YUNHONG GREEN CTI LTD
For the period ended Jun 30, 2024. Filed Sep 26, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Sep 26, 2024
YHGJ$3.40+9.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-09-25.
0001493152-24-038100
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-09-26.
0001493152-24-038294
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 39 previous paragraphs and 44 current paragraphs.
19 unchanged; 15 reworded; 8 added; 5 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 4 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Note Payable, Related Party
Current report
For the six month periods ended June 30, 2024 and 2023, net sales were $9,248,000 and $9,110,000, respectively.
Current report
Foil Balloons. Revenues from the sale of foil balloons increased during the three months period from $2,938,000 ending June 30, 2023 compared to $3,252,000 during the three month period of 2024. Revenues from the sale of foil balloons decreased during the six month period from $6,412,000 ending June 30, 2023 compared to $6,171,000 during the six month period of 2024. We believe that our smaller customers are managing their inventory levels more aggressively, negatively impacting order flow.
Current report
Films. Revenues from the sale of commercial films were $171,000 and $476,000 during the three and six month periods ended June 30, 2024, compared to $589,000 and $678,000 during the same periods of 2023. Order flow in this area has been historically inconsistent, impacted in part by consolidation in the industry, including our customers, as well as a large number of competitors.
Current report
Cost of Sales. During the three and six month period ended June 30, 2024, the cost of sales was $3,662,000 and $7,660,000, compared to $3,545,000 and $7,469,000 respectively for the same periods of 2023, with the change driven largely by changes in sales volume. As a percentage of sales, cost of sales was 84% and 83% during the three and six months ended June 30, 2024, compared to 87% and 82% during the three and six months ended June 30, 2023.
Current report
General and Administrative. During the three and six month period ended June 30, 2024, general and administrative expenses were $640,000 and $1,698,000 compared to $656,000 and $1,617,000, respectively, for the same periods in 2023. The Company had higher than usual audit fees in both years. Of note are the “re-audit” costs associated with 2023 due to the Company’s former auditor being suspended from practicing before the SEC during May 2024.
Current report
Other Income (Expense). During the three and six month period ended June 30, 2024, the Company incurred interest expense of $236,000 and $454,000 compared to interest expense of $155,000 and $297,000, respectively, during the same periods of 2023. Interest expense increased as a result of market rate increases that remained elevated throughout 2024. The Company applied for Employee Retention Tax Credits during 2021, most of which were factored during 2022 and cash received. Income related to the factored credit filings was recognized when the returns were processed by the US Government during 2023. As such, income of $300,000 and $895,000 was recognized during the three and six months ended June 30, 2023, respectively, for which cash was received during 2022.
Current report
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Removed paragraphs (5)
Previous report
Summary of Significant Events
Previous report
Foil Balloons. Revenues from the sale of foil balloons decreased during the three-month period from $3,474,000 ending March 31, 2023 compared to $2,919,000 during the three month period of 2024. The Company believes this decline is related to the timing of orders and shipments, as open orders for foil balloons were $0.5 million higher as of March 31, 2024 as compared to March 31, 2023.
Previous report
Films. Revenues from the sale of commercial films increased, from $89,000 during the three-month period ended March 31, 2023, compared to $305,000 during the same period of 2024. Sales in this area have been inconsistent due to a small number of customers and significant number of competitors.
Previous report
Cost of Sales. During the three month period ended March 31, 2024, the cost of sales was $3,999,000, compared to $3,924,000 for the same period of 2023. Lower sales volume and mix inefficiencies, as well as unusual repair and maintenance expenses, impacted 2024 vs. 2023, with gross margin of 18% during the 2024 period as compared to 22% during the same period of 2023.
Previous report
Other Income (Expense). During the three month period ended March 31, 2024, the Company incurred interest expense of $218,000 as compared to interest expense of $142,000 during the same period of 2023. Interest rates increased during 2023 and, despite expectations of reductions during 2024, have not yet been reduced. The Company also changed its borrowing structure to replace lender fees with interest payments at approximately the same net payment levels.
