the year or longer.

Supply Chain and Outsourcing Partners

As a result of COVID-19, we have encountered various supply chain disruptions impacting the availability of certain raw materials for our finished goods products. We have been proactively identifying alternative sources for delayed raw materials. At times, our highest demand products were impacted by supply chain disruptions, but availability continues to improve primarily as a result of our actions to mitigate such disruptions. Our third-party logistics partners are facing challenges with availability of staffing and transportation sources, which could cause product shipments to be delayed.

Health and Safety

We have taken proactive, aggressive action to protect the health and safety of our employees, customers, and partners. We monitor national, state, and local health recommendations and regulations, and will implement additional protective measures as appropriate.

Customer Demand

At the onset of the pandemic, as a result of government-mandated stay-at-home orders, some of our customers were impacted and forced to cease operations. Customer closings primarily impacted revenue for our Batiste Dry Shampoo distributed products during the last part of March 2020. Shipments to our major Batiste Dry Shampoo customers resumed in May 2020, but at lower levels than preceded the pandemic. Any other customer closures or restrictions would negatively impact our business.

We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. Given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

Results of Operations

Three months ended June 30, 2021 compared to three months ended June 30, 2020

	Three Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2021			2020					%
Net sales	$	8,451		$	6,083					38.9	%
Cost of sales		4,929			3,215					53.3	%
Gross profit		3,522			2,868					22.8	%
Gross margin		41.7	%		47.1	%
Operating expenses:
Advertising		203			141					44.0	%
Selling		2,518			1,614					56.0	%
General and administrative		1,687			1,293					30.5	%
Intangible asset amortization		387			210					84.3	%
Total operating expenses		4,795			3,258					47.2	%
(Loss) income from operations		(1,273	)		(390	)		)		(226.4	%)
Interest income		-			2			)		(100.0	%)
Interest expense		(175	)		(74	)		)		(136.5	%)
Other Income		-			350
Income before income taxes		(1,448	)		(112	)		)		(1,192.9	%)
Income tax benefit		382			34					1,023.5	%
Net loss	$	(1,066	)	$	(78	)		)		(1,266.7	%)

All values are in US Dollars.

Net loss primarily due to the following:

•	Decrease in gross profit due to shortages of key products, including our Scott’s Liquid Gold Wood Care product.
•	Increase in selling expenses primarily from transportation and labor associated with our logistics and warehousing partners.
---	---
•	Increase in general and administrative expenses primarily due to restructuring costs associated with separation of employees.
---	---
•	Increase in intangible asset amortization from our acquisition of BIZ and Dryel brands in July 2020.
---	---
•	Increase in interest expense associated with our UMB Loan Agreement we entered into in July 2020. The increased debt resulting from simultaneous supply chain shortages and investment in building depleted finished goods inventories has also increased our interest expense.
---	---
•	Partially offset by an increase in gross profit primarily attributable to the acquisition of our BIZ and Dryel products in July 2020. Decrease in gross margin is primarily due to lower margins on acquired brands and cost increases in our manufacturing partners’ raw materials.
---	---

Segment Results

Household Products

The following table shows comparative net sales, gross margin, gross profit, (loss) income from operations, volume and percentage changes for household products between periods:

	Three Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2021			2020					%
Net sales	$	3,754		$	2,272					65.2	%
Gross profit	$	1,377		$	1,338					2.9	%
Gross margin		36.7	%		58.9	%
(Loss) income from operations	$	(972	)	$	202			)		(581.2	%)

All values are in US Dollars.

•	Household products increase in net sales was primarily attributable to our BIZ and Dryel acquisitions. This was offset by a decrease in net sales from key product shortages, including our Scott’s Liquid Gold Wood Care product. We anticipate sales of this product to resume in the third quarter of 2021.
•	Lower gross margin and loss from operations. The increase in margins from outsourcing was offset by lower margins on acquired brands, increasing costs in our manufacturing partners’ raw materials, and increases in selling expenses as well as intangible asset amortization.
---	---

Personal Care Products

The following table shows comparative net sales, gross margin, gross profit, income (loss) from operations, volume and percentage changes for personal care products between periods:

	Three Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2021			2020					%
Personal care net sales
Net sales - distributed products	$	1,209		$	1,216			)		(0.6	%)
Net sales - manufactured products		3,488			2,595					34.4	%
Total personal care net sales	$	4,697		$	3,811					23.2	%
Gross profit	$	2,145		$	1,530					40.2	%
Gross margin		45.7	%		40.1	%
Loss from operations	$	(301	)	$	(592	)				49.2	%

All values are in US Dollars.

