What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-24 compared with 2020-11-23 · 93 added, 107 removed, 52 unchanged (79% of the section changed)

1 unchanged sentence

Forward Looking Statements

This quarterly report includes both historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.

This Quarterly Report on Form 10-Q includes both historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.

We have based these forward-looking statements on our current expectations and projections about future results.

1 unchanged sentence

Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this Quarterly Report on Form 10-Q.

We disclaim any intent or obligation to update any forward-looking statements after the date of this quarterly report to conform such statements to actual results or to changes in our opinions or expectations.

We disclaim any intent or obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform such statements to actual results or to changes in our opinions or expectations.

These forward-looking statements are affected by factors, risks, uncertainties and assumptions that we make, including, without limitation, those discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 under the heading “Risk Factors.”

We produce film products for novelty, packaging and container applications.

5 unchanged sentences

We also market and sell Candy Blossoms and party goods.

As of January 1, 2018, we adopted Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, using the modified retrospective method.

The adoption of ASC 606 did not have a material impact on our consolidated financial position or results of operations, as our revenue arrangements generally consist of a single performance obligation to transfer promised goods at a fixed price.

Net sales include revenues from sales of products and shipping and handling charges, net of estimates for product returns.

Revenue is measured at the amount of consideration the Company expects to receive in exchange for the transferred products.

The Company recognizes revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight are included in cost of sales, as we have elected the practical expedient included in ASC 606.

Revenue Recognition.

Substantially all of the Company's revenues are derived from the sale of products.

With respect to the sale of products, revenue from a transaction is recognized once it has (i) identified the contract(s) with a customer, (ii) identified the performance obligations in the contract, (iii) determined the transaction price, (iv) allocated the transaction price to the performance obligations in the contract, and (v) recognized revenue as the company satisfies a performance obligation.

The Company generally recognizes revenue for the sale of products when the products have been shipped and invoiced.

In some cases, product is provided on consignment to customers.

In those cases, revenue is recognized when the customer reports a sale of the product.

We provide for product returns based on historical return rates.

While we incur costs for sales commissions to our sales employees and outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than one year and we have elected the practical expedient included in ASC 606.

We do not incur incremental costs to obtain contracts with our customers.

Our product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract.

Therefore, the product warranties are not a separate performance obligation and are accounted for as described herein.

Sales taxes assessed by governmental authorities are accounted for on a net basis and are excluded from net sales.

As of January 1, 2019, we adopted ASC Topic 842, Leases (“ASC Topic 842”).

Refer to Note 13 for additional information.

Our primary leases relate to the facilities we use in Mexico.

We also have ancillary leases for items ranging from forklifts to printers.

The majority of our leases are classified as operating lease right-of-use (“ROU”) assets and related operating lease liabilities.

Finance leases are included in property and equipment and related liabilities.

ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at the commencement date for leases that exceed 12 months.

The expected lease term includes options to renew when it is reasonably certain that we will exercise such option.

Operating lease expense is recognized on a straight-line basis over the lease term and is included in the cost of sales or sales, general and administrative expense areas.

Finance leases are amortized on a straight-line basis and included in similar areas of expense classification.

Variable lease payments, non-lease component payments, and short-term rentals (leases less than 12 months in duration) are expensed as incurred.

Summary of Subsequent Events

As previously disclosed on a Current Report on Form 8-K of Yunhong CTI Ltd., on December 14, 2017, the Company entered into a Revolving Credit, Term Loan and Security Agreement (the “Loan Agreement”) with PNC Bank, National Association (“Lender”).

Prior to January 13, 2020, certain events of default under the Loan Agreement had occurred (the "Prior Defaults").

On January 13, 2020, a Limited Waiver, Consent, Amendment No.

5 and Forbearance Agreement (the “Forbearance Agreement”) between Lender and the Company became effective, pursuant to which Lender agreed to, among other things, forebear from exercising the rights and remedies in respect of the Prior Defaults afforded to Lender under the Loan Agreement for a period ending no later than December 31, 2020 (the “Forbearance Period”).

