YUNHONG GREEN CTI LTD.
For the period ended Dec 31, 2025. Filed Mar 23, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 23, 2026
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-K
Period ended 2024-12-31; filed 2025-04-15.
0001641172-25-004622
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsQuantitative and Qualitative Disclosures Regarding Market RiskFinancial Statements and Supplementary DataCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-23.
0001493152-26-012156
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsQuantitative and Qualitative Disclosures Regarding Market RiskFinancial Statements and Supplementary DataThe 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 77 previous paragraphs and 71 current paragraphs.
34 unchanged; 25 reworded; 12 added; 18 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 5 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 (12)
Current report
REVENUE
Current report
Sales of foil balloons were $12,764,000 in 2025 and $11,510,000 in 2024, an increase of 11% was primarily due to being awarded an additional everyday kit assortment at a mass retailer, as well as a slight increase in seasonal foil balloons.
Current report
General and administrative expenses increased to $4,938,000 in 2025 from $3,396,000 in 2024, an increase of 45% compared to last year. The main reason for this increase is due to $354,000 impairment expenses related to Hubei long-lived assets and $1,318,000 related to the stock surrender agreement, where we reacquired and cancelled 175,000 shares.
Current report
In July 2025, the Company entered into a settlement agreement with a former service provider to resolve certain outstanding disputes. The agreement, executed on July 10, 2025, provided for a cash payment to the Company. The Company received proceeds of $315,000 on July 29, 2025. In accordance with U.S. GAAP, the settlement proceeds were recognized as Other Income in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2025.
Current report
Borrowings under the Revolving Credit Facility bear interest at the prime rate + 7.82% (14.57% as of December 31, 2025), payable monthly in arrears. The Term Loan Facility bears interest at the prime rate + 1.45% (8.2% as of December 31, 2025) and is repaid in 48 monthly installments of approximately $15,000, beginning November 1, 2021. The Company also pays collateral monitoring fees of 4.62% of the eligible accounts receivable, inventory, and equipment supporting both facilities.
Current report
Originally maturing September 30, 2023, the Senior Facilities were extended to April 30, 2027 pursuant to a Fifth Amendment executed on September 30, 2025, which also increased the revolving commitment from $6.0 million to $7.0 million and added a 0.75% renewal fee, payable in two equal installments in October 2025 and September 2026. A $12,500 commitment fee was also incurred. All other material terms, including borrowing base, collateral, and covenants, remained unchanged.
Current report
At December 31, 2025 and 2024, the term loan balance was approximately $0.5 and $0.6 million, respectively, and the revolving balance was $6.8 million and $6.6 million, respectively. We had $0.2 million remaining available for borrowing under the Revolving Credit Facility as of December 31, 2025.
Current report
The Agreement requires the Company to maintain minimum tangible net worth of $4.0 million, subject to adjustment by the Lender. The Company was in compliance with this covenant as of December 31, 2025 and 2024. The Agreement also limits additional indebtedness, liens, dividends, mergers, and annual capital expenditures exceeding $1.0 million.
Current report
Recoverability and Impairment of Long-Lived Assets: The Company reviews long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable. Determining whether an impairment exists requires significant management judgment, including estimates of future cash flows, expected asset utilization, and assumptions about market and economic conditions. The Company evaluates recoverability by comparing the carrying value of an asset group to the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset group. If the carrying value exceeds those estimated undiscounted future cash flows, an impairment loss is recognized based on the amount by which the carrying value exceeds the asset group’s estimated fair value. During 2025, the Company recorded an impairment charge of $354,000 related to certain long-lived assets associated with the Hubei asset group. Changes in assumptions regarding future operating performance or market conditions could result in additional impairment charges in future periods.
