Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q includes both historical and "forward-looking statements" within the meaning of federal securities law. All such statements are qualified by this cautionary note, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future results. Words such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," or similar words are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this Quarterly Report on Form 10-Q. We disclaim any intent or obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform such statements to actual results or to changes in our opinions or expectations. These forward-looking statements are affected by factors, risks, uncertainties and assumptions that we make, including, without limitation, those discussed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2025 under the heading "Risk Factors."

Overview

We produce film products for novelty, packaging and container applications. These products include foil balloons, latex balloons and related 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 plant in Lake Barrington, Illinois. The Company purchases latex balloons from an unrelated vendor and distributes in the United States, particularly to those customers that prefer a combined solution for foil and latex balloons. Substantially all our film products for packaging and custom product applications are sold to customers in the United States. We market and sell our 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. The Company incorporated "Green" into the Company name to communicate our intention to supply biodegradable and compostable materials to the marketplace that are developed by our partners in Asia. We created a new subsidiary, in part, for this purpose. In recent periods, the U.S. government has imposed tariffs on certain goods imported from countries including China. Existing and future trade tariffs, import duties and quotas could also materially increase our costs of procuring the materials we use and disrupt the markets for the products we handle, which in turn could have a material adverse effect on our financial position, results of operations and cash flows.

Senior Credit Facilities

As of September 30, 2026, the Company maintained senior secured credit facilities with Line Financial, consisting of a $7.0 million revolving credit facility and a $0.7 million term loan. The facilities are secured by substantially all Company assets.

Borrowings under the Revolving Credit Facility bear interest at the prime rate + 7.82% (14.82% as of September 30, 2026) while the term loan bears interest at the prime rate plus 1.45% and is repaid in monthly installments of approximately $15,000. The facilities include standard financial and operational covenants, including a minimum tangible net worth requirement of $4.0 million, with which the Company was in compliance as of September 30, 2026.

In September 2025, the Company executed a Fifth Amendment extending maturity to April 30, 2027, and increasing the revolving commitment from $6.0 million to $7.0 million. The amendment also introduced a 0.75% renewal fee payable in two equal installments (October 2025 and September 2026) and a $12,500 commitment fee associated with the expanded facility.

On August 24, 2026, the Company entered into a Sixth Amendment to increase the seasonal overadvance limit from $250,000 to $300,000, effective August 28, 2026. The Sixth Amendment also required a one-time payment of $20,000. The seasonal overadvance limit will expire on December 31, 2026, and all outstanding overadvance amounts must be repaid in full by January 31, 2027. Except as described above, all other material terms, including borrowing base, collateral, and covenants, remained unchanged.

At September 30, 2026, the company had $4.8 million outstanding on the revolving facility and $0.4 million on the term loan, with $2.2 million of remaining borrowing capacity.

Note Payable, Related Party

The Company also has a subordinated note payable to former Director and former Chairman John H. Schwan bearing 6% interest, with a balance of $0.3 million remaining after a $1.0 million repayment in January 2024.

Results of Operations

Net Sales: Net sales for the three-month periods ended September 30, 2026 and 2025 were approximately $3,127,000 and $2,953,000, respectively, representing an increase of $174,000 or 6% quarter-over-quarter. The increase is primarily attributable to the timing of sales. In addition, foil balloon volumes have increased during quarter-over-quarter, however, overall for the nine month period it reduced by 10% as one of our mass retail customers adjusted its replenishment practices beginning in the second half of 2025, which affected the three- and nine-month periods.

For the three-month period ended September 30, 2026 and 2025, net sales by product category were as follows:

For the nine-month periods ended September 30, 2026 and 2025, net sales were $13,180,000 and $13,212,000 respectively, representing a decrease of $32,000, or 0%.

For the nine-month periods ended September 30, 2026 and 2025, net sales by product category were as follows:

Foil Balloons. Revenues from the sale of foil balloons increased during the three-month period ended September 30, 2026 to $2,520,000 compared to $2,352,000 during the same period of 2025. The increase is related to the timing of orders and shipments.

Revenues from the sale of foil balloons decreased during the nine-month period ended September 30, 2026 to $8,624,000 compared to $9,597,000 during the same period of 2025. The decrease is related to the timing of orders and shipments. In the second half of 2025 one of our large mass retail customers made some adjustments to their replenishment system due to a surplus in their supply chain.

Films. Revenues from the sale of commercial films were $69,000 and $317,000 during the three and nine month periods ended September 30, 2026, compared to $253,000 and $1,030,000 during the same periods of 2025. Sales in this area have been inconsistent due to a small number of customers and a significant number of competitors. Generally, our customers have experienced lower sales in this area compared to previous years, which has negatively impacted our sales, and we are uncertain whether demand in this segment will recover.