On June 15, 2020, the Lender provided the Company notice (the “Default Notice”) that (i) an additional Event of Default (as defined in the Loan Agreement) had occurred and is continuing as a result of the Company's failure to maintain a Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of 0.75 to 1.00 for the three-month period ended March 31, 2020 (the "March FCCR Default"), (ii) as a result of the occurrence and continuance of the March FCCR Default, the Forbearance Period has ended, and (iii) as a result of the termination of the Forbearance Period, the Lender is entitled to exercise immediately all of its rights and remedies under the Loan Agreement including, without limitation, ceasing to make further advances to the Company and declaring all obligations to be immediately due and payable in accordance with the Loan Agreement.

The Lender has continued to make advances to the Company (“Discretionary Advances”), although it is not required to do so under the terms of the Loan Agreement due to the Events of Default.

On July 17, 2020, the Lender provided the Company notice that multiple previously disclosed events, which each constitute an Event of Default, are continuing to occur.

Additionally, the Lender required that the Company obtain a commitment for third-party equity funding in an amount not less than $3,000,000 by no later than July 31, 2020.

Absent such commitment, the Lender advised that it may cease making discretionary advances to the Company.

On July 22, 2020, the Company’s board of directors authorized the Company to seek such funding and, to ensure that the Company met the Lender’s equity funding commitment deadline.

Yubao Li, the Company’s Chairman, committed that, in the event the Company does not obtain funding of at least $3,000,000, he would provide the necessary funding.

In September 2020, the Company received $1.5 million from an unrelated third party as an advance on a proposed sale of Series B Convertible Preferred Stock (the terms of which are currently being negotiated and finalized).

Additionally, in October 2020, the Company received a $1.5 million advance on a separate proposed equity financing for which the terms have not yet been finalized.

The Lender has continued to make the Discretionary Advances throughout this period and has indicated that we have complied with their request.

On April 23, 2021, the Company entered into a Purchase and Sale Agreement (“PSA”) with an unaffiliated purchaser (the “Purchaser”) pursuant to which the Company sold its facility in Lake Barrington, Illinois (the “Lake Barrington Facility”), in which our headquarters office, production and warehouse space are located, to the Purchaser.

The sale price for the Lake Barrington Facility was $3,500,000, consisting of $2,000,000 in cash and a promissory note with a principal amount of $1,500,000, due and payable on May 3, 2021 (the “Purchaser Promissory Note”).

Concurrently with the closing under the PSA, the Company and the Purchaser entered into a lease agreement pursuant to which the Company agreed to lease the Lake Barrington Facility from the Purchaser for a period of ten years.

The annual base rent commences at $500,000 for the first year of the term and escalates annually to $652,386 during the last year of the term of the lease.

As the decision to sell the lake Barrington Facility was made in April 2021, the facility is not classified as held for sale as of March 31, 2021.Concurrently with the entry into the PSA and the Lease, the Company entered into a Consent, Forbearance and Amendment No.

6 to Revolving Credit, Term Loan and Security Agreement (the “Amendment Agreement”) with PNC for itself and for the other participant lenders thereunder (collectively, the “Lender”).

Prior to entering into the Amendment Agreement, PNC had notified the Company that various events of default had occurred under the Loan Agreement (the “Existing Defaults”) and were continuing.

Pursuant to the Amendment Agreement, the Lender consented to the transactions contemplated by the PSA and the Lease, as required under the Loan Agreement.

As a condition to the Amendment Agreement, the Company agreed that the full $2,000,000 in cash proceeds from the sale of the Lake Barrington Facility would be applied to repay the $2,000,000 term loan owed to the Lender pursuant to the Loan Agreement.

The Company further agreed that $1,500,000 in proceeds from the Purchaser Promissory Note will be applied to amounts due and owing to the Lender under revolving credit advances made pursuant to the Loan Agreement (the “Revolving Loans”).

Pursuant to the Amendment Agreement, the Lender agreed to forbear from exercising its rights and remedies with respect to the Existing Event of Defaults under the Loan Agreement for a period ending on the earlier of September 30, 2021, the occurrence of a new event of default under the Loan Agreement, or the occurrence of a Termination Event (as defined therein).