Current report
Item No. 7A–**
Current report
Item No. 8–**
Removed paragraphs (18)
Previous report
Item No. 7–Management’s Discussion and Analysis of Financial Condition and Results of Operations
Previous report
Series B Preferred Stock
Previous report
In November 2020, we issued 170,000 shares of Series B Preferred for an aggregate purchase price of $1,500,000. The Series B Preferred have an initial stated value of $10.00 per share and liquidation preference over common stock. The Series B Preferred is convertible into shares of our common stock equal to the number of shares determined by dividing the sum of the stated value and any accrued and unpaid dividends by the conversion price of $1.00. The Series B Preferred accrues dividends at a rate of 8 percent per annum, payable at our election either in cash or shares of the Company’s common stock. The carrying value as of December 31, 2023 and December 31, 2022 amounted to none and $1,851,000, respectively. On February 1, 2023, the investor converted Series B Preferred into approximately 1.9 million shares of common stock, including accrued dividends.
Previous report
Deposits and Note Conversion to Common Stock
Previous report
In connection with the 2021 sale and leaseback transaction of the Company’s primary facility in Lake Barrington, IL, the landlord advanced rent payments in the form of a note. The balance of that note on December 31, 2022 was approximately $172,000. The note paid 3% interest and was due March 2024. In addition, the same entity made investment deposits during 2022 that were recorded as short-term deposit liabilities. On February 1, 2023, our Board of Directors approved the conversion of these liabilities into common stock at a rate of approximately 84% of the volume weighted average price (VWAP) of the Company’s common stock during the period these deposits were received. In total, approximately $0.9 million of liabilities were converted into approximately 1.8 million shares of our common stock during 2023. Upon conversion, both the note and deposit liabilities were fully eliminated.
Previous report
In connection with the Series D Offering in 2021, the Company issued warrants to purchase 128,000 shares of the Company’s common stock for $1 per share. During November 2023, the Company issued 675,183 shares of its common stock to retire all outstanding warrants, as well as a $317,000 deferred liability related to facility rent credits received from the Lake Barrington landlord. The warrants were converted in a cashless transaction based on the terms of the warrants. The Board of Directors determined the conversion price of the deferred liability would be consistent with the approach listed above, 84% of the volume weighted average price during the relevant time period. Both of these items are fully resolved upon this transaction.
Previous report
The valuation assumptions we have applied to determine the fair value of warrants issued in 2024 were as follows:
Previous report
REVENUE FROM OPERATIONS
Previous report
Sales of foil balloons were $11,510,000 in 2024 and $11,885,000 in 2023, a decrease of 3% is attributed to normal fluctuations of order flow and has caused decrease in sales for the year ended 2024 by 3%.
Previous report
General and administrative expenses increased to $3,396,000 in 2024 from $2,995,000 in 2023, an increase of 13%. The Company had higher than usual audit fees in 2024. Of note are the one-time costs associated with reperforming audit procedures related to 2023 due to the Company’s former auditor being suspended from practicing before the SEC during May 2024. This resulted in $300,000 higher audit expenses and related legal fees during 2024 as compared to 2023.
Previous report
Interest on the Senior Facilities is set at the prime rate published from time to time published in the Wall Street Journal (7.5% as of December 31, 2024), plus 1.45% per annum, accruing daily and payable monthly. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. The Term Loan Facility shall be repaid by the Company to Lender in 48 equal monthly installments of principal and interest, each in the amount of $15,000, commencing on November 1, 2021, and continuing on the first day of each month thereafter until the Term Loan Maturity Date (as defined in the Agreement). Also, the Company paid the Lender collateral monitoring fees of 4.62% of the eligible accounts receivable, inventory, and equipment supporting the Revolving Credit Facility and the Term Loan.
Previous report
The Senior Facilities require that the Company maintain Tangible Net Worth of at least $4,000,000 or greater (“Minimum Tangible Net Worth”). Minimum Tangible Net Worth may be adjusted downward by the Lender, from time to time, in its sole and absolute discretion, based on the effect of non-cash charges and other factors on the calculation of Tangible Net Worth. Other debt subordinated to Lender is not considered as a reduction of this calculation. The Company believes it was in compliance with this covenant for all relevant months, including as of December 31, 2024 and December 31, 2023, respectively.
Previous report
The Senior Facilities contain certain affirmative and negative covenants that limit the ability of the Company, among other things and subject to certain significant exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, and acquisitions, pay dividends and make other restricted payments, or make capital expenditures exceeding $1,000,000 in the aggregate in any fiscal year.
