UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to__________

Commission File Number

000-23115

YUNHONG GREEN CTI LTD.

(Exact name of registrant as specified in its charter)

Illinois		36-2848943
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

22160 N. Pepper Road
Barrington, Illinois		60010
(Address of principal executive offices)		(Zip Code)

(847)382-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value per share	YHGJ	The Nasdaq Stock Market LLC
		(The Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, no par value per share, as of September 17, 2024 was 25,848,187 (excluding treasury shares).

INDEX

PART I – FINANCIAL INFORMATION

Item No. 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023	1
	Unaudited Condensed Consolidated Statements of Income (Loss) for the three months ended March 31, 2024 and March 31, 2023	2
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and March 31, 2023	3
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2024 and March 31, 2023	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item No. 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item No. 3	Quantitative and Qualitative Disclosures Regarding Market Risk	15
Item No. 4	Controls and Procedures	15

PART II – OTHER INFORMATION

Item No. 1	Legal Proceedings	16
Item No. 1A	Risk Factors	16
Item No. 2	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item No. 3	Defaults Upon Senior Securities	16
Item No. 4	Mine Safety Disclosures	16
Item No. 5	Other Information	16
Item No. 6	Exhibits	17
	Signatures	18
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32


	March 31, 2024			December 31, 2023

ASSETS
Current assets:
Cash and cash equivalents	$	49,000		$	921,000
Accounts receivable, net		4,398,000			3,975,000
Inventories		7,710,000			7,791,000
Prepaid expenses		394,000			332,000

Total current assets		12,551,000			13,019,000

Property, plant and equipment:
Machinery and equipment		17,940,000			17,940,000
Office furniture and equipment		2,084,000			2,084,000
Intellectual property		783,000			783,000
Leasehold improvements		39,000			39,000
Fixtures and equipment at customer locations		519,000			519,000
Projects under construction		266,000			112,000
Property, plant and equipment gross		21,631,000			21,477,000
Less : accumulated depreciation and amortization		(20,675,000	)		(20,613,000	)

Total property, plant and equipment, net		956,000			864,000

Other assets:
Operating lease right-of-use		3,239,000			3,364,000

Total other assets		3,239,000			3,364,000

TOTAL ASSETS	$	16,746,000		$	17,247,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	964,000		$	917,000
Line of credit		5,556,000			4,991,000
Notes payable - current portion		145,000			140,000
Notes payable - related party		344,000			1,344,000
Notes payable		344,000			1,344,000
Operating lease liabilities		532,000			522,000
Advances from investors		-			2,000,000
Accrued liabilities		708,000			226,000

Total current liabilities		8,249,000			10,140,000

Long-term liabilities:
Notes payable – net of current portion		512,000			533,000
Operating lease liabilities		2,707,000			2,842,000

Total long-term liabilities		3,219,000			3,375,000

TOTAL LIABILITIES		11,468,000			13,515,000

Shareholders’ Equity:
Yunhong CTI, Ltd shareholders’ equity:
Series E Preferred Stock — no par value, 130,000 shares authorized, 130,000 and nil issued and outstanding at March 31, 2024 and December 31, 2023 (liquidation preference of $1,300,000)		780,000			-
Series F Preferred Stock — no par value, 70,000 shares authorized, 70,000 and nil issued and outstanding at March 31, 2024 and December 31, 2023 (liquidation preference of $700,000)		420,000			-
Preferred Stock, value		420,000			-
Common Stock – no par value, 2,000,000,000 shares authorized, 20,815,595 shares issued and 20,771,937 shares outstanding at March 31, 2024 and December 31, 2023, respectively		21,283,000			21,283,000
Paid-in-capital		7,889,000			6,967,000
Accumulated deficit		(24,933,000	)		(24,357,000	)
Less: Treasury stock, 43,658 shares, at cost		(161,000	)		(161,000	)

Total shareholders’ equity		5,278,000			3,732,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	16,746,000		$	17,247,000


