Forward-looking Statements:





Certain statements contained in this Quarterly Report on Form 10-Q, including
without limitation, our ability to provide required capital to support inventory
levels, the effect of price increases in raw materials that are petroleum or
chemical based or commodity chemicals on our margins, and the sufficiency of
funds provided through operations and existing sources of financing to satisfy
our cash requirements constitute forward-looking statements. For this purpose,
any statements contained in this report that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "believe," "may," "will," "expect,"
"anticipate," "intend," or "could," including the negative or other variations
thereof or comparable terminology, are intended to identify forward-looking
statements. These statements are subject to known and unknown risks,
uncertainties and other factors that may cause actual results to be materially
different from those expressed or implied by such forward-looking statements.
Factors that may affect these results include, but are not limited to, matters
relating to the proposed Merger; the impact of the COVID-19 pandemic on our
business and the economy in general; the highly competitive nature of our
industry; reliance on certain key customers; changes in consumer demand for
marine, recreational vehicle and automotive products; expenditures on, and the
effectiveness of our advertising and promotional efforts; adverse weather
conditions; unanticipated litigation developments; exposure to market risks
relating to changes in interest rates, foreign currency exchange rates and
prices for raw materials that are petroleum or chemical based, availability in
general of raw materials and other factors addressed in the sections entitled
"Risk Factors" in Part I, Item 1A of our annual report on Form 10-K for the year
ended December 31, 2021 and in Part II, Item 1A of this Quarterly Report on

Form
10-Q.



Overview:



On June 21, 2022, the Company entered into an agreement with One Water Marine
Inc. in which all of the Company's common shares will be converted into the
right to receive $13.08 per share. For additional information see our Form 8-K
filed with the SEC on June 22, 2022, and Note 13, Merger Agreement, to the
unaudited condensed consolidated financial statements included in the Quarterly
Report on Form 10-Q.



We are engaged in the manufacture, marketing and distribution of a broad line of
appearance, performance, and maintenance products for the marine, automotive,
power sports, recreational vehicle and outdoor power equipment markets, under
the Star brite® and other trademarks within the United States and Canada. In
addition, we produce private label formulations of many of our products for
various customers and provide custom blending and packaging services for these
and other products. We also manufacture, market and distribute chlorine
dioxide-based deodorizing, disinfectant and sanitizing products. We sell our
products through national retailers and to national and regional distributors.
In addition, we sell products to two companies affiliated with Peter G. Dornau,
our Chairman, President and Chief Executive Officer; these companies distribute
the products outside of the United States and Canada.

Critical accounting estimates:





See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Critical Accounting Estimates" in Part II, Item 7 of our Annual
Report on Form 10-K for the year ended December 31, 2021 for information
regarding our critical accounting estimates.



                                       17





Results of Operations:

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

The following table provides a summary of our financial results for the three months ended June 30, 2022 and 2021:





                                                                 For The Three Months Ended
                                                                          June 30,
                                                                           Percent         Percentage of Net Sales
                                           2022             2021           Change          2022                2021
Net sales                              $ 15,208,834       $15,688,985         (3.1) %         100.0 %            100.0 %
Cost of goods sold                        9,859,190         8,416,553          17.1 %          64.8 %             53.6 %
Gross profit                              5,349,644         7,272,432        (26.4) %          35.2 %             46.4 %
Advertising and promotion                 1,633,975         1,265,583          29.1 %          10.7 %              8.1 %
Selling and administrative                4,045,057         2,641,657          53.1 %          26.6 %             16.8 %
Operating (loss) income                   (329,388)         3,365,192       (109.8) %         (2.2) %             21.4 %
Interest (expense), net                    (79,128)          (40,823)          93.8 %           0.5 %              0.3 %
Benefit (provision) for income taxes         87,121         (723,054)       (112.0) %          (0.6 )%             4.6 %
Net (loss) income                      $  (321,395)     $   2,601,315       (112.4) %         (2.1) %             16.6 %




Net sales for the three months ended June 30, 2022 decreased by approximately
$480,000, or 3.1%, as compared to the three months ended June 30, 2021. The
Company had lower sales of core marine products partially offset by strong

sales
of winterizing products.