•	Net sales of distributed personal care products remained consistent. Net sales of Batiste increased over the prior year because several customers’ stores closed in the second quarter of 2020 due to COVID-19. This increase offset the conclusion of our distribution arrangement with Montagne Jeunesse in June 2020.
•	Net sales and gross profit of manufactured personal care products increased primarily due to higher sales of our Alpha Skin Care line to China and e-commerce partners as well as higher sales of our shampoo brands with increased store traffic in 2021 compared to the prior year where sales were impacted by COVID-19.
---	---
•	Increased gross margin was driven by product sales mix and outsourcing to contract manufacturing partners during the second and third quarters of 2020.
---	---

Six months ended June 30, 2021 compared to six months ended June 30, 2020

	Six Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2021			2020					%
Net sales	$	17,884		$	13,937					28.3	%
Cost of sales		10,225			7,605					34.5	%
Gross profit		7,659			6,332					21.0	%
Gross margin		42.8	%		45.4	%
Operating expenses:
Advertising		362			362					0.0	%
Selling		5,069			3,203					58.3	%
General and administrative		2,972			2,487					19.5	%
Intangible asset amortization		775			420					84.5	%
Total operating expenses		9,178			6,472					41.8	%
(Loss) income from operations		(1,519	)		(140	)		)		(985.0	%)
Interest income		-			3			)		(100.0	%)
Interest expense		(309	)		(78	)		)		(296.2	%)
Other Income		-			350			)		(100.0	%)
(Loss) income before income taxes		(1,828	)		135			)		(1,454.1	%)
Income tax benefit (expense)		482			64					653.1	%
Net (loss) income	$	(1,346	)	$	199			)		(776.4	%)

All values are in US Dollars.

Net loss primarily due to the following:

•	Decrease in gross profit due to shortages of key products, including our Scott’s Liquid Gold Wood Care product.
•	Increase in selling expenses primarily from transportation and labor associated with our logistics and warehousing partners.
---	---
•	Increase in general and administrative expenses primarily due to restructuring costs associated with separation of employees.
---	---
•	Increase in intangible asset amortization from our acquisition of BIZ and Dryel brands in July 2020.
---	---
•	Increase in interest expense associated with our UMB Loan Agreement we entered into in July 2020. The increased debt resulting from simultaneous supply chain shortages and investment in building depleted finished goods inventories has also increased our interest expense.
---	---
•	Partially offset by an increase in gross profit primarily attributable to the acquisition of our BIZ and Dryel products in July 2020. Decrease in gross margin is primarily due to lower margins on acquired brands and cost increases in our manufacturing partners’ raw materials.
---	---

Segment Results

Household Products

The following table shows comparative net sales, gross margin, gross profit, (loss) income from operations, volume and percentage changes for household products between periods:

	Six Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2021			2020					%
Net sales	$	8,199		$	4,404					86.2	%
Gross profit	$	3,282		$	2,427					35.2	%
Gross margin		40.0	%		55.1	%
(Loss) income from operations	$	(1,465	)	$	253			)		(679.1	%)

All values are in US Dollars.

•	Household products increase in net sales was primarily attributable to our BIZ and Dryel acquisitions. This was offset by a decrease in net sales from key product shortages, including our Scott’s Liquid Gold Wood Care product. We anticipate sales of this product to resume in the third quarter of 2021.
•	Lower gross margin and loss from operations. The increase in margins from outsourcing was offset by lower margins on acquired brands, increasing costs in our manufacturing partners’ raw materials, and increases in selling expenses as well as intangible asset amortization.
---	---

Personal Care Products

The following table shows comparative net sales, gross margin, gross profit, loss from operations, volume and percentage changes for personal care products between periods:

	Six Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2021			2020					%
Personal care net sales
Distributed products	$	3,170		$	4,121			)		(23.1	%)
Manufactured products		6,515			5,412					20.4	%
Total personal care net sales	$	9,685		$	9,533					1.6	%
Gross profit	$	4,377		$	3,905					12.1	%
Gross margin		45.2	%		41.0	%
Loss from operations	$	(54	)	$	(393	)				86.3	%

All values are in US Dollars.