	For the Three Months Ended March 31,
	2024			2023

Net sales	$	4,894,000		$	5,051,000

Cost of sales		3,999,000			3,924,000

Gross profit		895,000			1,127,000

Operating expenses:
General and administrative		1,040,000			961,000
Selling		34,000			32,000
Advertising and marketing		174,000			122,000

Total operating expenses		1,248,000			1,115,000

Income / (loss) from operations		(353,000	)		12,000

Other (expense) / income:
Interest expense		(218,000	)		(142,000	)
Other (expense) / income		(5,000	)		526,000

Total other (expense) / income, net		(223,000	)		384,000

Net income / (loss)	$	(576,000	)	$	396,000

Deemed dividends on preferred stock	$	(14,000	)	$	(11,000	)

Net income / (loss) attributable to Yunhong Green CTI Ltd common shareholders	$	(590,000	)	$	385,000

Basic income (loss) per common share	$	(0.03	)	$	0.02

Diluted income (loss) per common share	$	(0.03	)	$	0.02

Weighted average number of shares and equivalent shares of common stock outstanding:
Basic		20,771,937			17,689,552

Diluted		20,771,937			17,689,552


	For the Three Months Ended March 31,
	2024			2023

Cash flows from operating activities:
Net income/(loss)	$	(576,000	)	$	396,000
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization		62,000			80,000
Equity compensation expense		122,000			7,000
Change in assets and liabilities:
Accounts receivable		(423,000	)		(1,726,000	)
Inventories		81,000			381,000
Prepaid expenses and other assets		(62,000	)		(100,000	)
Trade payables		47,000			(35,000	)
Accrued liabilities		(18,000	)		(372,000	)

Net cash used in operating activities		(767,000	)		(1,369,000	)

Cash flows from investing activities:
Purchases of property, plant and equipment		(154,000	)		(56,000	)

Net cash used in investing activities		(154,000	)		(56,000	)

Cash flows from financing activities:
Receipt for preferred stock issuance		500,000			-
Repayment of note payable, related party		(1,000,000	)		-
Net advances (repayments) of term loan		(16,000	)		(45,000	)
Net advances (repayments) on revolving line of credit		565,000			1,454,000

Net cash provided by financing activities		49,000			1,409,000

Net (decrease) / increase in cash and cash equivalents		(872,000	)		(16,000	)

Cash and cash equivalents at beginning of period		921,000			146,000

Cash and cash equivalents at end of period	$	49,000		$	130,000

Supplemental disclosure of cash flow information and noncash investing and financing activities:
Cash payments for interest	$	218,000		$	118,000
Accretion of dividends on preferred stock	$	14,000		$	11,000
Conversion of notes and deposits into common stock	$	-		$	885,000
Reclassification of advances upon issuances of preferred stock	$	1,500,000		$	-
Allocation of proceeds from preferred stock financing to the issuance of warrants for preferred stock	$	814,000		$	-

	Shares		Amount		Shares		Amount			-	Shares		Amount		Capital			Earnings			Shares			Amount			TOTAL
	Series E Preferred Stock				Series F Preferred Stock						Common Stock				Paid-in			Accumulated (Deficit)			Less Treasury Stock
	Shares		Amount		Shares		Amount				Shares		Amount		Capital			Earnings			Shares			Amount			TOTAL

Balance December 31, 2023		-				-			-			20,815,595	$	21,283,000	$	6,967,000		$	(24,357,000	)		(43,658	)	$	(161,000	)		3,732,000

Series E Preferred Stock Issuance		130,000		771,000												529,000												1,300,000
Series F Preferred Stock Issuance						70,000		415,000								285,000												700,000
Series E Accrued Deemed Dividend				9,000												(9,000	)											-
Series F Accrued Deemed Dividend								5,000								(5,000	)											-
Stock Issuance												-																-
Equity Compensation Charge								-								122,000			-									122,000
Net Income (Loss)										-				-					(576,000	)					-			(576,000	)
Balance March 31, 2024		130,000	$	780,000		70,000	$	420,000	-			20,815,595	$	21,283,000	$	7,889,000		$	(24,933,000	)		(43,658	)	$	(161,000	)		5,278,000

-	Replace the asset monitoring fee on the Revolving Credit Facility with an increase in interest rate, to Prime plus 7.82% per annum. This change was intended by the parties to be financially neutral while easier to administer.