Additionally, certain additions and amendments to the Loan Agreement were set forth in the Amendment Agreement, including:

The Maximum Revolving Advance Amount is reduced from $18,000,0000 to $9,000,000;

The Termination Date of the Loan Agreement is revised from December 14, 2022 to December 31, 2021;

On or before June 30, 2021, or such later date as the Lender agrees in its sole discretion, the Company shall receive an equity investment of at least $1,500,000 and apply 100% of the proceeds to a reduction of the Revolving Credit Advance under the Loan Agreement (the “Equity Investment”);

On or before August 15, 2021, or such later date as the Lender agrees in its sole discretion, the Company shall deliver to Lender (i) a binding term sheet, in form and substance acceptable to Lender, from a financing source that provides for the refinance and payment in full, in cash, of the obligations owing under the Loan Agreement on or before September 30, 2021, or (ii) evidence, in form and substance satisfactory to the Lender, that certain equity holders of the Company have available and identifiable funds that are on deposit with a depository institution that are sufficient to pay in full, in cash, all of the Company obligations under the Loan Agreement on or before September 30, 2021;

On or before September 30, 2021, the Company will cause all of the amounts owing under the Loan Agreement to be paid in full in cash;

The Forbearance Reserve (as defined in Amendment No.

5 to the Loan Agreement) shall be increased from $1,025,000 to $2,525,000;

Effective August 1, 2021, accounts receivable from Wal-Mart Stores and its affiliates shall no longer be considered eligible receivables;

Modifications will be made to the budget, testing and variance provisions of the Loan Agreement.

In consideration for entering into the Loan Amendment, the Company agreed to pay the Lender a Forbearance Fee of $1,000,000.

Provided, however, that, so long as no Event of Default under the Loan Agreement has occurred (including as a result of a failure of the Company to pay down the Revolving Loans by $1,500,000 with the proceeds of the Purchaser Promissory Note, (i) if the Company consummates the Equity Investment by June 30, 2021, the Forbearance Fee shall be reduced by $250,000, to $750,000, and (ii) if the Company causes all of the obligations under the Loan Agreement to be paid in full, in cash, on or before September 30, 2021, the Forbearance Fee shall be reduced by an additional $500,000, to $250,000.

Comparability

5 unchanged sentences

These changes have been applied for all periods presented.

The Company divested its CTI Balloons (United Kingdom) subsidiary in the fourth quarter 2019 and is divesting its CTI Europe (Germany) subsidiary and Ziploc product line in 2020.

The Company divested its CTI Balloons (United Kingdom) subsidiary in the fourth quarter 2019, its Ziploc product line in the first quarter 2020, and is divesting its CTI Europe (Germany) subsidiary in 2021.

Results of Operations

For the three and nine month periods ended September 30, 2020, net sales were $5,981,000 and $18,794,000, compared to net sales of $6,365,000 and $24,259,000 for the same periods of 2019, respectively.

For the three month period ended September 30, 2020 and 2019, net sales by product category were as follows:

For the three month periods ended March 31, 2021 and 2020, net sales were $7,416,000 and $7,068,000, respectively.

For the three-month period ended March 31, 2021 and 2020, net sales by product category were as follows:

Three Months Ended

September 30, 2020

September 30, 2019

Product Category

(000) Omitted

Foil Balloons

Latex Balloons

Film Products

For the nine month period ended September 30, 2020 and 2019 net sales by product category were as follows:

Nine Months Ended

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Product Category

5 unchanged sentences

Foil Balloons .

Revenues from the sale of foil balloons increased during the three months period from $3,681,000 ending September 30, 2019 compared to $4,516,000 during the three month period of 2020.

Revenues from the sale of foil balloons decreased during the nine month period from $13,325,000 ending September 30, 2019 compared to $12,380,000 during the nine month period of 2020 mainly due to decreased foil sales in our Mexican subsidiary.

Revenues from the sale of foil balloons increased during the three-month period from $4,492,000 ending March 31, 2020 compared to $5,036,000 during the three month period of 2021.