•	Net sales and of distributed personal care products decreased due to the conclusion of our distribution arrangement with Montagne Jeunesse in the second quarter of 2020.
•	Net sales and gross profit of manufactured personal care products increased primarily due to higher sales of our Alpha Skin Care line to China and e-commerce partners as well as higher sales of our shampoo brands with increased store traffic in 2021 compared to the prior year where sales were impacted by COVID-19.
---	---
•	Increased gross margin was driven by product sales mix and outsourcing to contract manufacturing partners during the second and third quarters of 2020.
---	---

Liquidity and Capital Resources

Financing Agreements

Please see Note 7 to our Condensed Consolidated Financial Statements for information on our Loan Agreement with UMB, which replaced our Prior Credit Agreement with Chase on July 1, 2020.

Liquidity and Changes in Cash Flows

At June 30, 2021, we had $3,245 capacity on our revolving credit facility with UMB, with $991 available based on our collateralized assets. Our cash on hand was $20 as of June 30, 2021, an increase of $15 when compared to the balance as of December 31, 2020. Cash on hand is kept at low levels to minimize interest expense based on availability of the revolving credit facility.

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

	Six Months Ended June 30, (in thousands)
							Increase / (Decrease)
	2021			2020					%
Operating activities	$	(704	)	$	4,578			)		(115.4	%)
Investing activities		(114	)		346			)		(132.9	%)
Financing activities		833			(141	)				690.8	%

All values are in US Dollars.

•	Net cash used in operating activities was primarily related to our investments in finished goods inventories.
•	Net cash used in investing activities was related to capital expenditures associated with our ERP software implementation.
---	---
•	Net cash provided by financing activities was attributable to financing from our Loan Agreement with UMB to fund our operating and investing activities.
---	---

The uncertainty related to the COVID-19 outbreak has impacted our operations and could affect our future results. While we believe that our business model will allow us to generate sufficient operating cash flows, our liquidity has been affected by the timing of our build of depleted finished goods inventories, while our net sales have been delayed due to supply chain shortages. We expect that our current cash reserves and availability under our UMB Loan Agreement will be sufficient to meet operational cash needs during the next twelve months, but further supply chain disruptions in the short-term could limit our liquidity.

ITEM  4.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of June 30, 2021, we conducted an evaluation, under the supervision and with the participation of our interim co-presidents of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on that evaluation, our interim co-presidents concluded that our disclosure controls and procedures are effective as of June 30, 2021.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the six months ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM  1A.	RISK FACTORS

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and subsequent quarterly reports on Form 10-Q, which could materially affect our business, financial condition or future results.

ITEM  6.	EXHIBITS
Exhibit Number	Document
---	---
10.1	Third Amendment to Loan and Security Agreement, dated August 13, 2021
31.1	Rule 13a-14(a) Certification of the Interim Co-President.
31.2	Rule 13a-14(a) Certification of the Interim Co-President and Chief Financial Officer.
32.1*	Section 1350 Certification.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)
*	Furnished, not filed.
---	---

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.

SCOTT’S LIQUID GOLD-INC.
By:	/s/ Tisha Pedrazzini
	Tisha Pedrazzini
	Interim Co-President
By:	/s/ Kevin A. Paprzycki
	Kevin A. Paprzycki
	Interim Co-President and Chief Financial Officer
	(Principal Financial and Chief Accounting Officer)

Date: August 13, 2021

23

slgd-ex101_148.htm

Exhibit 10.1

THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) dated as of August 13, 2021, is entered into by umb bank, n.a. (together with its successors and assigns, “Lender”), SCOTT’S LIQUID GOLD-INC., a Colorado corporation (“SLG”), SLG CHEMICALS, INC., a Colorado corporation (“Chemicals”), and NEOTERIC COSMETICS, INC., a Colorado corporation (“NC”, and together with SLG and Chemicals, collectively, “Borrowers” and each, a “Borrower”) and each of the undersigned guarantors (collectively “Guarantors” and together with Borrowers, “Obligors”), with reference to the following facts:

RECITALS

A.	Lender and Borrowers are parties to a Loan and Security Agreement dated as of July 1, 2020, as amended by the First Amendment to the Loan and Security Agreement dated as of March 26, 2021, and as amended by the Second Amendment to Loan and Security Agreement dated as of June 25, 2021 (as may be further amended, supplemented, replaced, restated or otherwise modified, the “Loan Agreement”), pursuant to which Lender has provided certain credit facilities to Borrowers.
B.	Borrowers have requested that Lender make certain modifications to the Loan Agreement.
---	---
C.	Lender is willing to provide such accommodations to the Borrowers on the terms and conditions set forth below.
---	---

NOW, THEREFORE, the parties hereby agree as follows:

1.	Defined Terms.  Any and all initially capitalized terms used in this Amendment (including, without limitation, in the Recitals to this Amendment) without definition shall have the respective meanings assigned thereto in the Loan Agreement.
2.	Tangible Net Worth.  Effective as of May 1, 2021, Section 9.1 of the Loan Agreement is hereby amended to read in full as follows:
---	---

““Section 9.1Financial Covenants.

(a)Minimum Tangible Net Worth.  Tangible Net Worth as of the last day of each month, shall not be less than the Tangible Net Worth Requirement.  As used herein:

(i)‘Tangible Net Worth Requirement’ means as the Tangible Net Worth of Borrowers on December 31, 2021, determined as of the first Determination Date following December 31, 2021, which Tangible Net Worth Requirement shall be increased (but not decreased) on each Determination Date thereafter by an amount equal to 25% of positive Net Income for the fiscal year immediately preceding such Determination Date, based on the audited financial statements required by Section 8.1(a) with respect to the fiscal year ending prior to such Determination Date.

(ii)‘Determination Date’ means the date that Borrowers are required to deliver audited financial statements as set forth in Section 8.1(a).

(b)Minimum Fixed Charge Coverage Ratio.  Commencing with the month ended July 31, 2022, Borrowers’ Fixed Charge Coverage Ratio as of each month-end shall not be less than 1.20 to 1.00.  Borrowers’ Fixed Charge Coverage Ratio shall be measured on a trailing twelve month basis.

(c)Minimum Monthly Cash Flow After Debt Service.  Borrowers’ monthly Cash Flow After Debt Service, for each Test Period below, shall not be less than the amount opposite such Test Period through June 30, 2022:

Test Period	Cumulative Cash Flow After Debt Service
May 1, 2021 through May 31, 2021	-$280,000
June 1, 2021 through June 30, 2021	-$150,000
July 1, 2021 through July 31, 2021	-$526,000
August 1, 2021 through August 31, 2021	$93,000
September 1, 2021 through September 30, 2021	$136,000
October 1, 2021 through October 31, 2021	$70,000
November 1, 2021 through November 30, 2021	-$278,000
December 1, 2021 through December 31, 2021	$154,000
January 1, 2022 through January 31, 2022	$80,000
February 1, 2022 through February 29, 2022	$83,000
March 1, 2022 through March 31, 2022	$85,000
April 1, 2022 through April 30, 2022	$86,000
May 1, 2022 through May 31, 2022	$117,000
June 1, 2022 through June 30, 2022	$118,000”
3.	Intellectual Property Appraisal.  Each Obligor will take commercially reasonable steps to cause an intellectual property appraisal to be conducted by a third-party appraiser acceptable to Lender, with a delivery date of not later than 60 days after the date of this Amendment.
---	---
4.	Modification Fee.  In consideration for the accommodations provided herein, Obligors shall pay to Lender a modification fee in the amount of $50,000.00, which fee shall be fully earned on the date hereof but which shall be paid as follows: (a) $10,000.00 on August 31, 2021, (b) $10,000.00 on September 30, 2021, (c) $10,000.00 on October 31, 2021, (d) $10,000.00 on November 30, 2021, (e) $10,000.00 on December 31, 2021.
---	---
5.	Acknowledgments.  Each Obligor acknowledges and agrees that:
---	---
(a)	Lender has a valid, perfected and first priority security interest and lien upon all of the Collateral to secure the Obligations;
---	---
(b)	Each of the Loan Documents is in full force and effect, and is enforceable against such Obligor and the Collateral in accordance with its respective terms; and
---	---
(c)	Such Obligor has no defenses, offsets, recoupments or counterclaims to: (i) its obligation to pay all amounts from time to time owing and to perform all obligations required to be performed under the Loan Documents, (ii) enforcement of Lender’s rights in and to the Collateral, or (iii) enforcement of any other of Lender’s rights or remedies.
---	---