-	Reduce the interest rate on the Term Loan to Prime plus 1.45% per annum, with lender making a one-time additional advance of $206,000 to reset the Term Loan to $731,000.

-	Reduce the renewal fee for this transaction to $50,000 from the formula described above.

-	Set the Term Loan asset monitoring fee to 0.385% per month.

	-	Historical stock price volatility: The Company used the weekly closing price to calculate historical annual volatility which was a range from 68% - 241%.

	-	Risk-free interest rate: The Company bases the risk-free interest rate on the rate payable on US treasury securities with a similar maturity in effect at the time of the grant, which was 5.55%.

	-	Expected life: The expected life of the warrants represents the period of time warrants were expected to be outstanding. The Company used an expected life of 5 years.

	-	Dividend yield: The estimate for dividend yield is 0%, as the Company did not issue dividends during 2020 through 2024 and does not expect to do so in the foreseeable future.

	-	Estimated forfeitures: When estimating forfeitures, the Company considers historical terminations as well as anticipated retirements.

	Shares under Option (warrant)		Weighted Average Exercise Price
Balance at December 31, 2023		-	$	-
Granted		556,000		1.52
Cancelled/Expired		-		-
Exercised/Issued		-		-
Outstanding at March 31, 2024		556,000		1.52

Exercisable at March 31, 2024		556,000	$	1.52

2024 Warrants			556,000
Shares reserved as of March 31, 2024			556,000

	March 31, 2024		December 31, 2023
Raw materials	$	1,225,000	$	1,156,000
Work in process		2,501,000		2,511,000
Finished goods		3,894,000		4,124,000
Total inventories	$	7,710,000	$	7,791,000

	Three Months Ended					Three Months Ended
	March 31, 2024					March 31, 2023
Customer	Net Sales		% of Net Sales			Net Sales		% of Net Sales
Customer A	$	2,226,000		46	%	$	2,563,000		50	%
Customer B		1,710,000		35			1,652,000		32

	Three Months Ended March 31,
	% of Sales
	2024			2023

Top 3 Customers		86	%		86	%

Top 10 Customers		93	%		91	%

	●	An increase in accounts receivable of $423,000 compared to an increase in accounts receivable of $1,726,000 in the same period of 2023.

	●	An decrease in inventory of $81,000 compared to a decrease in inventory of $381,000 in 2023.

	●	An increase in trade payables of $47,000 compared to a decrease in trade payables of $35,000 in 2023.

	●	An increase in prepaid expenses and other assets of $62,000 compared to an increase of $100,000 in 2023.

	●	A decrease in accrued liabilities of $18,000 compared to a decrease in accrued liabilities of $372,000 in 2023.

	●	We lacked a sufficient number of accounting professionals with the necessary knowledge, experience and training to adequately account for significant, unusual transactions that resulted in misapplications of GAAP, particularly with regard to the timing of recognition of certain non-cash charges, and

	●	We are overly dependent upon our Acting Chief Financial Officer, who at present is our Chief Executive Officer, within an environment that is highly manual in nature.

Exhibit Number		Description

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith).
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith).
32**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101*		Interactive Data Files, including the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to Consolidated Financial Statements.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*		Filed herewith
**		furnished herewith

Date: September 25, 2024	Yunhong CTI Ltd.

	By:	/s/ Frank J. Cesario
		Frank J. Cesario
		Chief Executive Officer

	By:	/s/ Frank J. Cesario
		Frank J. Cesario
		Acting Chief Financial Officer

SEC Form 10-Q filed by Yunhong Green CTI Ltd.