What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-11 compared with 2023-05-15 · 77 added, 67 removed, 113 unchanged (56% of the section changed)

29 unchanged sentences

We market and sell our

novelty items, Candy Blossoms (balloons and candy arranged to look like a flower bouquet for gifting) and flexible containers for consumer

use primarily in the United States.

of Significant Events

novelty items, including balloon-inspired gift items (e.g., balloons and candy arranged to look like a flower bouquet for gifting) and

flexible containers for consumer use primarily in the United States.

30, 2021 financing

33 unchanged sentences

The Company believes it was in compliance with

this covenant during every relevant month, including as of December 31, 2022 and March 31, 2023.

this covenant during every relevant month, including as of December 31, 2022 and June 30, 2023.

Senior Facilities contain certain affirmative and negative covenants that limit the ability of the Company, among other things and subject

1 unchanged sentence

pay dividends and make other restricted payments, or make capital expenditures exceeding $1 million in the aggregate in any fiscal year.

of March 31, 2023 and December 31, 2022, the term loan balance amounted to $0.5 million, which consisted of the principal and interest

payable balance of $0.6 million and deferred financing costs of $0.1 million.

The balance of the Revolving Line of Credit as of March

31, 2023 and December 31, 2022 amounted to $4.3 and $2.9 million, respectively.

We are currently working on having a facility in place when the current facility expires on September 30, 2023.

of June 30, 2023 and December 31, 2022, the term loan balance amounted to $0.5 million, which consisted of the principal and interest

payable balance of $0.6 million and deferred financing costs of less than $0.1 million.

The balance of the Revolving Line of Credit as

of June 30, 2023 and December 31, 2022 amounted to $4.3 and $2.9 million, respectively.

of Operations

For the three month periods ended March 31, 2023 and 2022, net sales were $5,051,000 and $5,797,000, respectively.

the three-month period ended March 31, 2023 and 2022, net sales by product category were as follows:

Three Months Ended

March 31, 2023

March 31, 2022

Product Category

Foil Balloons

Film Products

Revenues from the sale of foil balloons decreased during the three-month period from $3,832,000 ending March 31, 2022 compared

For the three month periods ended June 30, 2023 and 2022, net sales were $4,059,000 and $4,418,000, respectively.

the three-month period ended June 30, 2023 and 2022, net sales by product category were as follows:

the six month periods ended June 30, 2023 and 2022, net sales were $9,110,000 and $10,215,000, respectively.

the six month period ended June 30, 2023 and 2022, net sales by product category were as follows:

Revenues from the sale of foil balloons increased during the three months period from $2,674,000 ending June 30, 2022 compared

to $2,938,000 during the three month period of 2023.

While the price of helium has reduced from its 2022 peak, it remains elevated from

the beginning of 2022, which negatively impacts the demand for balloons primarily filled with helium.

Revenues from the sale of commercial films decreased, from $828,000 during the three-month period ended March 31, 2022, compared to $89,000

during the same period of 2023.

The Company’s largest customer increased its demand for the line that the Company supplies in 2022

and finished the year with inventory, negatively impacting early 2023 orders.

Revenues from the sale of other products were $1,112,000 during the three-month period ended March 31, 2022, compared to

$1,488,000 during the same period of 2023.

The revenues from the sale of other products during these periods 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 foil balloons decreased during the six month period from

$6,506,000 ending June 30, 2022 compared to $6,412,000 during the six month period of 2023.

An increase in the price of helium during

2022 negatively impacted customers of most types of foil balloons beginning the second quarter 2022.

This price increase was the result

of both the broad inflationary pressures and restrictions on trade with Russia, as we believe the latter supplied approximately 5% of

the helium used in the marketplace.

This combined with temporary individual supply issues created increased pricing in the market.

market price of helium remains elevated based on historical norms, but less elevated than during the middle of 2022.

We also discontinued

certain products during 2022 for which we were not able to secure adequate inflationary price increases.

Revenues from the sale of commercial films were $589,000 and $678,000 during the three and six month periods ended June 30, 2023, compared

to $535,000 and $1,363,000 during the same periods of 2022.

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.

Revenues from the sale of other products were $532,000 and $2,020,000 during the three and six month periods ended June

30, 2023, compared to $1,209,000 and $2,346,000 during the same periods of 2022.

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.

The largest shipments of candy inspired gift items during 2023 occurred during March, while the same shipments during 2022 occurred during

In addition, shipments related to Valentine’s Day were complete as of December 2022, while in the prior year they went into

January 2022.

This timing impacts comparability in an area where total order flow has been increasing.

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 three month periods ended March 31, 2023 and 2022.

Three Months Ended March 31,

Top 3 Customers

Top 10 Customers

the three-month period ended March 31, 2023, there were two customers whose purchases represented more than 10% of the Company’s

sales of our top three and ten customers for the three month periods ended June 30, 2023 and 2022.

Months Ended June 30,

the three and six months ended June 30, 2023 and 2022, there were two customer 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, 2023 were $2,563,000 and $1,652,000, or 50%

and 32%, respectively, of consolidated net sales.

Sales to these customers for the three months ended March 31, 2022 were $2,502,000

and $1,347,000, or 43% and 23%, respectively of consolidated net sales.