Other Revenues: Revenues from the sale of other products were $537,000 and $4,239,000 during the three and nine month periods ended September 30, 2026 compared to $348,000 and $2,585,000 during the same periods of 2025. Other revenues during these periods primarily consisted of: (i) sales of balloon-inspired gift products, including candy and small inflated balloons packaged in small containers; and (ii) sales of accessories and supply items related to balloon products. The increase in other revenues was primarily attributable to the timing of Valentine's Day-related shipments, as a greater portion of shipments associated with the 2025 Valentine's Day season occurred in December 2024, resulting in lower other revenues during 2025.

Sales 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 and nine month periods ended September 30, 2026 and 2025.

During the three and nine months ended September 30, 2026 and 2025, there were two customers 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, 2026 and 2025 are as follows:

As of September 30, 2026, the total amounts owed to the Company by these customers were approximately $3,101,000 or 99% of the Company's consolidated gross accounts receivable. The amounts owed at September 30, 2025 by these customers were $2,595,000 or 93% of the Company's consolidated accounts receivable. This concentration also affects the Company's liquidity: eligible accounts receivable from these customers constitute a substantial portion of the borrowing base under the Revolving Credit Facility, and the loss of, or significant payment delays by, either customer would reduce availability thereunder.

Cost of Sales. During the three and nine month periods ended September 30, 2026, the cost of sales was $2,796,000 and $11,296,000 compared to $2,886,000 and $11,301,000 respectively for the same periods of 2025, with the change driven largely by changes in sales volume. As a percentage of sales, cost of sales was 89% and 86% during the three and nine months ended September 30, 2026, compared to 98% and 86% during the three and nine months ended September 30, 2025. The decrease in cost of sales during the three months ended September 30, 2026 is attributed to product mix that provides better margins.

General and Administrative. During the three and nine month periods ended September 30, 2026, general and administrative expenses were $868,000 and $2,466,000 as compared to $869,000 and $2,462,000, respectively, for the same periods of 2025.

Selling, Advertising and Marketing: During the three and nine month periods ended September 30, 2026, selling, advertising and marketing expenses were $153,000 and $525,000 as compared to $181,000 and $591,000, respectively, for the same period in 2025. Selling, advertising and marketing costs have decreased by $28,000 and $66,000.

Other Income (Expense): During the three and nine month periods ended September 30, 2026, the Company incurred interest expense of $183,000 and $650,000 as compared to interest expense of $198,000 and $662,000, respectively, during the same periods of 2025.

Financial Condition, Liquidity and Capital Resources

Cash Flow Items.

Operating Activities. During the nine months ended September 30, 2026, net cash provided by operations was $2,240,000, compared to net cash provided by operations during the nine months ended September 30, 2025 of $2,300,000.

Significant changes in working capital items during the nine months ended September 30, 2026 included:

Investing Activity. During the nine months ended September 30, 2026, cash used in investing activity was $106,000, compared to cash used in investing activity for the same period of 2025 in the amount of $68,000.

Financing Activities. During the nine months ended September 30, 2026, cash used in financing activities was $2,120,000 compared to cash used in financing activities for the same period of 2025 in the amount of $2,065,000. Financing activity during 2026 consisted principally of changes in the balances of revolving and principal repayments on term loan debt.

Liquidity and Capital Resources.

At September 30, 2026, the Company had cash balances of $111,000 compared to cash balances of $387,000 for the same period of 2025.

The 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, in obtaining adequate capital on acceptable terms to fund any operating losses. Management's plans to continue as a going concern include raising additional capital, including through a potential registered offering of equity securities, as well as borrowings, continuing to focus on attaining profitable operations, and exploring alternative funding sources on an as needed basis. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The supply chain constraints, inflationary pressures and tariffs are expected to impact to some extent our operations and reduced access to capital. The ability of the Company to continue as a going concern is dependent upon its ability to successfully generate or otherwise secure other sources of financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Although the Company remained in compliance with all financial covenants under the Credit Agreement as of September 30, 2026, management concluded that substantial doubt exists because anticipated operating cash flows and liquidity remain dependent upon obtaining additional financing or achieving sustained profitability.

The Company's primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under the Credit Agreement. The Senior Facilities mature on April 30, 2027. There can be no assurance that the Company will be able to renew, extend or refinance the Senior Facilities, or obtain additional financing, on acceptable terms or at all.

Seasonality

In 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.

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, 2025, 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, 2025.