Cost of goods sold increased by approximately $1,443,000, or 17.1%, during the
three months ended June 30, 2022, as compared to the three months ended June 30,
2021. Cost of sales increased at a higher rate than net sales primarily because
of cost increases in both petroleum-based and other raw materials in addition to
transportation cost increases from imports and domestic shipment freight cost to
customers.




Gross profit decreased by approximately $1,923,000, or 26.4%, for the three
months ended June 30, 2022, as compared to the three months ended June 30, 2021.
Gross profit primarily decreased due to the Company's cost of goods sold
described above. As a percentage of net sales, gross profit was approximately
35.2% and 46.4% for the three months ended June 30, 2022 and 2021, respectively.



Advertising and promotion expenses increased by approximately $368,000, or
29.1%, during the three months ended June 30, 2022, as compared to the three
months ended June 30, 2021. The increase in advertising and promotion expenses
was principally a result of increased marketing programs, internet advertising
and television advertising. As a percentage of net sales, advertising and
promotion expenses increased to 10.7% for the three months ended June 30, 2022,
from 8.1% for the three months ended June 30, 2021.



Selling and administrative expenses increased by approximately $1,403,000 or
53.1%, during the three months ended June 30, 2022, as compared to the three
months ended June 30, 2021. The increase in selling and administrative expenses
was primarily a result of two factors. The Company incurred legal and other
professional costs associated with the pending merger with OneWater Marine, Inc.
In addition, the Company incurred higher employee compensation expenses. As a
percentage of net sales, selling and administrative expenses increased to 26.6%
for the three months ended June 30, 2022, from 16.8% for the three months ended
June 30, 2021.



                                       18






Interest (expense), net for the three months ended June 30, 2022 increased by
approximately $38,000 or 93.8%, as compared to the three months ended June 30,
2021. The increase principally resulted from interest expense related to our
term loan for the expansion at Kinpak.

Benefit from income taxes for the three months ended June 30, 2022 was approximately $87,000, or 21.3% of our income before income taxes. For the three months ended June 30, 2021 the provision for income taxes was approximately $723,000, or 21.8% of our income before income taxes.

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

The following table provides a summary of our financial results for the six months ended June 30, 2022 and 2021:





                                                         For The Six Months Ended June 30,
                                                                      Percent          Percentage of Net Sales
                                      2022              2021          Change           2022               2021
Net sales                         $  27,946,163     $ 28,820,209         (3.0) %          100.0 %            100.0 %
Cost of goods sold                   17,860,537       16,167,056          10.5 %           63.9 %             56.1 %
Gross profit                         10,085,626       12,653,153        (20.3) %           36.1 %             43.9 %
Advertising and promotion             2,705,554        2,207,397          22.6 %            9.7 %              7.7 %
Selling and administrative            6,045,087        4,614,469          31.0 %           21.6 %             16.0 %
Operating income                      1,334,985        5,831,287        (77.1) %            4.8 %             20.2 %
Interest (expense), net                (110,810 )        (78,010 )        42.0 %            0.4 %              0.3 %
Provision for income taxes             (246,289 )     (1,247,693 )      (80.3) %            0.9 %              4.3 %
Net income                        $     977,886     $  4,505,584        (78.3) %            3.5 %             15.6 %





Net sales for the six months ended June 30, 2022 decreased by approximately
$874,000, or 3.0%, as compared to the six months ended June 30, 2021. The
decrease in net sales was principally a result of several customers adjusting
their inventory levels of Star brite® branded marine products, private label
marine and RV products.




Cost of goods sold increased by approximately $1,693,000, or 10.5%, during the
six months ended June 30, 2022, as compared to the six months ended June 30,
2021. The increase in cost of goods sold was a result primarily of higher cost
of petroleum based raw materials, imported material shipping costs of containers
along with higher domestic transportation costs in addition to higher cost of
manufacturing operating costs.



