Revenue and Sales Performance - In 2023, revenues from product lines were as follows: Novelty Products accounted for 66% of total revenues, Flexible Film Products for 5%, and Balloon-inspired gifts and Other Products for 29%[22]. - Consolidated net sales for the fiscal year ended December 31, 2023, were $17.8 million, a decrease of 1% from $18.0 million in 2022[118]. - Sales of foil balloons increased by 8% to $11.8 million in 2023, compared to $10.9 million in 2022[119]. - Sales of film products decreased by 54% to $928,000 in 2023, down from $2.0 million in 2022[120]. - The company has seen an enhanced impact of seasonality in sales, with increased order flow related to events and lower order flow for everyday items since 2022[142]. Product Development and Innovation - The company expanded its product offerings to include compostable materials aimed at replacing single-use plastics, leading to a name change to include "Green" and a new trading symbol "YHGJ" approved by shareholders in August 2023[14]. - The company aims to develop new products and improve existing ones through research and innovation within its core product categories[24]. - The company spent approximately $200,000 on research and development activities in both fiscal years ended December 31, 2023 and 2022[57]. - The company has been engaged in developing flexible film products for over 40 years and holds several patents related to these products, including specific films and zipper closures[15]. Financial Performance and Position - The company has a cumulative net loss of approximately $24 million from inception to December 31, 2023, and may require additional financing to fund future operations[130]. - Cash used in operating activities amounted to $1.1 million in 2023, compared to cash generated of $2.4 million in 2022[127]. - Cash provided by financing activities was $2.1 million in 2023, compared to cash used of $2.1 million in 2022[129]. - The company converted approximately $0.9 million of liabilities into approximately 1.8 million shares of common stock in February 2023[102]. - As of December 31, 2023, the term loan balance was $0.7 million, and the balance of the Revolving Line of Credit was $4,991,000, an increase from $2,878,000 in 2022[137]. Cost and Expense Management - Cost of sales decreased to $14.5 million in 2023 from $14.9 million in 2022, a reduction of 2%[122]. - General and administrative expenses decreased by 19% to $3.0 million in 2023 from $3.7 million in 2022[123]. - Marketing and advertising expenses increased by 32% to $531,000 in 2023, up from $402,000 in 2022[124]. - The company experienced significant fluctuations in the cost of raw materials, which materially affected profitability, particularly in the case of petroleum or natural gas-based films and resins[47]. Compliance and Regulatory Matters - The company is subject to various federal, state, and local laws regarding waste generation and believes it is in material compliance with applicable environmental regulations[60]. - The company has been in compliance with the covenant requiring a Minimum Tangible Net Worth of at least $4,000,000 since inception[135]. - Management concluded that the disclosure controls and procedures were not effective as of December 31, 2023, due to identified material weaknesses[163]. - The company has not maintained effective internal control over financial reporting as of December 31, 2023, due to identified deficiencies[167]. Corporate Governance and Management - The Board of Directors met three times during 2023, with no director absent for more than one meeting[187]. - The Audit Committee met once during 2023 to discuss the Company's financial statements and oversee financial risks[194]. - The Compensation Committee met twice in 2023 to review executive compensation and employee benefit plans[195]. - The Company adopted an Executive Compensation Recovery ("Clawback") Policy in 2023, allowing recovery of performance-based compensation under certain conditions[204]. Employee and Personnel Matters - As of December 31, 2023, the company had 57 full-time employees, with 29 in manufacturing or warehouse functions[58]. - The Company reported a total compensation of $289,400 for CEO Frank Cesario in 2023, a decrease from $338,077 in 2022[206]. - COO Jana Schwan received total compensation of $248,666 in 2023, compared to $254,410 in 2022[206]. - The company is dependent on key personnel for its future success, and any loss of these individuals could adversely affect its business plan[184]. Cybersecurity and Risk Management - The Company has implemented measures to manage cybersecurity risks, with oversight from the Board of Directors and the Audit and Compliance Committee[78]. - Management is responsible for identifying and managing exposure to cybersecurity threats, with a notification process in place for potentially material incidents[80]. Market and Competitive Landscape - The company has developed new distribution channels and sales relationships in the United States, Europe, Mexico, Latin America, and Australia over the past several years[24]. - Foil balloons remain buoyant when filled with helium for extended periods and are marketed as novelty items with printed designs and messages, appealing to the social expression industry[30].
Yunhong Green CTI(YHGJ) - 2023 Q4 - Annual Report