Reworded paragraphs (15)
Previous wording
On September 30, 2021 (the “Closing Date”), the Company entered into a loan and security agreement (the “Agreement”) with Line Financial (the “Lender”), which provides for a senior secured financing consisting of a revolving credit facility (the “Revolving Credit Facility) in an aggregate principal amount of up to $6 million (the “Maximum Revolver Amount”) and term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $731,250 (“Term Loan Amount” and, together with the Revolving Credit Facility, the “Senior Facilities”). The Senior Facilities are secured by substantially all assets of the Company. The Company believes it has been in compliance with the terms of these Senior Facilities since their inception in September 2021.
Current wording
On September 30, 2021 (the “Closing Date”), the Company entered into a loan and security agreement (the “Agreement”) with Line Financial (the “Lender”), which provides for a senior secured financing consisting of a revolving credit facility (the “Revolving Credit Facility) in an aggregate principal amount of up to $6 million (the “Maximum Revolver Amount”) and term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $731,250 (“Term Loan Amount” and, together with the Revolving Credit Facility, the “Senior Facilities”). The Senior Facilities are secured by substantially all assets of the Company. This Agreement and the Senior Facilities were extended on similar terms during September 2023 with a termination date of September 30, 2025. The Company has been in compliance with the terms of these Senior Facilities since inception in September 2021.
Previous wording
The Senior Facilities matured on September 30, 2023 and were extended with a maturity date of September 30, 2025. The facility automatically extends for successive periods of one year each, unless the Company or the Lender gives the other party written notice of termination not less than 90 days prior to the end of such term or renewal term, as applicable. If the Senior Facilities are renewed, the Company shall pay the Lender a renewal fee of 1.25% of the Maximum Revolver Amount and the Term Loan Amount upon each renewal on the anniversary of the Closing Date. The Company has the option to prepay the Term Loan Facility (together with all accrued but unpaid interest and a Term Loan Prepayment Fee (as defined the Agreement) in whole, but not in part, upon not less than 60 days prior written notice to the Lender. With this September 30, 2023 extension, the parties agreed changes in terms including:
Current wording
The Senior Facilities matured on September 30, 2023 and were amended to extend the maturity date to September 30, 2025. The facility automatically extends for successive periods of one year each, unless the Company or the Lender gives the other party written notice of termination not less than 90 days prior to the end of such term or renewal term, as applicable. If the Senior Facilities are renewed, the Company shall pay the Lender a renewal fee of 1.25% of the Maximum Revolver Amount and the Term Loan Amount upon each renewal on the anniversary of the Closing Date. The Company has the option to prepay the Term Loan Facility (together with all accrued but unpaid interest and a Term Loan Prepayment Fee (as defined the Agreement) in whole, but not in part, upon not less than 60 days prior written notice to the Lender. With the September 30, 2023 amendment, the parties agreed changes in terms including:
Previous wording
As of March 31, 2024 and December 31, 2023, the term loan balance amounted to $0.7 million, which consisted of the principal and interest payable balance of $0.7 million and deferred financing costs of approximately $30,000. The balance of the Revolving Line of Credit as of March 31, 2024 and December 31, 2023 amounted to $5,556,000 and $4,991,000, respectively. By virtue of the September 30, 2023 extension above, the Company was advanced $206,000 and the Term Loan was reset to $731,000. The Term Loan is repaid by approximately $15,000 per month, offset by related charges.
Current wording
As of June 30, 2024 and December 31, 2023, the term loan balance amounted to $0.6 million and $0.7 million, respectively, which consisted of the principal and interest payable balance of $0.7 million and deferred financing costs of approximately $30,000. The balance of the Revolving Line of Credit as of June 30, 2024 and December 31, 2023 amounted to $4,788,000 and $4,991,000, respectively.
Previous wording
As of January 1, 2019, the Company had a note payable to John H. Schwan, Director and former Chairman of the Board, for $1.6 million, including accrued interest. This loan accrues interest, is due December 31, 2023, and is subordinate to the Senior Facilities. During January 2019, Mr. Schwan converted $600,000 of the note into approximately 181,000 shares of our common stock at the then market rate of $3.32 per share. As a result of the conversion, the loan balance decreased to $1 million. The loan and interest payable to Mr. Schwan amounted to $1.3 million as of December 31, 2023. $1 million of this was paid to Mr. Schwan during January 2024. The parties agreed to the payment of the remaining $0.3 million at a future date to be determined.
