What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-09-25 compared with 2023-11-13 · 142 added, 165 removed, 75 unchanged (80% of the section changed)

21 unchanged sentences

products, films for packaging and custom product applications, and flexible containers for packaging and consumer storage applications.

We produce all of our film products for packaging, container applications and most of our foil balloons at our facility in Lake Barrington,

We produce all of our film products for packaging, container applications and most of our foil balloons at our plant in Lake Barrington,

We used to produce our latex balloons and latex products at a majority-owned facility in Guadalajara, Mexico (Flexo Universal,

5 unchanged sentences

We market and sell our

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.

We have also begun to support and offer for sale compostable material

solutions intended for the North American market.

30, 2021 financing

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”).

Proceeds of loans borrowed under the Senior Facilities

were used to repay all amounts outstanding under the Company’s prior Agreements and for the Company’s working capital.

Senior Facilities are secured by substantially all assets of the Company.

on the Senior Facilities shall be the prime rate published from time to time published in the Wall Street Journal (8% as of March 31,

novelty items, Balloon inspired gifts (balloons and candy arranged to look like a flower bouquet for gifting) and flexible containers

for consumer use primarily in the United States.

During 2023 we changed our name to include “Green”, to communicate our intention

to supply biodegradable and compostable materials to the marketplace that our developed by our partners in Asia.

We are in the process

of creating a new subsidiary for this purpose.

of Significant Events

30, 2021 financing, amended and extended to September 30, 2025

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.

on the Senior Facilities was set at the prime rate published from time to time published in the Wall Street Journal (8.5% as of March 31,

2024), plus 1.95% per annum, accruing daily and payable monthly.

4 unchanged sentences

until the Term Loan Maturity Date (as defined in the Agreement).

Also, the Company will pay the Lender collateral monitoring fees of

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.

the Company paid the Lender a loan fee of 1.25% of the Maximum Revolver Amount and the Term Loan Amount upon the execution of the Agreement.

During August 2022 the terms were modified to reduce the collateral monitoring fee to 2.77% and added a provision that barred the Company

from repaying the facility prior to September 2023.

The September 2023 extension further modified the fee structure, eliminating the

Asset Monitoring Fee on the Revolving Credit Facility while increasing the interest rate to Prime plus 7.82% per annum, with the intent

of being cash flow neutral between the parties but more straightforward in administration.

The Term Loan maintains an asset monitoring

fee of 0.385% per month pursuant to the renewal agreement.

Senior Facilities matured on September 30, 2023 and were extended by agreement between the parties until September 30, 2025.

facility shall automatically be extended 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.

Senior Facilities require that the Company shall, commencing December 31, 2021, 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 during every relevant month, including as of December 31, 2022 and September 30, 2023.

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.

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:

the asset monitoring fee on the Revolving Credit Facility with an increase in interest rate, to Prime plus 7.82% per annum.

change was intended by the parties to be financially neutral while easier to administer.

the interest rate on the Term Loan to Prime plus 1.45% per annum, with lender making a one-time additional advance of $206,000 to

reset the Term Loan to $731,000.

the renewal fee for this transaction to $50,000 from the formula described above.

the Term Loan asset monitoring fee to 0.385% per month.

Senior Facilities require that the Company maintain Tangible Net Worth of at least $4,000,000 or greater (“Minimum Tangible Net

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 March 31, 2024 and December 31, 2023, respectively.

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 million in the aggregate in any fiscal year.

We have extended this facility with the lender on September 30, 2023.

of September 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.

pay dividends and make other restricted payments, or make capital expenditures exceeding $1,000,000 in the aggregate in any fiscal year.

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 September 30, 2023 and December 31, 2022 amounted to $3.4 and $2.9 million, respectively.

Pursuant to the extension, the Lender advanced

the Company $0.2 million and increased the Term Loan to $0.7 million, which will be reflected in the Company’s October 2023 financial

Pursuant to agreement between the parties, the Company paid a $50,000 renewal fee for the renewal, as opposed to the formula

described above.

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.

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,

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

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.

of Operations

For the three month periods ended September 30, 2023 and 2022, net sales were $1,923,000 and $2,263,000, respectively.

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

For the three month periods ended March 31, 2024 and 2023, net sales were $4,894,000 and $5,051,000, respectively.

the three-month period ended March 31, 2024 and 2023, net sales by product category were as follows:

Three Months Ended

September 30, 2023

September 30, 2022

Product Category

% of Net Sales

Foil Balloons

Film Products

the nine month periods ended September 30, 2023 and 2022, net sales were $11,330,000 and $12,478,000, respectively.

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

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Product Category

% of Net Sales

Foil Balloons

Film Products

Revenues from the sale of foil balloons increased during the three months period from $1,612,000 ending September 30, 2022

compared to $1,701,000 during the three month period of 2023.

Revenues from the sale of foil balloons decreased during the nine month

period from $8,118,000 ending September 30, 2022 compared to $8,113,000 during the nine 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.

The 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.

Finally, our seasonality demonstrates

a low point in revenue during the third quarter with a high point during the fourth quarter.

Revenues from the sale of commercial films were $68,000 and $746,000 during the three and nine month periods ended September 30, 2023,

compared to $537,000 and $1,900,000 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 $154,000 and $2,174,000 during the three and nine month periods ended September

30, 2023, compared to $114,000 and $2,460,000 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, (iii) the sale of accessories and supply items related to balloon products, and going

forward (iv) sales of compostable materials.