Gross profit decreased by approximately $2,568,000, or 20.3%, for the six months
ended June 30, 2022 as compared to the six months ended June 30, 2021. Gross
profit decreased due to lower sales volume and higher cost of sales as described
above. As a percentage of net sales, gross profit was approximately 36.1% and
43.9% for the six months ended June 30, 2022 and 2021, respectively.



Advertising and promotion expenses increased by approximately $498,000, or
22.6%, during the six months ended June 30, 2022, as compared to the six months
ended June 30, 2021.   The increase in advertising and promotion expenses was
principally a result of increased TV advertising in addition to several
marketing programs targeting consumer brand awareness to our branded products.
As a percentage of net sales, advertising and promotion expenses increased to
9.7% for the six months ended June 30, 2022, from 7.7% for the six months ended
June 30, 2021.




Selling and administrative expenses increased by approximately $1,431,000, or
31.0%, during the six months ended June 30, 2022, as compared to the six months
ended June 30, 2021. The increase in selling and administrative expenses was
primarily a result of our pending merger with One Water Marine. In additional
the Company incurred higher employee compensation expenses. As a percentage of
net sales, selling and administrative expenses increased to 21.6% for the six
months ended June 30, 2022, from 16.0% for the six months ended June 30, 2021.



Interest (expense), net for the six months ended June 30, 2022 increased by
approximately $33,000 or 42.0%, as compared to the six months ended June 30,
2021. The increase principally resulted from interest expense related to our
term loan for the expansion at Kinpak.



Provision for income taxes for the six months ended June 30, 2022 was
approximately $246,289, or 20.1% of our income before taxes. For the six months
ended June 30, 2021 the provision was approximately $1,248,000, or 21.7% of

our
income before taxes.

                                       19

Liquidity and capital resources:

Our cash balance was approximately $7,018,000 at June 30, 2022 and approximately $12,685,000 at December 31, 2021.





The following table summarizes our cash flows for the six months ended June 30,
2022 and 2021:



                                                            Six Months Ended
                                                                June 30,
                                                          2022             2021

Net cash (used in) provided by operating activities $ (5,228,933 ) $ 483,201 Net cash used in investing activities

                   (2,664,078 )     (2,922,273 )
Net cash provided by (used in) financing activities      2,226,465         (859,478 )
Effect of exchange rate fluctuations on cash                  (338 )

1,775


Net decrease in cash and restricted cash              $ (5,666,884 )   $ (3,296,775 )




Net cash used in operating activities for the six months ended June 30, 2022 was
approximately $5,229,000, as compared to net cash provided by operating
activities of approximately $483,000 for the six months ended June 30, 2021.
During the six months ended June 30, 2022, net income decreased by approximately
$3,528,000, noncash adjustments to net income increased by approximately
$193,000, and changes in working capital used approximately $2,378,000 more in
cash, as compared to the six months ended June 30, 2021.



Net trade accounts receivable at June 30, 2022 aggregated approximately
$11,580,000, an increase of approximately $2,036,000, or 21.3%, as compared to
approximately $9,544,000 in net trade accounts receivable outstanding at
December 31, 2021.  The increase was principally a result of our net sales
during the second quarter of 2022. Receivables due from affiliated companies
aggregated approximately $1,494,000 at June 30, 2022, an increase of
approximately $282,000, or 23.3%, from receivables due from affiliated companies
of approximately $1,212,000 at December 31, 2021. The increase was primarily a
result of our net sales to the affiliated companies in the second quarter of
2022.




Inventories, net were approximately $23,584,000 and $16,819,000 at June 30, 2022
and December 31, 2021, respectively, representing an increase of approximately
$6,765,000, or 40.2%, during the six months ended June 30, 2022. We believe the
higher levels of inventories were necessary in order to reduce potential supply
chain problems and material price increases.



Net cash used in investing activities for the six months ended June 30, 2022
decreased by approximately $258,000, or 8.8%, as compared to the six months
ended June 30, 2021. The decrease in cash used was principally due to the
winding down of our expansion of our manufacturing, warehouse and distribution
facilities at Kinpak.