Current wording
The Company is party to a note payable to John H. Schwan, Director and former Chairman of the Board, with a loan balance of $1.3 million and interest rate of 6% as of December 31, 2023. The Company repaid $1 million to Mr. Schwan during January 2024. The parties agreed to the payment of the remaining $0.3 million at a future date to be determined. This related party note payable is subordinate to the Senior Facilities.
Previous wording
Net Sales. For the three month periods ended March 31, 2024 and 2023, net sales were $4,894,000 and $5,051,000, respectively.
Current wording
Net Sales. For the three month periods ended June 30, 2024 and 2023, net sales were $4,354,000 and $4,059,000, respectively.
Previous wording
Other Revenues. Revenues from the sale of other products were $1,488,000 during the three-month period ended March 31, 2023, compared to $1,670,000 during the same period of 2024. The revenues from the sale of other products during these periods include (i) sales of a line of Balloon Inspired Gifts and similar products consisting of candy and small inflated balloons sold in small containers and (ii) the sale of accessories and supply items related to balloon products.
Current wording
Other Revenues. Revenues from the sale of other products were $931,000 and $2,601,000 during the three and six month periods ended June 30, 2024, compared to $532,000 and $2,020,000 during the same periods of 2023. The revenues from the sale of other products during these periods include (i) sales of a line of balloon-inspired gift items and similar products consisting of candy and small inflated balloons sold in small containers, (ii) latex balloons, and (iii) the sale of accessories and supply items related to balloon products.
Previous wording
During the three-month period ended March 31, 2024, there were two customers whose purchases represented more than 10% of the Company’s consolidated net sales. Sales to these customers for the three month period ended March 31, 2024 were $2,226,000 and $1,710,000, or 46% and 35%, respectively, of consolidated net sales. Sales to these customers for the three months ended March 31, 2023 were $2,563,000 and $1,652,000, or 50% and 32%, respectively of consolidated net sales. As of March 31, 2024, the total amount owed to the Company by these customers was approximately $2,272,000 and $1,855,000, or 51% and 42%, respectively of the Company’s consolidated net accounts receivable. The amount owed at March 31, 2023 by these customers was approximately $962,000 and $2,245,000, or 29% and 67%, respectively, of the Company’s consolidated net accounts receivable.
Current wording
During the three and six months ended June 30, 2024 and 2023, there were two customers whose purchases represented more than 10% of the Company’s consolidated net sales. Sales to these customers for the three and six months ended June 30, 2024 and 2023 are as follows:
Previous wording
Selling, Advertising and Marketing. During the three month period ended March 31, 2024, selling, advertising and marketing expenses were $208,000 as compared to $154,000 for the same period in 2023.
Current wording
Selling, Advertising and Marketing. During the three and six month period ended June 30, 2024, selling, advertising and marketing expenses were $223,000 and $413,000 as compared to $148,000 and $302,000, respectively, for the same periods in 2023. 2023 marked a low point in these expenses while 2024 inflected higher, including $30,000 in additional sales commissions based on product mix and the payroll cost associated with new product design.
Previous wording
Operating Activities. During the three months ended March 31, 2024, net cash used by operations was $767,000, compared to net cash used in operations during the three months ended March 31, 2023 of $1,369,000.
Current wording
Operating Activities. During the six months ended June 30, 2024, net cash provided by operations was $108,000, compared to net cash used in operations during the six months ended June 30, 2023 of $1,361,000.
Previous wording
Significant changes in working capital items during the three months ended March 31, 2024 included:
Current wording
Significant changes in working capital items during the six months ended June 30, 2024 included:
Previous wording
Investing Activity. During the three months ended March 31, 2024, cash used in investing activity was $154,000, compared to cash used in investing activity for the same period of 2023 in the amount of $56,000.