Latex Balloons.

Revenues from the sale of latex balloons were $1,014,000 and $3,712,000 during the three and nine month periods ended September 30, 2020, compared to $2,059,000 and $5,640,000 during the same periods of 2019.

Revenues from the sale of latex balloons decreased during the three-month period from $1,583,000 during the three period ended March 31, 2020, to $697,000 during the same period of 2021.

Latex balloons encountered a COVID-19 constraint, as production activities were severely limited by the Mexican government.

Revenues from the sale of commercial films were $78,000 and $664,000 during the three and nine month periods ended September 30, 2020, compared to $236,000 and $1,475,000 during the same periods of 2019.

Our main customer had restructured their program in the first quarter both related to COVID-19 disruption and also the integration of a merger partner.

Revenues from the sale of commercial films were $445,000 during the three-month period ended March 31, 2021, compared to $215,000 during the same period of 2020.

Other Revenues .

Revenues from the sale of other products were $374,000 and $2,038,000 during the three and nine month periods ended September 30, 2020, compared to $9,000 and $3,571,000 during the same periods of 2019.

Revenues in 2019 include a discontinued line of organizing solutions that was fully deconsolidated in 2019.

The revenues from the sale of other products during the first nine months of 2020 include (i) sales of a line of “Candy Blossoms” 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.

Revenues from the sale of other products were $1,237,000 during the three-month period ended March 31, 2021, compared to $778,000 during the same period of 2020.

The revenues from the sale of other products during the first three months of 2021 and 2020 include (i) sales of a line of “Candy Blossoms” 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.

Sales to a limited number of customers continue to represent a large percentage of our net sales.

The table below illustrates the impact on sales of our top three and ten customers for the nine month periods ended September 30, 2020 and 2019.

Three Months Ended September 30,

Top 3 Customers

Top 10 Customers

Nine Months Ended September 30,

The table below illustrates the impact on sales of our top three and ten customers for the three month periods ended March 31, 2021 and 2020.

Three Months Ended March 31,

Top 3 Customers

Top 10 Customers

During the nine month period ended September 30, 2020, there was one customer whose purchases represented more than 10% of the Company’s consolidated net sales.

Sales to this customer for the nine month period ended September 30, 2020 was $9,412,000 or 50% of consolidated net sales.

Sales to this customer for the nine months ended September 30, 2019 was $8,190,000, or 34% of consolidated net sales.

As of September 30, 2020, the total amount owed to the Company by this customer was approximately $1,725,000, or 33% of the Company’s consolidated net accounts receivable.

The amount owed at September 30, 2019 by this customer was approximately $831,000, or 16% of the Company’s consolidated net accounts receivable.

During the three-month period ended March 31, 2021, there was one customer whose purchases represented more than 10% of the Company’s consolidated net sales.

Sales to this customer for the three month period ended March 31, 2021 was $3,991,000 or 54% of consolidated net sales.

Sales to this customer for the three months ended March 31, 2020 was $3,222,000, or 45% of consolidated net sales.

As of March 31, 2021, the total amount owed to the Company by this customer was approximately $2,385,000, or 33% of the Company’s consolidated net accounts receivable.

The amount owed at March 31, 2020 by this customer was approximately $2,097,000, or 29% of the Company’s consolidated net accounts receivable.

Cost of Sales .

During the three and nine month periods ended September 30, 2020, the cost of sales was $5,720,000 and $16,442,000, compared to $6,285,000 and $20,926,000, respectively, for the same periods of 2019.

The reduction in cost of sales was largely due to the termination of the vacuum sealing product line, reduced presence in the form of discontinued subsidiaries, and a temporary reduction in orders related to COVID-19.

During the three month period ended March 31, 2021, the cost of sales was $6,323,000, compared to $5,586,000 for the same period of 2020 due to higher sales volume.

General and Administrative .

During the three and nine month periods ended September 30, 2020, general and administrative expenses were $1,067,000 and $3,254,000 as compared to $1,167,000 and $3,866,000 respectively, for the same periods in 2019.