6.Representations and Warranties.  Each Obligor represents and warrants to Lender that:

(a)	Upon the effectiveness of this Amendment, there exists no Default or Event of Default, or any other condition or occurrence of events that constitutes or with the passage of time or the giving of notice or both, would constitute a Default or Event of Default, under the Loan Agreement or any other Loan Document.
(b)	Each Obligor executing and delivering this Amendment, has been duly authorized to execute and deliver this Amendment by all necessary corporate action on the part of such Obligor.
---	---
(c)	All representations and warranties of the Obligors contained in the Loan Documents, except for those that speak as of a particular date, are and remain true and correct in all material respects as of the date of this Amendment.
---	---
7.	Conditions Precedent.  The effectiveness of this Amendment shall be subject to the prior satisfaction of each of the following conditions:
---	---
(a)	This Amendment.  Lender shall have received this Amendment duly executed by an authorized officer of Borrowers and Guarantors; and
---	---
(b)	Officers Certificate.  Lender shall have received a duly executed Officer’s Certificate in form acceptable to Lender.
---	---
8.	Renewal and Extension of Security Interests and Liens.  Each Obligor hereby (a) renews and affirms the Liens created and granted in the Loan Documents, and (b) agrees that this Amendment shall in no manner affect or impair the Liens securing the Obligations, and that
---	---
such Liens shall not in any manner be waived, the purposes of this Amendment being to modify the Loan Agreement as herein provided, and to carry forward all Liens securing the same, which are acknowledged by such Obligor to be valid and subsisting.
---
9.	Integration.  This Amendment, and the documents referred to herein constitute the entire agreement of the parties in connection with the subject matter hereof and cannot be changed or terminated orally.  All prior agreements, understandings, representations, warranties and negotiations regarding the subject matter hereof, if any, are merged into this Amendment.
---	---
10.	Counterparts.  This Amendment may be executed in multiple counterparts, each of which when so executed and delivered shall be deemed an original, and all of which, taken together, shall constitute but one and the same agreement.  The parties agree that the electronic signature of a party to this Amendment shall be as valid as an original manually executed signature of such party and shall be effective to bind such party to this Agreement.
---	---
11.	Release.  Each of the Obligors (for purposes of this Section, each a “Releasing Party” and collectively, the “Releasing Parties”) releases, acquits and forever discharges Lender, UMB Financial Corporation and their respective past, present and future directors, officers, employees, agents, attorneys, affiliates, successors, administrators and assigns (collectively, the “Released Parties”) of and from any and all claims, actions, causes of action, demands, rights, damages, costs, loss of service, expenses and compensation whatsoever, heretofore or hereafter arising from any events or occurrences, or anything done, omitted to be done, or allowed to be done by any of the Released Parties on or before the date of execution of this Amendment, WHICH DO OR MAY EXIST, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, FORESEEN OR UNFORESEEN (collectively, the “Released Matters”).  In furtherance of this general release, Releasing Parties each acknowledge and waive the benefits of California Civil Code Section 1542 (and all similar ordinances and statutory, regulatory, or judicially created laws or rules of any other jurisdiction), which provides:
---	---

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”