Previous report
As of December 31, 2024 and December 31, 2023, the term loan balance amounted to $623,000 and $715,000, respectively, which consisted of the principal and interest payable balance of $623,000 and $715,000, respectively and deferred financing costs of approximately $17,000 and $41,000, respectively. The balance of the Revolving Line of Credit as of December 31, 2024 and December 31, 2023 amounted to $6,578,000 and $4,991,000, respectively. The Revolving Line of Credit exceeded $6,000,000 due to the year-end holiday schedule of the lender, and returned to less than $6,000,000 on January 3, 2025.
Previous report
As of December 31, 2022, the Company had a note payable to Alex Feng for $0.2 million. This loan accrued interest at a rate of 3% and is subordinated to the Senior Facilities. In accordance with the subordination agreement, payments may be made beginning April 2022 subject to availability under the revolving line of credit, and the maturity date for this loan was March 2024. Along with certain deposits received during 2022, this note was converted into common stock during February 2023.
Previous report
Through September 30, 2022, the Company has received approximately $160,000 in Employee Retention Tax Credits (“ERTC”) from the United States Government related to claims that were filed during 2021. $123,000 was listed as General and Administrative, while the remainder is in Other Income. During October 2022 the Company executed a financing transaction wherein the remaining open claims for $1.2 million in ERTC was sold to a third party for $0.9 million. Once the $1.2 million was ultimately paid, those funds were immediately transferred to the third party. To the extent any of the $1.2 million in ERTC claims were determined by the United States Government not to be payable, a prorated portion of the $0.9 million would have been returned to that investor. The $0.9 million was listed as a deferred income current liability as of December 31, 2022, which was recognized upon acceptance and processing of the amended returns by the United States Government. During 2023, all claims had been processed and refunds issued, which were forwarded to the third party above. As a result, approximately $0.9 million of the deferred income liability was recognized during 2023.
Previous report
Share-Based Compensation: Compensation expense for time-based restricted stock units is measured at the grant date and recognized ratably over the vesting period. We determine the fair value of time-based and performance-based restricted stock units based on the closing market price of our common stock on the grant date. The recognition of compensation expense associated with performance-based restricted stock units requires judgment in assessing the probability of meeting the performance goals, as well as defined criteria for assessing achievement of the performance-related goals. For the purposes of measuring compensation expense, the number of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. The performance shares begin vesting only upon the achievement of the performance criteria. The performance shares begin vesting only upon the achievement of the performance criteria. The achievement of the performance goals can impact the valuation and associated expense of the restricted stock units. The assumptions used in accounting for the share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if circumstances change and we use different assumptions, our stock-based compensation expense could be materially different in the future.
Previous report
Item No. 8–Financial Statements and Supplementary Data
Reworded paragraphs (25)
Previous wording
In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 130,000 shares of Series E Convertible Preferred Stock (“Series E Preferred”) resulting in gross proceeds of $1.3 million from an unrelated third party. In aggregate, between Series E Preferred and Series F Convertible Preferred Stock (“Series F Preferred”) financings, $1.5 million of the total Series E and F proceeds were received as an advance prior to December 31, 2023. These funds advanced were initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was reclassified as equity. In addition, 361,400 warrants to purchase the Company’s common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $1.52 per share or 90% of the variable price based on the ten-day volume weighted average price (“VWAP”) of the Company’s common stock. The issuance of the Series E Preferred Stock resulted in an allocation of $0.8 million to the convertible preferred stock and $0.5 million to the warrants described below and classified as Additional Paid-In Capital. Holders of the Series E Preferred will be entitled to receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common stock. Such dividends may be paid in cash or otherwise based on the terms of the agreement. Accrued dividends $93,000 were recorded for the year ended December 31, 2024.