Decrease is due mainly to headcount reductions.

During the three month period ended March 31, 2021, general and administrative expenses were $1,120,000 as compared to $702,000 for the same period in 2020 due mainly to increase to PNC violation and legal matters with vendors.

Selling, Advertising and Marketing .

During the three and nine month periods ended September 30, 2020, selling, advertising and marketing expenses were $101,000 and $384,000 as compared to $148,000 and $714,000, respectively, for the same periods in 2019.

Decrease is due mainly to headcount reductions.

During the three month period ended March 31, 2021, selling, advertising and marketing expenses were $139,000 as compared to $175,000 for the same period in 2020.

Other Income (Expense) .

During the three and nine month periods ended September 30, 2020, the Company incurred interest expense of $255,000 and $1,033,000 as compared to interest expense of $465,000 and $1,493,000 during the same periods of 2019.

During the three months ended September 30, 2020 the Company recorded $248,000 of other income for the Payroll Protection Program, PPP, anticipated grant related to payroll, utility and rent payments.

During the nine months ended September 30, 2020 the Company recorded $1,048,000 of other income for the Payroll Protection Program, PPP, anticipated grant related to payroll, utility and rent payments.

For the three month and nine month periods ended September 30, 2020, the Company had a foreign currency transaction gain/(loss) of $15,000 and $(169,000) as compared to a gain/(loss) of $(26,000) and $(27,000) during the same periods of 2019.

During the three month period ended March 31, 2021, the Company incurred interest expense of $231,000 as compared to interest expense of $441,000 during the same period of 2020.

Interest expense decreased due to the reduction of the Company's senior debt facility.

For the three month period ended March 31, 2021, the Company had a foreign currency transaction loss of $26,000 as compared to a loss of $154,000 during the same period of 2020.

Financial Condition, Liquidity and Capital Resources

1 unchanged sentence

Operating Activities .

During the nine months ended September 30, 2020, net cash provided by operations was $995,000, compared to net cash provided by operations during the nine months ended September 30, 2019 of $4,172,000.

Significant changes in working capital items during the nine months ended September 30, 2020 included:

A decrease in accounts receivable of $2,916,000 compared to a decrease in accounts receivable of $2,776,000 in the same period of 2019.

A decrease in inventory of $2,315,000 compared to an increase in inventory of $1,435,000 in 2019.

During the three months ended March 31, 2021, net cash used in operations was $1,421,000, compared to net cash provided by operations during the three months ended March 31, 2020 of $842,000.

Significant changes in working capital items during the three months ended March 31, 2021 included:

An increase in accounts receivable of $1,860,000 compared to a decrease in accounts receivable of $797,000 in the same period of 2020.

An increase in inventory of $16,000 compared to a decrease in inventory of $242,000 in 2020.

An increase in trade payables of $752,000 compared to a decrease in trade payables of $158,000 in 2020.

A decrease in accrued liabilities of $331,000 compared to an increase in accrued liabilities of $167,000 in 2019.

In September 2020, the Company received $1.5 million from an unrelated third party as an advance on a proposed sale of Series B Redeemable Convertible Preferred Stock.

As of September 30, 2020, the Company was in the process of negotiating and finalizing the terms of the arrangement.

As the agreement was not finalized as of September 30, 2020, the $1.5 million advance is classified as Advance from Investor within liabilities on the accompanying balance sheet.

An increase in prepaid expenses and other assets of $212,000 compared to a decrease of $133,000 in 2020.

An increase in accrued liabilities of $158,000 compared to an increase in accrued liabilities of $40,000 in 2020.

Investing Activity .

During the nine months ended September 30, 2020, cash used in investing activity was $140,000, compared to cash used in investing activity for the same period of 2019 in the amount of $144,000.

During the three months ended March 31, 2021, cash used in investing activity was $46,000, compared to cash used in investing activity for the same period of 2020 in the amount of $19,000.

Financing Activities .

During the nine months ended September 30, 2020, cash used in financing activities was $2,237,000 compared to cash used in financing activities for the same period of 2019 in the amount of $4,546,000.

