Revenue and Sales Performance - In 2022, revenue breakdown was as follows: Novelty Products accounted for 60% of total revenues, Flexible Film Products for 11%, and Candy Blossoms and Other Products for 29%[20]. - The company's total revenues from continuing operations for the year ended December 31, 2022, were $18.048 million, a decrease of 25.1% from $24.086 million in 2021[100]. - Foil balloons accounted for 60% of total net sales in 2022, down from 76% in 2021, while the "Other" category increased to 29% from 14%[100]. - Sales to the top 10 customers represented 90% of net revenues in 2022, compared to 85% in 2021, indicating a high customer concentration risk[104]. - Sales of foil balloons decreased by 40% to $10,858,000 in 2022 from $18,235,000 in 2021, primarily due to increased helium prices[108]. - Sales of film products decreased by 15% to $2,036,000 in 2022 from $2,386,000 in 2021, as the second largest customer had excess inventory[109]. - Sales of other products increased by 49% to $5,154,000 in 2022 from $3,464,000 in 2021, driven by larger holiday orders and new product offerings[110]. - Consolidated net sales for the fiscal year ended December 31, 2022, were $18,048,000, a decrease of 25% compared to $24,086,000 in 2021[107]. Operational Changes and Strategy - The company plans to focus on growth and profitability within its core product lines, specifically foil balloons and related products, while liquidating non-core subsidiaries[22]. - The company has successfully transitioned to a new credit facility since September 2021, remaining in compliance since inception[22]. - The company relocated its warehousing and light assembly facility to Elgin, IL in March 2021, instead of Laredo, TX due to various factors including the Covid-19 pandemic[22]. - The company has developed new distribution channels and sales relationships in the United States, Europe, Mexico, Latin America, and Australia[22]. - The company has introduced additional automation features in production lines during 2022 and plans to continue implementing automation tools in 2023 and beyond to manage labor costs[59]. - The company has exited foreign operations since 2019, focusing on North American operations, particularly foil balloons and related products[86]. Financial Performance and Challenges - The company experienced significant fluctuations in the cost of raw materials, which represent a substantial portion of total product costs, impacting profitability[46]. - The price of helium, crucial for the company's foil balloons, increased dramatically beginning in February 2022, negatively affecting revenue by several million dollars from May 2022 through the end of 2022[69]. - Cash generated by operating activities amounted to $2,368,000 in 2022, compared to cash used of ($3,710,000) in 2021[118]. - The company incurred net interest expense of $450,000 in 2022, down from $564,000 in 2021, due to a lower average outstanding balance of debt[115]. - The company has a cumulative net loss of approximately $24 million from inception to December 31, 2022, raising concerns about its ability to continue as a going concern[122]. - The company has received approximately $160,000 in Employee Retention Tax Credits (ERTC) and sold remaining claims for $1.2 million to a third party for $0.9 million[134]. Research and Development - The company engages in research and development to create innovative and proprietary products within its core product categories[22]. - Research and development expenditures were approximately $200,000 for the fiscal year ended December 31, 2022, compared to $206,000 in 2021, indicating a slight decrease in investment[56]. Leadership and Governance - The company has experienced significant leadership changes, with Frank Cesario rejoining as Chief Executive Officer in January 2022 after previously serving in various roles since 2017[171]. - The Board of Directors consists of five members, with three identified as independent according to NASDAQ standards[181]. - The Audit Committee met three times during 2022 to oversee financial risks and ensure compliance with accounting standards[190]. - The Compensation Committee, which met twice in 2022, is responsible for reviewing executive compensation and employee benefit plans[191]. - The Company aims to improve board diversity, having transitioned from a 100% Caucasian, 100% male board to three Asian directors, two of whom are female[197]. - The Company has established a goal for broad representation on its Board of Directors, reflecting its commitment to diversity[197]. Compliance and Internal Controls - The company is subject to various federal, state, and local regulations regarding waste management and environmental compliance, which it believes it is in material compliance with[60]. - Management identified material weaknesses in internal control over financial reporting, concluding that there is a reasonable possibility of material misstatements in the consolidated financial statements[162]. - The Company maintains disclosure controls and procedures to ensure compliance with the Securities Exchange Act of 1934[156]. - The Company has adopted a complaint monitoring procedure for confidential reporting of accounting or auditing concerns[189]. Employee Compensation - In 2022, Frank Cesario, the Chief Executive Officer, received total compensation of $338,077, which included a salary of $235,577 and stock awards of $102,500[203]. - Jana M. Schwan, the Chief Operating Officer, earned total compensation of $254,410 in 2022, with a salary of $201,910 and stock awards of $43,000[203]. - Jennifer M. Connerty, the Chief Financial Officer, had total compensation of $32,013 in 2022, reflecting her salary[203]. - The compensation expense for stock awards in 2022 was recognized under ASC Topic 718 as reported in the Company's audited financial statements[205]. - The Company had no employment agreements with Named Executive Officers until January 2022, when Mr. Cesario entered into his agreement[208].
Yunhong Green CTI(YHGJ) - 2022 Q4 - Annual Report