Current wording
In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 130,000 shares of Series E Convertible Preferred Stock (“Series E Preferred”) resulting in gross proceeds of $1.3 million from an unrelated third party. In aggregate, between Series E Preferred and Series F Convertible Preferred Stock (“Series F Preferred”) financings, $1.5 million of the total Series E and F proceeds were received as an advance prior to December 31, 2023. These funds advanced were initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was reclassified as equity. In addition, 36,140 warrants to purchase the Company’s common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $15.2 per share or 90% of the variable price based on the ten-day volume weighted average price (“VWAP”) of the Company’s common stock. The issuance of the Series E Preferred Stock resulted in an allocation of $0.8 million to the convertible preferred stock and $0.5 million to the warrants described below and classified as Additional Paid-In Capital. Holders of the Series E Preferred will be entitled to receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common stock. Such dividends may be paid in cash or otherwise based on the terms of the agreement. Accrued dividends of $205,000 and $93,000 were recorded as of December 31, 2025 and 2024, respectively.
Previous wording
In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 70,000 shares of Series F Preferred resulting in gross proceeds of $0.7 million from an unrelated third party. As disclosed above certain of these proceeds were received as an advance prior to December 31, 2023. This investment was initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was classified as equity. In addition, warrants to purchase 194,600 shares of the Company’s common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $1.52 per share or 90% of the variable price based on the ten-day volume weighted average price (“VWAP”) of the Company’s common stock prior to exercise. The issuance of the Series F Preferred Stock resulted in an allocation of $0.4 million to the convertible preferred stock and $0.3 million to the warrants described below and classified as Additional Paid-In Capital. Holders of the Series F Preferred will be entitled to receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common stock. Such dividends may be paid in cash or stock, at the Company’s discretion, based on the terms of the agreement. Accrued dividends of $50,000 were recorded for the year ended December 31, 2024, respectively.
Current wording
In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 70,000 shares of Series F Preferred resulting in gross proceeds of $0.7 million from an unrelated third party. As disclosed above certain of these proceeds were received as an advance prior to December 31, 2023. This investment was initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was classified as equity. In addition, warrants to purchase 19,460 shares of the Company’s common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $15.2 per share or 90% of the variable price based on the ten-day volume weighted average price (“VWAP”) of the Company’s common stock prior to exercise. The issuance of the Series F Preferred Stock resulted in an allocation of $0.4 million to the convertible preferred stock and $0.3 million to the warrants described below and classified as Additional Paid-In Capital. Holders of the Series F Preferred will be entitled to receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common stock. Such dividends may be paid in cash or stock, at the Company’s discretion, based on the terms of the agreement. Accrued dividends of $110,000 and $50,000 were recorded as of December 31, 2025 and 2024, respectively.
Previous wording
As described above, in connection with the Series E and F convertible preferred equity issuances, a total of 556,000 warrants were issued, exercisable for the Company’s common stock at the lower of $1.52 per share or 90% of the 10 day VWAP.
Current wording
As described above, in connection with the Series E and F convertible preferred equity issuances, a total of 55,600 warrants were issued, exercisable for the Company’s common stock at the lower of $15.2 per share or 90% of the 10 day VWAP.
Previous wording
As of December 31, 2024 the Company reserved the following shares of its common stock for the exercise of warrants, and preferred stock:
Current wording
As of December 31, 2025 the Company reserved the following shares of its common stock for the exercise of warrants,:
Previous wording
Our revenues from operations from each of our product categories in each of the past two years have been as follows:
Current wording
Our revenues from each of our product categories in each of the past two years have been as follows:
Previous wording
Purchases by a limited number of customers represent a significant portion of our total revenues. During 2024 and 2023, respectively, sales to our top 10 customers represented 93% and 94%, respectively, of net revenues for each year. During 2024 and 2023, there were two customers to whom our sales represented more than 10% of net revenues.
Current wording
Purchases by a limited number of customers represent a significant portion of our total revenues. During 2025 and 2024, respectively, sales to our top 10 customers represented 93% and 93%, respectively, of net revenues for each year. During 2025 and 2024, there were two customers to whom our sales represented more than 10% of net revenues.
Previous wording
For the fiscal year ended December 31, 2024, consolidated net sales of the sale of all products were $17,953,000 compared to consolidated net sales of $17,804,000 for the year ended December 31, 2023, an increase of 1% as more fully described below.
Current wording
For the fiscal year ended December 31, 2025, consolidated net sales of the sale of all products were $19,705,000 compared to consolidated net sales of $17,953,000 for the year ended December 31, 2024, an increase of 10% as more fully described below.