Net cash provided by financing activities for the six months ended June 30, 2022
was approximately $2,226,000, as compared to net cash used in financing
activities of approximately $859,000 for the six months ended June 30, 2021. The
principal reason for the change is that during the six months ended June 30,
2022, we had approximately $3,460,000 in borrowings under our revolving line of
credit, as compared to no borrowing during the first six months of 2021. During
the six months ended June 30, 2022, the Company paid dividends to common
shareholders aggregating approximately $761,000 and made payments on long term
debt of approximately $467,000, as compared to dividends paid to common
shareholders aggregating approximately $569,000 and payments on long term debt
of approximately $291,000 during the six months ended June 30, 2021.



See Notes 6 and 7 to the condensed consolidated financial statements included in
this report for information concerning our principal credit facilities,
consisting of Kinpak's obligations relating to a term loan, the payment of which
we have guaranteed, an industrial development bond financing, the payment of
which we have guaranteed, and a revolving line of credit. At June 30, 2022 and
December 31, 2021, we had outstanding balances of approximately $4,756,000 and
$4,888,000, respectively, under Kinpak's obligation relating to the term loan,
$3,106,000 and $3,334,000, respectively, under Kinpak's obligations relating to
the industrial development bond financing, and approximately $3,460,000 and $0,
respectively, in borrowings under our revolving credit facility.



                                       20






The loan agreement pertaining to our revolving credit facility, as amended, has
a stated term that expires on August 30, 2024, although as was the case with
earlier revolving lines of credit provided to us in recent years, amounts
outstanding are payable on demand. Nevertheless, the loan agreement pertaining
to our revolving line of credit contains various covenants, including financial
covenants that are described in Note 6 to the condensed consolidated financial
statements included in this report.  At June 30, 2022, we were in compliance
with these financial covenants. The revolving credit facility is subject to
several events of default, including a decline of the majority shareholder's
ownership below 50% of our outstanding shares.



Our guarantee of Kinpak's obligations related to the industrial development bond
financing are subject to various covenants, including financial covenants that
are described in Note 7 to the condensed consolidated financial statements
included in this report. At June 30, 2022, we were in compliance with these
financial covenants.



In connection with our acquisition of assets of Snappy Marine, we issued a
promissory note in the amount of $1,000,000, including interest (of the
$1,000,000 amount of the promissory note, $930,528 was recorded as principal,
and the remaining $69,472, representing an imputed interest rate of 2.87% per
annum, is being recorded as interest expense over the term of the note). At June
30, 2022, we had an outstanding balance of $216,667 under the promissory note
(including $213,082 recorded as principal and $3,585 to be recorded as interest
expense over the remaining term of the note).

We also obtained financing through leases for office equipment, totaling approximately $68,000 and $79,000 at June 30, 2022 and December 31, 2021, respectively.


Some of our assets and liabilities are denominated in Canadian dollars and are
subject to currency exchange rate fluctuations. We do not engage in currency
hedging and address currency risk as a pricing issue. For the six months ended
June 30, 2022, we recorded $8 in foreign currency translation adjustments
(increasing shareholders' equity by $8).



During the past few years, we have introduced a number of new products. At
times, new product introductions have required us to increase our overall
inventory and have resulted in lower inventory turnover rates. The effects of
reduced inventory turnover have not been material to our overall operations. We
believe that all required capital to maintain such increases will continue to be
provided by operations and our current revolving line of credit or a renewal or
replacement of the facility.



Many of the raw materials that we use in the manufacturing process are petroleum
or chemical based and commodity chemicals that are subject to fluctuating
prices. The nature of our business does not enable us to pass through the price
increases to our national retailer customers and to our distributors as promptly
as we experience increases in raw material costs. This may, at times, adversely
affect our margins.

We believe that funds provided through operations and our revolving line of credit will be sufficient to satisfy our cash requirements over at least the next twelve months.

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