Yunhong Green CTI Ltd. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone Q4 report; the supplied filing text does not provide a clear standalone fourth-quarter financial summary.
Business context
The company develops, manufactures, and sells foil balloons and related novelty products, flexible packaging films, and balloon-inspired gifts. It renamed itself Yunhong Green CTI Ltd. and changed its Nasdaq ticker from CTIB to YHGJ in 2023. Product revenue mix was 66% foil balloons, 5% film products, and 29% other products.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $17.804 million | $18.048 million |
| Gross profit / margin | $3.258 million / 18.3% | $3.138 million / 17.4% |
| Operating loss | $(399,000) | $(1.120) million |
| Net loss | $(235,000) | $(1.467) million |
| Net loss attributable to common shareholders | $(246,000), or $(0.01) per share | $(2.051) million, or $(0.22) per share |
| Cash from (used in) operations | $(1.117) million | $2.368 million |
Sales declined 1%. Foil balloon sales rose 8% to $11.769 million, while film product sales fell 54% to $928,000; other product sales declined 1% to $5.107 million. Cost of sales decreased 2%, and gross margin improved. General and administrative expense fell 19% to $2.995 million. Interest expense increased to $628,000 from $450,000. Other income was $792,000, including recognition of approximately $900,000 related to previously deferred Employee Retention Tax Credit proceeds.
Operating cash flow turned negative, principally as accounts receivable increased by $2.357 million; inventory declined by $534,000. Investing activities used $221,000, while financing activities provided $2.113 million. Year-end cash was $921,000. Current assets were $13.019 million and current liabilities $10.140 million.
At year-end, the company reported $4.991 million drawn on its revolving facility, $673,000 of term debt, and $1.344 million in subordinated officer notes. Total debt was approximately $7.008 million; operating lease liabilities were another $3.364 million. The secured credit facilities, with a maximum revolving amount of $6 million, were extended to September 30, 2025. The company said it was in covenant compliance.
Material changes and unusual items
- Sales mix shifted: foil balloons increased as helium prices eased, while film sales fell following a major customer’s unusually high purchases in 2022.
- Cash generation weakened despite the smaller net loss. The substantial increase in receivables was a significant working-capital use.
- Common shares outstanding increased from 16.06 million at year-end 2022 to 20.77 million at year-end 2023. Conversions of preferred stock and debt/deposits, and shares issued in connection with warrants and deferred liabilities, contributed to the increase. No warrants remained outstanding at year-end.
- The company reported a cumulative deficit of approximately $24 million. Its auditor issued an unmodified financial-statement opinion but highlighted substantial doubt about the company’s ability to continue as a going concern.
- In 2024, after year-end, the company reported that 2023 and January 2024 investor deposits were converted into Series E and F convertible preferred stock totaling $2.0 million. It also repaid $1.0 million of the officer note in January 2024 and said the remainder would be paid later in 2024.
Outlook, risks, and controls
No quantified revenue or earnings guidance is provided. Management’s stated priorities include improving core balloon operations, expanding distribution, developing products, using automation, and exploring compostable materials. Management cautioned that cash may be insufficient for the next 12 months and that additional financing may be needed; its plans to improve performance and raise capital are not assured.
- Customer concentration is acute: Walmart and Dollar Tree accounted for 36% and 46% of 2023 revenue, respectively; the top 10 customers represented 94%. The company generally has no minimum-purchase commitments. Management estimated helium pricing reduced revenue by several million dollars from May 2022 through 2023.
- Other risks include raw-material and helium cost or supply volatility, inflation and supply-chain disruptions, labor costs, intense competition, seasonal demand, inventory obsolescence, and dependence on a limited number of suppliers and customers.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2023 because of material weaknesses: insufficient accounting resources for complex or unusual transactions and excessive dependence on the CEO, who also served as Acting CFO, in a highly manual control environment. Remediation was underway; effectiveness had not yet been established.
- Management did not believe pending ordinary-course legal matters would have a material adverse effect. The filing reports no cybersecurity incident that materially affected, or was reasonably likely to materially affect, the company.
Key facts for investors to verify
- Liquidity and going-concern status, including current cash needs, borrowing availability under the asset-based credit facility, covenant headroom, and any additional financing.
- Collection of the $3.975 million year-end receivables balance, including $3.4 million due from the two largest customers, and the sustainability of customer orders.
- Terms, conversion rights, and potential dilution from the Series E and F preferred stock issued in 2024, as well as completion of the remaining officer-note repayment.
- Progress in remediating the disclosed material weaknesses and whether future filings report effective controls.
- Whether margins and operating cash flow can improve as helium costs, labor expenses, product mix, and automation investments evolve.