We have a history of operating losses and substantial indebtedness. Future cash flows from operations and financings may not be sufficient to enable us to meet our obligations under our indebtedness, which likely would have a material adverse effect on our business, financial condition, and results of operations.
We may need additional financing and our ability to obtain such financing may be limited.
The Gerber Finance loan agreements contain certain covenants that restrict our ability to engage in certain transactions and may impair our ability to respond to changing business and economic conditions.
Our inability to comply with the financial covenants under our loan agreements with Gerber Finance and Premier Bank could have a material adverse effect on our financial condition.
We are dependent on our senior management team and other key employees.
The cyclical and seasonal nature of the housing industry causes our revenues and operating results to fluctuate, and we expect this cyclicality and seasonality to continue in the future.
Our operating results could be adversely affected by changes in the cost and availability of raw materials.
We have material weaknesses in our internal control over financial reporting and concluded that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2018.
We have a few customers that account for a significant portion of our revenues, and the loss of these customers, or decrease in their demand for our products, could have a material adverse effect on our results.
If KBS is unable to maintain or establish its relationships with independent dealers and contractors who sell its homes, KBS revenue could decline.
Due to the nature of our business, many of our expenses are fixed costs and if there are decreases in demand for our products, it may adversely affect our operating results.
Certain actions taken in connection with reducing operating costs may have a negative impact on our business.
Due to the nature of the work we perform, we may be subject to significant liability claims and disputes.
Our costs of doing business could increase as a result of changes in, expanded enforcement of, or adoption of new federal, state or local laws and regulations.
There is a limited market for our common stock.
Our ability to use net operating loss carryforwards to offset future taxable income for U.S. income tax purposes may be limited.
The concentration of our stock ownership may limit individual stockholder ability to influence corporate matters.
Net Sales. Net sales were approximately $6.9 million for the three months ended June 30, 2019 compared with approximately $11.3 million for the same period in 2018. The decrease was primarily due to a decrease in KBS’s net sales, which were approximately $2.9 million for the three months ended June 30, 2019 as compared to $4.9 million for the same period in 2018, a decrease in EBGL net sales which were approximately $4.0 million for the three months ended June 30, 2019 compared to $5.5 million for the comparable period in 2018 and a decrease in LSVM net sales, which were approximately $49.7 thousand for the three months ended June 30, 2019 as compared to $0.9 million for the same period in 2018. The decrease in KBS net sales was primarily due to a decrease in commercial developer sales as the Company adjusts to the strategic shift away from large commercial projects with significant site work to focus on its core competency of manufacturing modular buildings for residential customers, as disclosed in Note 2 to the condensed consolidated financial statements. The decrease in EGBL sales was primarily due to timing.
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