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

the same shipments during 2022 occurred during April.

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

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.

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

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.

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 September 30, 2023 and 2022.

Three Months Ended September 30,

Top 3 Customers

Top 10 Customers

Nine Months Ended September 30,

sales of our top three and ten customers for the three-month periods ended March 31, 2024 and 2023.

Three Months Ended March 31,

Top 3 Customers

Top 10 Customers

the three and nine months ended September 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 and nine months ended September 30, 2023 and 2022 are

Three Months Ended

September 30, 2023

September 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

of September 30, 2023, the total amounts owed to the Company by these customers were approximately $806,000 or 81% of the Company’s

consolidated net accounts receivable.

The amounts owed at September 30, 2022 by these customers were approximately $679,000 or 45% of

the Company’s consolidated net accounts receivable.

During the three and nine month period ended September 30, 2023, the cost of sales was $1,903,000 and $9,372,000, compared

to $2,021,000 and $10,394,000 respectively for the same periods of 2022 due to lower sales volume.

As a percentage of sales, cost of

sales was 85% during the nine months ended September 30, 2023, compared to 83% during the nine months ended September 30, 2022.

designs its cost structure around its seasonality, with lower revenue and spend during the third quarter and higher activity during the

fourth quarter.

With revenue for the three months ended September 30, 2023 reduced by $0.3 million from the three months ended September

30, 2022, there were greater inefficiencies and reduced fixed cost coverage during the 2023 quarter, resulting in the nine month period

difference noted above.

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

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.

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

2023, with gross margin of 18% during the 2024 period as compared to 22% during the same period of 2023.

and Administrative .

During the three and nine month period ended September 30, 2023, general and administrative expenses were $677,000

and $2,294,000 compared to $896,000 and $2,731,000, respectively, for the same periods in 2022.

When the price of helium increased during

2022, the Company established greater control over its expenses, resulting in lower personnel, professional, and ancillary service cost

during the nine months ended September 30, 2023 as compared to the same period of 2022.

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

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.

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.

Advertising and Marketing .

During the three and nine month period ended September 30, 2023, selling, advertising and marketing expenses

were $172,000 and $474,000 as compared to $103,000 and $435,000, respectively, for the same periods in 2022.

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.

Income (Expense) .

During the three and nine month period ended September 30, 2023, the Company incurred interest expense of $124,000

and $421,000 compared to interest expense of $120,000 and $325,000, 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 the first six months of 2023.

As such, income of none and $895,000 was recognized during the three and nine

months ended September 30, 2023, respectively, for which cash was received during 2022.

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.

Condition, Liquidity and Capital Resources

During the nine months ended September 30, 2023, net cash used in operations was $442,000, compared to net cash provided

by operations during the nine months ended September 30, 2022 of $1,187,000.

changes in working capital items during the nine months ended September 30, 2023 included:

decrease in accounts receivable of $685,000 compared to a decrease in accounts receivable of $2,032,000 in the same period of 2022.

increase in inventory of $203,000 compared to an increase in inventory of $1,286,000 in 2022.

increase in trade payables of $87,000 compared to an decrease in trade payables of $54,000 in 2022.

decrease in prepaid expenses and other assets of $22,000 compared to an increase of $562,000 in 2022.

decrease in accrued liabilities of $496,000 compared to an increase in accrued liabilities of $878,000 in 2022.

During the nine months ended September 30, 2023, cash used in investing activity was $136,000, compared to cash used investing

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.

changes in working capital items during the three months ended March 31, 2024 included:

increase in accounts receivable of $423,000 compared to an increase in accounts receivable of $1,726,000 in the same period of 2023.

decrease in inventory of $81,000 compared to a decrease in inventory of $381,000 in 2023.

increase in trade payables of $47,000 compared to a decrease in trade payables of $35,000 in 2023.

increase in prepaid expenses and other assets of $62,000 compared to an increase of $100,000 in 2023.

decrease in accrued liabilities of $18,000 compared to a decrease in accrued liabilities of $372,000 in 2023.

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.

During the nine months ended September 30, 2023, cash provided by financing activities was $496,000 compared to cash

used in financing activities for the same period of 2022 in the amount of $1,031,000.

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.

and Capital Resources .

September 30, 2023, the Company had cash balances of $64,000 compared to cash balances of $101,000 for the same period of 2022.

March 31, 2024, the Company had cash balances of $49,000 compared to cash balances of $130,000 for the same period of 2023.

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,

16 unchanged sentences

the Credit Agreement.

We believe that we have been in compliance with covenants since refinancing with Line Financial in September 2021.

That Credit Agreement expired per its terms on September 30, 2023, and was replaced by a new agreement between the parties until September

The subordinated note is maturing in the near term.

While the Company expects to address the note maturity and find acceptable

credit as it requires, there can be no assurance of success, and as such, might negatively impact the Company’s ability to continue

as a going concern.

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.

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.

see pages 11-20 of our Annual Report on Form 10-K for the year ended December 31, 2022 for a description of policies that are critical

to our business operations and the understanding of our results of operations.

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, 2023.

Critical Accounting Estimates

The critical accounting estimates utilized by the Company in preparation of the accompanying financial statements are set forth in

Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, under the heading “Management’s Discussion

and Analysis of Financial Condition and Results of Operations”.

There have been no material changes to these policies since December 31, 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