12.	Acknowledgment of Guarantor.  Each Guarantor hereby acknowledges and agrees to the terms and conditions of this Amendment, acknowledges and reaffirms its/his/her obligations owing to Lender under its/his/her Guaranty, and each other Loan Document to which such Guarantor is a party, and agrees that the Guaranty and other Loan Documents are and shall remain in full force and effect.  Although each Guarantor has been informed of the matters set forth herein and has acknowledged and agreed to the same, each Guarantor understands and acknowledges that Lender has no obligation to inform Guarantors of such matters in the future or to seek any Guarantor’s acknowledgement or agreement to future amendments, and nothing herein shall create such a duty.
13.	Costs and Expenses.  Borrowers agree to pay upon demand all of Lender’s expenses, including without limitation reasonable, reasonably documented attorneys’ fees, charges and disbursements of outside counsel for Lender, incurred in connection with the preparation, negotiation, review, analysis, administration, enforcement or modification of, and collection and other litigation relating to, or arising out of the Loan Agreement or any other Loan
---	---
Document, or any amounts owing thereunder.  Lender may pay someone else to help collect such amounts and to enforce the Loan Agreement or any other Loan Document, and Borrowers will pay that amount.  This includes, subject to any limits under applicable law, reasonable, reasonably documented Lender’s attorneys’ fees and legal expenses, whether or not there is a lawsuit, including attorneys’ fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), foreclosure costs, appeals, and any anticipated post-judgment collection services.  Borrowers will pay any court costs, in addition to all other sums provided by law.
---
14.	Governing Law.  This Amendment, the interpretation and construction of this Amendment and any provision of this Amendment and of any issue relating to the transactions contemplated by this Amendment shall be governed by the laws of the State of CALIFORNIA, not including conflicts of law rules.
---	---
15.	Waiver of Jury Trial.  To the fullest extent permitted by applicable law, the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim, or proceeding arising out of or related to this Amendment.
---	---
16.	Further Assurances.  Borrowers agree to execute and deliver such other agreements, documents and instruments and take such other actions as Lender may reasonably request in connection with the transactions contemplated by this Amendment.
---	---
17.	ENTIRE AGREEMENT.  THIS AMENDMENT, THE LOAN AGREEMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH AND PURSUANT TO THIS AMENDMENT AND THE LOAN AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
---	---

[Signature Page Follows]

IN WITNESS WHEREOF, Obligors and Lender have executed this Amendment by their respective duly authorized officers as of the date first above written.

LENDER: <br><br>UMB BANK, N.A.<br><br><br>By:   /s/ John D. Watkins<br><br><br>Name:  John D. Watkins<br>Title:    Senior Vice President
BORROWERS:<br><br>SCOTT’S LIQUID GOLD-INC.<br><br><br>By:   /s/ Kevin Paprzycki<br>Name:  Kevin Paprzycki<br>Title:  Co-President and Chief Financial Officer
SLG CHEMICALS, INC.<br><br><br>By:  /s/ Kevin Paprzycki<br>Name:  Kevin Paprzycki<br>Title:  Co-President and Chief Financial Officer
NEOTERIC COSMETICS, INC.<br><br><br>By:  /s/ Kevin Paprzycki<br>Name:  Kevin Paprzycki<br>Title:  Co-President and Chief Financial Officer
GUARANTORS:<br><br>SLG TOUCH-A-LITE, INC.<br><br><br>By:  /s/ Kevin Paprzycki<br>Name:  Kevin Paprzycki<br>Title:  Co-President and Chief Financial Officer
---

7

slgd-ex311_8.htm

EXHIBIT 31.1

CERTIFICATION

I, Tisha Pedrazzini, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Scott’s Liquid Gold-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.

Dated: August 13, 2021	/s/ Tisha Pedrazzini
	Tisha Pedrazzini
	Interim Co-President

slgd-ex312_6.htm

EXHIBIT 31.2

CERTIFICATION

I, Kevin A. Paprzycki, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Scott’s Liquid Gold-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.

Dated: August 13, 2021	/s/ Kevin A. Paprzycki
	Kevin A. Paprzycki
	Interim Co-President and Chief Financial Officer

slgd-ex321_7.htm

EXHIBIT 32.1

CERTIFICATION OF ANNUAL REPORT ON FORM 10-Q OF

SCOTT’S LIQUID GOLD-INC.

FOR THE QUARTER ENDED JUNE 30, 2021

Each of the undersigned hereby certifies, for the purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Scott’s Liquid Gold-Inc. (“Scott’s Liquid Gold”), that to his knowledge:

1. This Quarterly Report on Form 10-Q 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 such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Scott’s Liquid Gold.

This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Quarterly Report on Form 10-Q. A signed original of this statement has been provided to Scott’s Liquid Gold and will be retained by Scott’s Liquid Gold and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification is executed as of August 13, 2021.

/s/ Tisha Pedrazzini
Tisha Pedrazzini
Interim Co-President
/s/ Kevin A. Paprzycki
Kevin A. Paprzycki
Interim Co-President and Chief Financial Officer