Previous wording
Sales of film products were $847,000 in 2024 and $927,000 in 2023, a decrease of 9%. 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 wording
Sales of film products were $1,129,000 in 2025 and $847,000 in 2024, an increase of 33%. 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.
Previous wording
Sales of other products increased to $5,596,000 in 2024 from $4,992,000 in 2023, an increase of 12%. This category includes sales of balloon inspired gifts, which featured larger holiday orders than the prior year as well as the launch of an everyday offering.
Current wording
Sales of other products increased to $5,812,000 in 2025 from $5,596,000 in 2024, an increase of 4%. This category includes sales of balloon inspired gifts, which featured larger holiday orders than the prior year as well as an increase in everyday product.
Previous wording
Cost of sales decreased to $14,352,000 in 2024 compared to $14,546,000 in 2023, a decrease of 1.33%, which is negligible compared to an 1% increase in sales.
Current wording
Cost of sales increased to $16,115,000 in 2025 compared to $14,352,000 in 2024, an increase of 12%, which is attributed to increase in sales by 10%.
Previous wording
Selling expenses increased to $141,000 in 2024 from $131,000 in 2023.
Current wording
Selling expenses increased to $147,000 in 2025 from $141,000 in 2024.
Previous wording
During 2024, we incurred net interest expense of $862,000 compared to net interest expense of $628,000 during 2023.
Current wording
During 2025, we incurred net interest expense of $878,000 compared to net interest expense of $862,000 during 2024.
Previous wording
During 2024, cash used in operating activities amounted to $1,274,000, compared to cash used in operating activities during 2023 of $1,222,000. Significant changes in working capital items affecting cash flow used in operating activities were:
Current wording
During 2025, cash used in operating activities amounted to $172,000, compared to cash used in operating activities during 2024 of $1,274,000. Significant changes in working capital items affecting cash flow used in operating activities were:
Previous wording
During fiscal 2024, cash used in investing activities amounted to $331,000 compared to cash used in investing activities during fiscal 2023 of $221,000. This is due to timing of production equipment upgrades and replacement.
Current wording
During fiscal 2025, cash used in investing activities amounted to $83,000 compared to cash used in investing activities during fiscal 2024 of $331,000. This is due to timing of production equipment upgrades and replacement.
Previous wording
During fiscal 2024, cash provided by financing activities amounted to $904,000, compared to cash provided by financing activities of $2,118,000 during fiscal 2023. This is primarily due to repayment of principal on the related party note.
Current wording
During fiscal 2025, cash provided by financing activities amounted to $132,000, compared to cash provided by financing activities of $904,000 during fiscal 2024. This is primarily due to an increase in revolving credit limit from $6 million to $7 million in 2025.
Previous wording
The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has a cumulative net loss from inception to December 31, 2024 of approximately $26 million and had approximately $0.2 million of cash as of December 31, 2024. The Company’s cash resources from operations may be insufficient to meet its anticipated needs during the next twelve months. If the Company does not execute its plan, it may require additional financing to fund its future planned operations.
Current wording
The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has a cumulative net loss from inception to December 31, 2025 of approximately $28.4 million and had approximately $0.1 million of cash as of December 31, 2025. The Company’s cash resources from operations may be insufficient to meet its anticipated needs during the next twelve months. If the Company does not execute its plan, it may require additional financing to fund its future planned operations.
Previous wording
The ability of the Company to continue as a going concern is dependent on the Company having adequate capital to fund its operating plan and performance. Management’s plans to continue as a going concern may include raising additional capital through sales of equity securities and borrowing, continuing to focus our Company on the most profitable elements, and exploring alternative funding sources on an as needed basis. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. Supply chain challenges and inflationary pressures have impacted the Company’s business operations to some extent and is expected to continue to do so and, these impacts may include reduced access to capital. The ability of the Company to continue as a going concern may be dependent upon its ability to successfully secure other sources of financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Current wording
The ability of the Company to continue as a going concern is dependent on the Company having adequate capital to fund its operating plan and performance. Management’s plans to continue as a going concern may include raising additional capital through sales of equity securities and borrowing, continuing to focus our Company on the most profitable elements, and exploring alternative funding sources on an as needed basis. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. Supply chain challenges and inflationary pressures have impacted the Company’s business operations to some extent and is expected to continue to do so and, these impacts may include reduced access to capital. There is substantial doubt about the ability of the Company to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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 in place at the time. This credit facility, as amended, matures on September 30, 2025. While we expect to have sufficient financial resources available on acceptable terms, there can be no assurance this will occur, particularly in light of increasingly conservative financial markets.