Current wording
Investing Activity. During the six months ended June 30, 2024, cash used in investing activity was $274,000, compared to cash used investing activity for the same period of 2023 in the amount of $94,000.
Previous wording
Financing Activities. During the three months ended March 31, 2024, cash provided by financing activities was $49,000 compared to cash provided by financing activities for the same period of 2023 in the amount of $1,409,000. Financing activity during 2024 consisted principally of changes in the balances of revolving and long-term debt, along with issuance of convertible preferred stock. During the period ended March 31, 2024, $0.5 million was received for convertible preferred stock while $1.0 million of Notes Payable was repaid.
Current wording
Financing Activities. During the six months ended June 30, 2024, cash used in financing activities was $733,000 compared to cash provided by financing activities for the same period of 2023 in the amount of $1,409,000. Uses of cash in financing activity during the six months ended June 30, 2024 consisted principally of changes in the balance of revolving debt of $0.2 million and a $1.0 million repayment of the related party note payable. $0.5 million of cash was provided by the issuances of convertible preferred stock during the six months ended June 30, 2024.
Previous wording
At March 31, 2024, the Company had cash balances of $49,000 compared to cash balances of $130,000 for the same period of 2023.
Current wording
At June 30, 2024, the Company had cash balances of $22,000 compared to a cash balance of $921,000 as of June 30, 2023.
Previous wording
The Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under the Credit Agreement. While the Company expects to have access to needed capital at reasonable cost, there can be no assurance of success, and as such, might negatively impact the Company’s ability to continue as a going concern.
Current wording
The Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under the Credit Agreement. We believe that we have been in compliance with covenants since refinancing with Line Financial in September 2021. That Credit Agreement expires per its terms on September 30, 2025, unless it is extended by the parties or replaced. While the Company expects to have access to needed capital at reasonable cost, there can be no assurance of success, and as such, might negatively impact the Company’s ability to continue as a going concern.
Previous wording
General and Administrative. During the three month period ended March 31, 2024, general and administrative expenses were $1,040,000 as compared to $961,000 for the same period in 2023. The largest change was a $50,000 increase in the cost of professional services, particularly the annual audit cost. On April 1, 2024, the Company made a change with respect to its independent auditing firm, ending the relationship with BF Borgers, CPA PC (BFB) and engaging Wolf and Company, PC. On May 3, 2024, the Company became aware that BFB had agreed to be suspended from appearing or practicing before the SEC. Because of this, the Company may no longer use audit reports or consent from BFB in future filings. Without the 2023 audit report, the Company’s new auditors will need to perform procedures related to 2023 balances in order to be able to perform an effective review of required 2024 filings, including the Form 10-Q for the period ended March 31, 2024. Until this was completed, the Company was not able to issue filings during 2024. This effort will also increase administrative expenses in 2024 related to audit services.
Current wording
On April 1, 2024, the Company made a change with respect to its independent auditing firm, ending the relationship with BF Borgers, CPA PC (BFB) and engaging Wolf & Company, P.C. On May 3, 2024, the Company became aware that BFB had agreed to be suspended from appearing or practicing before the SEC. Because of this, the Company may no longer use audit reports or consent from BFB in future filings. Without the 2023 audit report, the Company’s new auditors need to perform procedures related to 2023 balances in order to be able to perform an effective review of required 2024 filings, including the Form 10-Q for the periods ended March 31, 2024 and June 30, 2024. Until this was completed, the Company was not able to issue filings during 2024. The Nasdaq provided the Company until September 27, 2024 to file its delinquent filings including this Form 10-Q for the period ended June 30, 2024. Failure to file within the provided time would result in the delisting of the Company’s shares from Nasdaq, subject to the opportunity to appeal the result to a Hearings Panel. This filing is the second of two addressing this requirement.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
For the six month period ended June 30, 2024 and 2023, net sales by product category were as follows:
Current report — wording carried from elsewhere
As of June 30, 2024, the total amounts owed to the Company by these customers were approximately $3,232,000 or 94% of the Company’s consolidated net accounts receivable. The amounts owed at June 30, 2023 by these customers were approximately $2,455,000 or 83% of the Company’s consolidated net accounts receivable.