As of March 31, 2023, the total amount owed to the Company by

these customers was approximately $962,000 and $2,245,000, or 29% and 67%, respectively of the Company’s consolidated net accounts

The amount owed at March 31, 2022 by these customers was approximately $696,000 and $1,669,000, or 20% and 48%, respectively,

of the Company’s consolidated net accounts receivable.

During the three month period ended March 31, 2023, the cost of sales was $3,924,000, compared to $4,758,000 for the same

period of 2022 due to lower sales volume and increased cost and mix efficiencies during 2023.

Sales to these customers for the three and six months ended June 30, 2023 and 2022 are as follows:

of June 30, 2023, the total amounts owed to the Company by these customers were approximately $2,455,000 or 83% of the Company’s

consolidated net accounts receivable.

The amounts owed at June 30, 2022 by these customers were approximately $2,008,000 or 73% of the

Company’s consolidated net accounts receivable.

During the three and six month period ended June 30, 2023, the cost of sales was $3,545,000 and $7,469,000, compared to

$3,615,000 and $8,373,000 respectively for the same periods of 2022 due to lower sales volume.

As a percentage of sales, cost of sales

was 87% and 82% during the three and six months ended June 30, 2023, compared to 82% and 82% during the three and six months ended June

and Administrative .

During the three month period ended March 31, 2023, general and administrative expenses were $961,000 as compared

to $837,000 for the same period in 2022.

The Company incurred start up expenses with a new audit firm partner during 2023 as well as

transition cost inefficiencies.

During the three and six month period ended June 30, 2023, general and administrative expenses were $656,000

and $1,617,000 compared to $998,000 and $1,835,000, respectively, for the same periods in 2022.

The Company had higher than usual audit

fees related to a new audit firm onboarding during the first three months of 2023 that was not repeated during the second quarter of

Advertising and Marketing .

During the three month period ended March 31, 2023, selling, advertising and marketing expenses were $154,000

as compared to $221,000 for the same period in 2022.

The Company made small investments during 2022 that were not repeated during 2023.

During the three and six month period ended June 30, 2023, selling, advertising and marketing expenses

were $148,000 and $302,000 as compared to $111,000 and $332,000, respectively, for the same periods in 2022.

Income (Expense) .

During the three month period ended March 31, 2023, the Company incurred interest expense of $142,000 as compared

to interest expense of $96,000 during the same period of 2022.

The dramatic increase in interest rates during 2022 flowed through to

the Company’s Prime interest rate based borrowing structure.

During the three and six month period ended June 30, 2023, the Company incurred interest expense of $155,000 and

$297,000 compared to interest expense of $109,000 and $205,000, respectively, during the same periods of 2022.

Interest expense increased

as a result of market rate increases throughout 2022.

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.

Condition, Liquidity and Capital Resources

During the three months ended March 31, 2023, net cash used by operations was $1,369,000, compared to net cash provided

by operations during the three months ended March 31, 2022 of $2,000.

changes in working capital items during the three months ended March 31, 2023 included:

During the six months ended June 30, 2023, net cash used in operations was $1,361,000, compared to net cash provided

by operations during the six months ended June 30, 2022 of $303,000.

changes in working capital items during the six months ended June 30, 2023 included:

increase in accounts receivable of $1,341,000 compared to a decrease in accounts receivable of $707,000 in the same period of 2022.

decrease in inventory of $686,000 compared to an increase in inventory of $405,000 in 2022.

increase in trade payables of $35,000 compared to an increase in trade payables of $215,000 in 2022.

decrease in trade payables of $331,000 compared to an decrease in trade payables of $112,000 in 2022.

increase in prepaid expenses and other assets of $47,000 compared to a decrease of $333,000 in 2022.

decrease in accrued liabilities of $737,000 compared to a decrease in accrued liabilities of $87,000 in 2022.

During the three months ended March 31, 2023, cash used in investing activity was $56,000, compared to cash used in investing

During the six months ended June 30, 2023, cash used in investing activity was $94,000, compared to cash used investing

activity for the same period of 2022 in the amount of $94,000.

During the three months ended March 31, 2023, cash provided by financing activities was $1,409,000 compared to cash provided

by financing activities for the same period of 2022 in the amount of $155,000.

Financing activity during 2023 consisted principally of

changes in the balances of revolving and long-term debt.

During the six months ended June 30, 2023, cash provided by financing activities was $1,409,000 compared to cash used

in financing activities for the same period of 2022 in the amount of $221,000.

and Capital Resources .

March 31, 2023, the Company had cash balances of $130,000 compared to cash balances of $208,000 for the same period of 2022.

June 30, 2023, the Company had cash balances of $100,000 compared to cash balances of $54,000 for the same period of 2022.

ability of the Company to continue as a going concern is dependent on the Company executing its business plan and, if unable to do so,

19 unchanged sentences

While the Company

expects to find an acceptable credit facility, there can be no assurance of success, and as such, might negatively impact the Company’s

ability to continue as a going concern.

expects to find an acceptable credit facility and is currently in negotiations for such, there can be no assurance of success, and as

such, might negatively impact the Company’s ability to continue as a going concern.

the foil balloon product line, sales have historically been seasonal with approximately 40% occurring in the period from December through

6 unchanged sentences

No material changes to such information have occurred during

the three months ended March 31, 2023.

the three and six months ended June 30, 2023.

Quantitative and Qualitative Disclosures Regarding Market Risk

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