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 in place at the time. This credit facility, as amended, matures on April 30, 2027.
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 $7.0 million as amended (the “Maximum Revolver Amount”), subject to borrowing base provisions, 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 has remained in compliance with all material covenants since inception.
Previous 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:
Current wording
The facility automatically renews for successive one-year periods unless either party provides written notice of termination not less than 90 days prior to the end of the then-current term. The Company may prepay the Term Loan Facility (together with accrued interest and any applicable prepayment fee) in whole, but not in part, upon at least 60 days’ prior written notice
Previous wording
The Company is party to a note payable to John H. Schwan, Director and former Chairman of the Board, with a loan balance due of $1.3 million as of December 31, 2023 and an interest rate of 6%. 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.
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 due for an initial amount of $1.3 million as of December 31, 2023 and an interest rate of 6%. 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
In the foil balloon product line, sales have historically been seasonal. Approximately half of these sales are considered “everyday” in nature while the other half tend to be event driven (certain holidays, graduation season, and other events). Since 2022, we have seen an enhanced impact of seasonality, with increased order flow related to events, and lower order flow related to everyday items.
Current wording
In the foil balloon product line, sales have historically been seasonal. Approximately half of these sales are considered “everyday” in nature while the other half tend to be event driven (certain holidays, graduation season, and other events). Since 2022, we have seen an enhanced impact of seasonality, with increased order flow related to events.
Previous wording
*Inventory Valuation.*Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard costs which approximate costing determined on a first-in, first out basis. Standard costs are reviewed and adjusted at the time of introduction of a new product or design, periodically and at year-end based on actual direct and indirect production costs. On a periodic basis, the Company reviews its inventory levels for estimated obsolescence or unmarketable items, in reference to future demand requirements and shelf life of the products. As of December 31, 2024 and 2023, the Company had established a reserve for obsolescence, marketability or excess quantities with respect to inventory in the aggregate amount of $155,000. In addition, on a periodic basis, the Company disposes of inventory deemed to be obsolete or unsaleable and, at such time, charges reserve for the value of such inventory. We record freight income as a component of net sales and record freight costs as a component of cost of goods sold.
Current wording
*Inventory Valuation.*Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard costs and determined on a first-in, first out basis. Standard costs are reviewed and adjusted at the time of introduction of a new product or design, periodically and at year-end based on actual direct and indirect production costs. On a periodic basis, the Company reviews its inventory levels for estimated obsolescence or unmarketable items, in reference to future demand requirements and shelf life of the products. As of December 31, 2025 and 2024, the Company had established a reserve for obsolescence, marketability or excess quantities with respect to inventory in the aggregate amount of $194,000 and $155,000 respectively. In addition, on a periodic basis, the Company disposes of inventory deemed to be obsolete or unsaleable and, at such time, charges reserve for the value of such inventory.
Previous wording
As of December 31, 2024 and 2023, the amount of the net deferred tax asset was none, as we continued to record a full valuation allowance against the gross value of the deferred tax asset. Each quarter and year-end, management makes a judgment to determine the extent to which the deferred tax asset will be recovered from future taxable income. This value was reduced, in large part, due to changes in US tax law effective 2018 which will impact the value of future deductions.
Current wording
As of December 31, 2025 and 2024, the amount of the net deferred tax asset was none, as we continued to record a full valuation allowance against the gross value of the deferred tax asset. Each quarter and year-end, management makes a judgment to determine the extent to which the deferred tax asset will be recovered from future taxable income.
Previous wording
Item No. 7A–Qualitative and Quantitative Disclosures Regarding Market Risk
Current wording
Qualitative and Quantitative Disclosures Regarding Market Risk