Financial Performance - Net sales for the three months ended March 31, 2023, were $5,051,000, a decrease of 12.9% compared to $5,797,000 for the same period in 2022[7] - Gross profit increased to $1,127,000 for Q1 2023, compared to $1,039,000 in Q1 2022, reflecting a gross margin improvement[7] - The company reported a net income of $396,000 for Q1 2023, a significant turnaround from a net loss of $21,000 in Q1 2022[7] - Basic income per common share for Q1 2023 was $0.02, compared to a loss of $0.04 per share in Q1 2022, indicating improved profitability[7] - Revenues from foil balloons decreased to $3,474,000 (69% of net sales) in Q1 2023 from $3,832,000 (66% of net sales) in Q1 2022, reflecting a 9% decline[73] - Revenues from film products dropped significantly to $89,000 (2% of net sales) in Q1 2023 from $828,000 (14% of net sales) in Q1 2022, a decrease of 89%[74] - Revenues from other products increased to $1,488,000 (29% of net sales) in Q1 2023 from $1,112,000 (19% of net sales) in Q1 2022, a growth of 34%[75] Expenses and Cost Management - Operating expenses totaled $1,115,000 in Q1 2023, slightly down from $1,058,000 in Q1 2022, indicating cost management efforts[7] - General and administrative expenses increased to $961,000 in Q1 2023 from $837,000 in Q1 2022, reflecting startup expenses with a new audit firm[80] - Selling, advertising, and marketing expenses decreased to $154,000 in Q1 2023 from $221,000 in Q1 2022, due to reduced investments[81] - Interest expense rose to $142,000 in Q1 2023 compared to $96,000 in Q1 2022, driven by increased interest rates[82] - The cost of sales for Q1 2023 was $3,924,000, down from $4,758,000 in Q1 2022, attributed to lower sales volume and improved cost efficiencies[79] Cash Flow and Liquidity - Cash and cash equivalents decreased to $130,000 as of March 31, 2023, from $146,000 at the end of 2022[6] - The company generated $1,409,000 in net cash from financing activities during Q1 2023, compared to $155,000 in Q1 2022, highlighting stronger financing efforts[8] - Net cash used by operations was $1,369,000 in Q1 2023, a significant decline from net cash provided of $2,000 in Q1 2022[83] - Cash used in investing activities increased to $56,000 in Q1 2023 from $15,000 in Q1 2022[84] - Cash balances decreased to $130,000 at March 31, 2023, compared to $208,000 at the same date in 2022[86] - The company’s cash resources from operations may be insufficient to meet anticipated needs over the next twelve months, indicating potential liquidity challenges[25] Assets and Liabilities - Accounts receivable increased to $3,344,000 as of March 31, 2023, compared to $1,618,000 at December 31, 2022, indicating potential revenue growth[6] - Total current liabilities rose to $9,288,000 as of March 31, 2023, up from $7,478,000 at the end of 2022, reflecting increased short-term financial obligations[6] - The company’s total assets increased to $16,562,000 as of March 31, 2023, compared to $15,282,000 at December 31, 2022, showing overall growth in asset base[6] - The company’s total stockholders' equity as of March 31, 2023, was $4.035 million[11] - The balance of the Revolving Line of Credit as of March 31, 2023, was $4.3 million, an increase from $2.9 million as of December 31, 2022[70] Financing and Debt - The company had a term loan balance of $0.5 million and a revolving line of credit balance of $4.284 million as of March 31, 2023[34] - The company has a loan agreement with Line Financial, with a revolving credit facility of up to $6 million and a term loan facility of $731,250, maturing on September 30, 2023[64] - The company faces substantial doubt about its ability to continue as a going concern for one year from the issuance of the financial statements[88] - The Credit Agreement, a primary source of liquidity, is set to expire on September 30, 2023, unless extended or replaced[89] Stock and Equity Transactions - The company issued common stock for notes payable and investor deposits amounting to $884,000 during the reporting period[11] - The Company converted a note payable of $0.2 million to Alex Feng into common stock in February 2023[36] - The Series A Preferred Stock generated a beneficial conversion feature valued at approximately $2.5 million, with no dividends accrued in Q1 2023[39] - The Series B Preferred Stock was converted into approximately 1.9 million shares of common stock on February 1, 2023[40] - The Series C Preferred Stock was converted into approximately 2 million shares of common stock on September 1, 2022[41] - The Series D Preferred Stock generated a beneficial conversion feature of approximately $0.3 million, with 1.8 million shares converted on September 1, 2022[43] - The Company converted approximately $0.9 million of liabilities into approximately 1.8 million shares of common stock in February 2023[44] - The Company issued 792,660 warrants in connection with the Series A Offering, with an exercise price of $1 per share[45] - The Company has a total of 128,000 warrants outstanding as of March 31, 2023, with an exercise price of $1.75[48] - The CEO's restricted stock grant includes performance conditions tied to EBITDA, stock price, and operating cash flow, with 250,000 shares awarded[49] Operational Challenges - The company has faced impacts from the COVID-19 pandemic, supply chain challenges, and inflationary pressures, which may affect future operations[26] - The company maintains a Tangible Net Worth of at least $4,000,000, and believes it was in compliance with this covenant as of March 31, 2023[68] - The company had two customers whose purchases represented over 10% of consolidated net sales, contributing $2,563,000 (50%) and $1,652,000 (32%) in Q1 2023, compared to $2,502,000 (43%) and $1,347,000 (23%) in Q1 2022[78] - As of March 31, 2023, the total amounts owed by these two customers were approximately $962,000 (29%) and $2,245,000 (67%) of the company's consolidated net accounts receivable[56]
Yunhong Green CTI(YHGJ) - 2023 Q1 - Quarterly Report