During the three months ended March 31, 2021, cash provided by financing activities was $1,557,000 compared to cash used in financing activities for the same period of 2020 in the amount of $1,700,000.

Financing activity consisted principally of changes in the balances of revolving and long-term debt.

During 2020, the Company sold 542,660 shares of Series A Preferred to multiple investors for an aggregate purchase price of $5.4 million.

The Company has also received an advance of $1.5 million in from an investor for a Series B stock purchase that was not finalized as of September, 30 2020.

Liquidity and Capital Resources .

At September 30, 2020, the Company had cash balances of none compared to cash balances of $115,000 for the same period of 2019.

As of September 30, 2020, the Company was not in compliance with its credit facility, operating under a forbearance agreement.

For this reason, $1.4 million of long-term debt was reclassified as current debt as of September 30, 2020.

Failure to ultimately regain compliance with the terms of our credit agreement, or enter into a suitable replacement financing vehicle, could negatively impact our ability to carry on our business up to and including our ability to continue as a going concern.

Additionally, we have encountered difficulties with seasonal cash flow needs, including increased costs associated with recruiting and retaining workers in the Chicago area.

The failure to either regain compliance with the terms of our credit facility or properly manage seasonal cash needs could put a strain on the Company, up to and including our ability to continue as a going concern.

See Note 3 for additional discussion.

At March 31, 2021, the Company had cash balances of $86,000 compared to cash balances of $160,000 for the same period of 2020.

These amounts do not include cash related to discontinued operations of $75,632 and $6,073 as of March 31, 2021 and 2020.

The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses.

Management’s plans to continue as a going concern 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.

The COVID-19 pandemic has impacted the Company’s business operations to some extent and is expected to continue to do so and, in light of the effect of such pandemic on financial markets, these impacts may include reduced access to capital.

The ability of the Company to continue as a going concern is 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.

The Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under the Credit Agreement with PNC (see Note 4).

As of March 2019, October 2019 and January 2020, we entered into forbearance agreements with PNC.

We encountered subsequent compliance failures with covenants during 2020 and we were out of compliance with the terms of our credit facility, as amended, as of March 31, 2021.

The annual base rent commences at $500,000 for the first year of the term and escalates annually to $652,386 during the last year of the term of the lease.

Concurrently with the entry into the PSA and the Lease, the Company entered into a Consent, Forbearance and Amendment No.

6 to Revolving Credit, Term Loan and Security Agreement (the “Amendment Agreement”) with PNC for itself and for the other participant lenders thereunder (collectively, the “Lender”).

Prior to entering into the Amendment Agreement, PNC had notified the Company that various events of default had occurred under the Loan Agreement (the “Existing Defaults”) and were continuing.

Pursuant to the Amendment Agreement, the Lender consented to the transactions contemplated by the PSA and the Lease, as required under the Loan Agreement.

Additionally, certain additions and amendments to the Loan Agreement were set forth in the Amendment Agreement, including:

The Maximum Revolving Advance Amount is reduced from $18,000,0000 to $9,000,000;

The Termination Date of the Loan Agreement is revised from December 14, 2022 to December 31, 2021;

On or before September 30, 2021, the Company will cause all of the amounts owing under the Loan Agreement to be paid in full in cash;

The Forbearance Reserve (as defined in Amendment No.

5 to the Loan Agreement) shall be increased from $1,025,000 to $2,525,000;

Effective August 1, 2021, accounts receivable from Wal-Mart Stores and its affiliates shall no longer be considered eligible receivables;

Modifications will be made to the budget, testing and variance provisions of the Loan Agreement.

In consideration for entering into the Loan Amendment, the Company agreed to pay the Lender a Forbearance Fee of $1,000,000.

In the foil balloon product line, sales have historically been seasonal with approximately 40% occurring in the period from December through March of the succeeding year and 24% being generated in the period July through October in recent years.

1 unchanged sentence

The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results.

No material changes to such information have occurred during the three and nine months ended September 30, 2020.

No material changes to such information have occurred during the three months ended March 31, 2021.

Quantitative and Qualitative Disclosures Regarding Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis