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 September 30, 2025

☐	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 November 13, 2025, was 2,773,863 (excluding treasury shares).

INDEX

PART I – FINANCIAL INFORMATION

Item No. 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets at September 30, 2025 and December 31, 2024	1
	Unaudited Condensed Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2025 and September 30, 2024	2
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and September 30, 2024	3
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2025 and September 30, 2024	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item No. 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item No. 3	Quantitative and Qualitative Disclosures Regarding Market Risk	16
Item No. 4	Controls and Procedures	16

PART II – OTHER INFORMATION

Item No. 1	Legal Proceedings	17
Item No. 1A	Risk Factors	17
Item No. 2	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item No. 3	Defaults Upon Senior Securities	17
Item No. 4	Mine Safety Disclosures	17
Item No. 5	Other Information	17
Item No. 6	Exhibits	18
	Signatures	19
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

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Yunhong Green CTI, Ltd

Unaudited Condensed Consolidated Balance Sheets

	September 30,			December 31,
	2025			2024
ASSETS
Current assets:
Cash and cash equivalents	$	387,000		$	220,000
Accounts receivable, net		2,691,000			5,403,000
Inventories		8,680,000			8,493,000
Prepaid expenses		184,000			412,000

Total current assets		11,942,000			14,528,000

Property, plant and equipment:
Machinery and equipment		22,347,000			22,246,000
Office furniture and equipment		2,122,000			2,084,000
Intellectual property		783,000			783,000
Leasehold improvements		39,000			39,000
Fixtures and equipment		518,000			518,000
Projects under construction		125,000			196,000
Property, plant and equipment gross		25,934,000			25,866,000
Less: accumulated depreciation and amortization		(21,436,000	)		(20,958,000	)

Total property, plant and equipment, net		4,498,000			4,908,000

Other assets:
Operating lease right-of-use		3,539,000			3,950,000
Prepaid expenses, noncurrent		2,192,000			2,192,000

Total other assets		5,731,000			6,142,000

TOTAL ASSETS	$	22,171,000		$	25,578,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	1,749,000		$	1,537,000
Line of credit		4,579,000			6,578,000
Notes payable – current portion		183,000			606,000
Notes payable – related party		344,000			344,000
Notes payable		344,000			344,000
Operating lease liabilities – current portion		564,000			480,000
Advance investor deposit		100,000			1,050,000
Accrued liabilities		722,000			810,000

Total current liabilities		8,241,000			11,405,000

Long-term liabilities:
Note payable – noncurrent		357,000			-
Operating lease liabilities – noncurrent		3,032,000			3,470,000

Total long-term liabilities		3,389,000			3,470,000

TOTAL LIABILITIES	$	11,630,000		$	14,875,000

SHAREHOLDERS’ EQUITY
Series E Preferred Stock — no par value, 130,000 shares authorized, issued and outstanding at September 30, 2025 and December 31, 2024 (liquidation preference of $1,300,000)		948,000			864,000
Series F Preferred Stock — no par value, 70,000 shares authorized, issued and outstanding at September 30, 2025 and December 31, 2024 (liquidation preference of $700,000)		510,000			465,000
Preferred stock value		510,000			465,000
Common stock - no par value, 2,000,000,000 shares authorized, 2,776,788 and 2,599,185 shares issued, and 2,772,363 and 2,594,759 shares outstanding at September 30, 2025 and December 31, 2024, respectively		28,765,000			27,533,000
Additional paid-in-capital		7,747,000			7,858,000
Accumulated deficit		(27,268,000	)		(25,856,000	)
Less: Treasury stock, 4,426 shares, at cost		(161,000	)		(161,000	)

TOTAL SHAREHOLDERS’ EQUITY		10,541,000			10,703,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	22,171,000		$	25,578,000

See accompanying notes to condensed consolidated unaudited financial statements.

Reflects a 1-for-10 reverse stock split of the Company’s common stock, effective October 1, 2025

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Yunhong Green CTI, LTD

Unaudited Condensed Consolidated Statements of Income (Loss)

	2025			2024			2025			2024
	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2025			2024			2025			2024

Net sales	$	2,953,000		$	2,540,000		$	13,212,000		$	11,788,000

Cost of sales		2,886,000			2,560,000			11,301,000			10,220,000

Gross profit		67,000			(20,000	)		1,911,000			1,568,000

Operating expenses:
General and administrative		869,000			751,000			2,462,000			2,449,000
Selling		37,000			36,000			109,000			105,000
Advertising and marketing		144,000			184,000			482,000			528,000

Total operating expenses		1,050,000			971,000			3,053,000			3,082,000

Income (loss) from operations		(983,000	)		(991,000	)		(1,142,000	)		(1,514,000	)

Other (expense) income:
Interest expense		(198,000	)		(201,000	)		(662,000	)		(655,000	)
Other income/(expense)		370,000			(1,000	)		392,000			(13,000	)

Total other income (expense), net		172,000			(202,000	)		(270,000	)		(668,000	)

Net loss	$	(811,000	)	$	(1,193,000	)	$	(1,412,000	)	$	(2,182,000	)

Deemed dividends on preferred stock		(43,000	)		(28,000	)		(128,000	)		(98,000	)

Net loss attributable to Yunhong CTI Ltd common shareholders	$	(854,000	)	$	(1,221,000	)	$	(1,540,000	)	$	(2,280,000	)

Basic income (loss) per common share	$	(0.31	)	$	(0.47	)	$	(0.58	)	$	(1.01	)
Diluted income (loss) per common share	$	(0.31	)	$	(0.47	)	$	(0.58	)	$	(1.01	)

Weighted average number of shares and equivalent shares of common stock outstanding:
Basic		2,733,863			2,584,819			2,653,638			2,251,727

Diluted		2,733,863			2,584,819			2,653,638			2,251,727

See accompanying notes to condensed consolidated unaudited financial statements.

Reflects a 1-for-10 reverse stock split of the Company’s common stock, effective October 1, 2025

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Yunhong Green CTI, Ltd

Unaudited Condensed Consolidated Statements of Cash Flows

	2025			2024
	For the Nine Months Ended September 30,
	2025			2024

Cash flows from operating activities:
Net loss	$	(1,412,000	)	$	(2,182,000	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		478,000			181,000
Equity compensation expense		18,000			133,000

Change in assets and liabilities:
Accounts receivable		2,712,000			1,779,000
Inventories		(187,000	)		(61,000	)
Prepaid expenses and other assets		228,000			(23,000	)
Trade payables		212,000			651,000
Advance investor deposit		100,000			-
Operating leases		57,000			-
Accrued liabilities		94,000			384,000

Net cash provided by (used in) operating activities		2,300,000			862,000

Cash flows from investing activities:
Purchases of property, plant and equipment		(68,000	)		(302,000	)

Net cash (used in) provided by investing activities		(68,000	)		(302,000	)

Cash flows from financing activities:
Receipt for preferred stock issuance		-			500,000
Repayment of note payable, related party		-			(1,000,000	)
Repayment of note payable		(66,000	)		(47,000	)
Net advances (repayments) on revolving line of credit		(1,999,000	)		(929,000	)

Net cash provided by (used in) financing activities		(2,065,000	)		(1,476,000	)

Net increase (decrease) in cash and cash equivalents		167,000			(916,000	)

Cash and cash equivalents at beginning of period		220,000			921,000

Cash and cash equivalents at end of period	$	387,000		$	5,000

Supplemental disclosure of cash flow information and noncash investing and financing activities:
Cash payments for interest	$	662,000		$	655,000
Accretion of dividends on preferred stock	$	129,000		$	98,000
Common stock issued in exchange for assets acquired		-		$	6,250,000
Allocation of proceeds from preferred stock financing to the issuance of warrants for preferred stock		-		$	814,000
Reclassification of advances upon issuances of preferred stock		-		$	1,500,000
Conversion of advance received from investors into common stock	$	1,050,000			-
Common stock issued in exchange for rent due to Icy Melon	$	182,000			-

See accompanying notes to condensed consolidated unaudited financial statements.

Reflects a 1-for-10 reverse stock split on the Company’s common stock effective October 1, 2025

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Yunhong Green CTI, Ltd

Unaudited Condensed Consolidated Statements of Shareholders’ Equity

	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, 2024		130,000	$	864,000		70,000	$	465,000		2,599,185	$	27,533,000	$	7,858,000		$	(25,856,000	)		(4,426	)	$	(161,000	)	$	10,703,000

Series E Accrued Deemed Dividend		-		28,000				-		-		-		(28,000	)		-			-			-			-
Series F Accrued Deemed Dividend		-		-		-		15,000		-		-		(15,000	)		-			-			-			-
Common Stock Issuance for Rent				-		-		-		27,604		182,000		-			-			-			-			182,000
Equity Compensation Charge		-		-		-		-		-		-		9,000			-			-			-			9,000
Net Loss		-		-		-		-		-		-		-			(416,000	)		-			-			(416,000	)

Balance March 31, 2025		130,000	$	892,000		70,000	$	480,000		2,626,788	$	27,715,000	$	7,824,000		$	(26,272,000	)		(4,426	)	$	(161,000	)	$	10,478,000

Series E Accrued Deemed Dividend		-		28,000				-		-		-		(28,000	)		-			-			-			-
Series F Accrued Deemed Dividend		-		-		-		15,000		-		-		(15,000	)		-			-			-			-
Common Stock Issuance for Advance Investor Deposit				-		-		-		150,000		1,050,000		-			-			-			-			1,050,000
Equity Compensation Charge		-		-		-		-		-		-		8,000			-			-			-			8,000
Net Loss		-		-		-		-		-		-		-			(185,000	)		-			-			(185,000	)

Balance June 30, 2025		130,000	$	920,000		70,000	$	495,000		2,776,788	$	28,765,000	$	7,789,000		$	(26,457,000	)		(4,426	)	$	(161,000	)	$	11,351,000

Series E Accrued Deemed Dividend		-		28,000				-		-		-		(28,000	)		-			-			-			-
Series F Accrued Deemed Dividend		-		-		-		15,000		-		-		(15,000	)		-			-			-			-
Equity Compensation Charge		-		-		-		-		-		-		1,000			-			-			-			1,000
Net Loss		-		-		-		-		-		-		-			(811,000	)		-			-			(811,000	)

Balance September 30, 2025		130,000	$	948,000		70,000	$	510,000		2,776,788	$	28,765,000	$	7,747,000		$	(27,268,000	)		(4,426	)	$	(161,000	)	$	10,541,000

See accompanying notes to unaudited condensed consolidated financial statements.

Reflects a 1-for-10 reverse stock split on the Company’s common stock effective October 1, 2025

	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		-	$	-		-	$	-		2,081,560	$	21,283,000	$	6,967,000		$	(24,357,000	)		(4,426	)	$	(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		-		-		-		-		-		-		-			-			-			-			-
Common Stock Issued for Assets Acquired		-		-		-		-		-		-		-			-			-			-			-
Stock Issuance - Vesting Milestone		-		-		-		-		-		-		-			-			-			-			-
Equity Compensation Charge		-		-		-		-		-		-		122,000			-			-			-			122,000
Net Loss		-		-		-		-		-		-		-			(576,000	)		-			-			(576,000	)

Balance March 31, 2024		130,000	$	780,000		70,000	$	420,000		2,081,560	$	21,283,000	$	7,889,000		$	(24,933,000	)		(4,426	)	$	(161,000	)	$	5,278,000

Series E Accrued Deemed Dividend		-		36,000				-		-		-		(36,000	)		-			-			-			-
Series F Accrued Deemed Dividend		-		-		-		20,000		-		-		(20,000	)		-			-			-			-
Common Stock Issued for Assets Acquired		-		-		-		-		500,000		6,250,000		-			-			-			-			6,250,000
Stock Issuance - Vesting Milestone		-		-		-		-		7,625		-		-			-			-			-			-
Equity Compensation Charge		-		-		-		-		-		-		5,000			1,000			-			-			6,000
Net Loss		-		-		-		-		-		-		-			(414,000	)		-			-			(414,000	)

Balance June 30, 2024		130,000	$	816,000	$	70,000	$	440,000		2,589,185	$	27,533,000	$	7,838,000		$	(25,346,000	)		(4,426	)	$	(161,000	)	$	11,120,000
Balance		130,000	$	816,000	$	70,000	$	440,000		2,589,185	$	27,533,000	$	7,838,000		$	(25,346,000	)		(4,426	)	$	(161,000	)	$	11,120,000

Series E Accrued Deemed Dividend		-		18,000				-		-		-		(18,000	)		-			-			-			-
Series F Accrued Deemed Dividend		-		-		-		10,000		-		-		(10,000	)		-			-			-			-
Equity Compensation Charge		-		-		-		-		-		-		6,000						-			-			6,000
Net Loss		-		-		-		-		-		-		-			(1,193,000	)		-			-			(1,193,000	)

Balance September 30, 2024		130,000	$	834,000	$	70,000	$	450,000		2,589,185	$	27,533,000	$	7,816,000		$	(26,539,000	)		(4,426	)	$	(161,000	)	$	9,933,000
Balance		130,000	$	834,000	$	70,000	$	450,000		2,589,185	$	27,533,000	$	7,816,000		$	(26,539,000	)		(4,426	)	$	(161,000	)	$	9,933,000

See accompanying notes to unaudited condensed consolidated financial statements.

Reflects a 1-for-10 reverse stock split on the Company’s common stock effective October 1, 2025

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Yunhong Green CTI Ltd.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 - Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed consolidated interim financial statements have been prepared and, in the opinion of management, contain all material adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the consolidated financial position and the consolidated statements of income (loss), cash flows and changes in shareholders’ equity for the periods presented in conformity with generally accepted accounting principles for interim consolidated financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X.

Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America. Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2025. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2024, filed on April 15, 2025, which can be found on the Company’s website (www.ctiindustries.com) or www.sec.gov.

The accounting policies used in preparing the condensed consolidated financial statements in this Form 10-Q are the same as those used in preparing our consolidated financial statements included in our annual report on Form 10-K for the fiscal year ended December 31, 2024. See Note 2 on Form 10-K for the fiscal year ended December 31, 2024 for significant accounting policies.

The financial information presented in these financial statements has been rounded to the nearest thousand dollars ($000), which is in accordance with our policy to simplify the presentation. The financial information is not presented in thousand-dollar increments.

All of the Company’s historical share and per share information related to issued and outstanding common stock, outstanding share based awards and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect the 1-for-10 reverse stock split approved by the Company’s shareholders on August 22, 2025 and effective October 1, 2025.

Principles of consolidation and nature of operations:

Yunhong Green CTI Ltd., its wholly owned subsidiary Yunhong Technology Industry (Hubei) Co., Ltd., and its inactive subsidiary CTI Supply, Inc. (collectively, the “Company”) (i) design, manufacture and distribute metalized balloon products throughout the world, (ii) distribute purchased latex balloons products, and (iii) operate systems for the production, lamination, coating and printing of films used for food packaging and other commercial uses and for conversion of films to flexible packaging containers and other products.

The condensed consolidated financial statements include the accounts of Yunhong Green CTI Ltd., CTI Supply, Inc., and Yunhong Technology Industry (Hubei) Co., Ltd. All intercompany accounts and transactions have been eliminated in consolidation.

Reclassification:

Certain amounts in the Company’s condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.

Use of estimates:

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the amounts reported of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period in the financial statements and accompanying notes. Actual results may differ from those estimates. The Company’s significant estimates include valuation allowances for credit losses and inventory valuation, and the valuation of warrants to purchase preferred stock.

Segments:

The Company views its operations and manages its business as one segment, both in terms of geography and operations. All manufacturing occurs in the United States. Due to the single reportable segment, this financial information is presented on the Consolidated Statements of Income (Loss). There are no significant segment expenses reported to the chief operating decision maker (CODM) on a disaggregated basis. On June 30, 2024, the Company acquired production assets in China but has not yet commenced operations within this subsidiary.

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Earnings per share:

Basic (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period.

Diluted (loss) per share is computed by dividing the net loss by the weighted average number of shares of common stock and equivalents (stock options and warrants), unless anti-dilutive, during each period. In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive.

For both September 30, 2025 and 2024, shares to be issued upon the exercise of warrants aggregated 55,600. No options were outstanding for the nine months ended September 30, 2025 and 2024. The number of shares included in the determination of earnings on a diluted basis for the three months ended September 30, 2025 and 2024 were none, as doing so would have been anti-dilutive.

Revenue recognition:

Net sales include revenues from sales of products and shipping and handling charges, net of estimates for product returns. Revenue is measured at the amount of consideration the Company expects to receive in exchange for the transferred products. Revenue is recognized at the point in time when we transfer the promised products to the customer and the customer obtains control over the products. The Company recognizes revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight are included in cost of sales, as we have elected the practical expedient included in ASC 606.

The Company provides for product returns based on historical return rates. While we incur costs for sales commissions to our sales employees and outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than one year and we have elected the practical expedient included in ASC 606. We do not incur incremental costs to obtain contracts with our customers. Our product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Therefore, the product warranties are not a separate performance obligation and are accounted for as described herein. Sales taxes assessed by governmental authorities are accounted for on a net basis and are excluded from net sales.

Note 2 – Liquidity and Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business. The Company has a cumulative net loss from inception to September 30, 2025 of approximately $27 million. The accompanying financial statements for the nine months ended September 30, 2025 have been prepared assuming the Company will continue as a going concern. The Company’s cash resources from operations may be insufficient to meet its anticipated needs during the next twelve months. If the Company does not execute its plan, it may require additional financing to fund its future planned operations.

The ability of the Company to continue as a going concern is dependent on the Company having adequate capital to fund its operating plan and performance. Management’s plans to continue as a going concern may include raising additional capital through sales of equity securities and borrowing, continuing to focus our Company on the most profitable elements, 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 challenges, inflationary pressures and tariffs have impacted on the Company’s business operations to some extent and is expected to continue to do so and these impacts may include reduced access to capital. The ability of the Company to continue as a going concern may be dependent upon its ability to successfully 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.

The Company’s primary sources of liquidity continue to include cash and cash equivalents and borrowings available under the Credit Agreement (see Note 3). This credit facility has been amended and concludes on April 30, 2027. However, the Company’s ability to access capital on favorable terms is subject to several factors, including market conditions, lender risk appetite, and overall economic trends. There can be no assurance that such financing will be available, or available on acceptable terms, particularly considering increasingly conservative conditions in the financial markets. The Company continues to monitor its liquidity position and capital structure closely to ensure ongoing financial flexibility.

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Note 3 - Debt

On September 30, 2021 (the “Closing Date”), the Company entered into a loan and security agreement (the “Agreement”) with Line Financial (the “Lender”), which provides for a senior secured financing consisting of a revolving credit facility (the “Revolving Credit Facility) in an aggregate principal amount of up to $7 million, as amended (the “Maximum Revolver Amount”), subject to borrowing base provisions, and term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $731,250 (“Term Loan Amount” and, together with the Revolving Credit Facility, the “Senior Facilities”). The Senior Facilities are secured by substantially all assets of the Company. The Company has remained in compliance with all material covenants since inception.

Borrowings under the Revolving Credit Facility bear interest at the prime rate + 7.82% (15.07% as of September 30, 2025), payable monthly in arrears. The Term Loan Facility bears interest at the prime rate + 1.45% (8.7% as of September 30, 2025) and is repaid in 48 monthly installments of approximately $15,000, beginning November 1, 2021. The Company also pays collateral monitoring fees of 4.62% of the eligible accounts receivable, inventory, and equipment supporting both facilities.

Originally maturing September 30, 2023, the Senior Facilities were extended to April 30, 2027 pursuant to a Fifth Amendment executed on September 30, 2025, which also increased the revolving commitment from $6.0 million to $7.0 million and added a 0.75% renewal fee, payable in two equal installments in October 2025 and September 2026. A $12,500 commitment fee was also incurred. All other material terms, including borrowing base, collateral, and covenants, remained unchanged.

The facility automatically renews for successive one-year periods unless either party provides written notice of termination not less than 90 days prior to the end of the then-current term. The Company may prepay the Term Loan Facility (together with accrued interest and any applicable prepayment fee) in whole, but not in part, upon at least 60 days’ prior written notice.

The Agreement requires the Company to maintain minimum tangible net worth of $4.0 million, subject to adjustment by the Lender. The Company was in compliance with this covenant as of September 30, 2025 and December 31, 2024. The Agreement also limits additional indebtedness, liens, dividends, mergers, and annual capital expenditures exceeding $1.0 million.

At September 30, 2025 and December 31, 2024, the term loan balance was approximately $0.6 million (net of $0 and $17,000 deferred costs, respectively), and the revolving balance was $4.6 million and $6.6 million, respectively. The December 2024 balance temporarily exceeded the then limit due to holiday-related timing and was reduced below the cap on January 3, 2025. $2.4 million remained available for borrowing under the Revolving Credit Facility as of September 30, 2025.

The Company also has a subordinated note payable to John H. Schwan, Director and former Chairman of the Board, bearing 6% interest. The balance was $1.3 million at December 31, 2023; $1.0 million was repaid in January 2024, with $0.3 million remaining due at a future date to be determined.

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Note 4 - Shareholders’ Equity

Series E Convertible Preferred Stock

In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 130,000 shares of Series E Convertible Preferred Stock (“Series E Preferred”) resulting in gross proceeds of $1.3 million from an unrelated third party. In aggregate, between Series E Preferred and Series F Convertible Preferred Stock (“Series F Preferred”) financings, $1.5 million of the total Series E and F proceeds were received as an advance prior to December 31, 2023. These funds advanced were initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was reclassified as equity, similar to the prior Convertible Preferred issuances. The issuance of the Series E Preferred Stock resulted in an allocation of $0.8 million to the convertible preferred stock and $0.5 million to the warrants described below and classified as Additional Paid-In Capital. Holders of the Series E Preferred will be entitled to receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common stock. Such dividends may be paid in cash or otherwise based on the terms of the agreement. In addition, warrants to purchase 36,140 shares of the Company’s common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $15.2 per share or 90% of the variable price based on the ten-day volume weighted average price (“VWAP”) of the Company’s common stock prior to exercise. Accrued dividends of $177,000 and $93,000 were recorded as of September 30, 2025 and December 31, 2024, respectively.

Series F Convertible Preferred Stock

In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 70,000 shares of Series F Preferred resulting in gross proceeds of $0.7 million from an unrelated third party. As disclosed above certain of these proceeds were received as an advance prior to December 31, 2023. This investment was initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was classified as equity, similar to the prior Convertible Preferred issuances. The issuance of the Series F Preferred Stock resulted in an allocation of $0.4 million to the convertible preferred stock and $0.3 million to the warrants described below and classified as Additional Paid-In Capital. Holders of the Series F Preferred will be entitled to receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common stock. Such dividends may be paid in cash or stock, at the Company’s discretion, based on the terms of the agreement. In addition, warrants to purchase 19,460 shares of the Company’s common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $15.2 per share or 90% of the variable price based on the ten-day volume weighted average price (“VWAP”) of the Company’s common stock prior to exercise. Accrued dividends of $95,000 and $50,000 were recorded as of September 30, 2025 and December 31, 2024, respectively.

Warrants

As described above, in connection with the Series E and F convertible preferred equity issuances, a total of 55,600 warrants were issued, convertible in the Company’s common stock at the lower of $15.2 per share or 90% of the 10 day VWAP prior to exercise.

The Company has applied the Black-Scholes model to value stock-based awards. That model incorporates various assumptions in the valuation of stock-based awards relating to the risk-free rate of interest to be applied, the estimated dividend yield and expected volatility of the Company’s Common Stock. The risk-free rate of interest is the U.S. Treasury yield curve for periods within the expected term of the option at the time of grant. The expected volatility is based on historical volatility of the Company’s Common Stock.

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A summary of the Company’s stock warrant activity is as follows:

	Shares under Option (warrant)		Weighted Average Exercise Price
Balance at December 31, 2024		55,600	$	15.2
Granted		-		-
Cancelled/Expired		-		-
Exercised/Issued		-		-
Outstanding at September 30, 2025		55,600		15.2

Exercisable at September 30, 2025		55,600	$	15.2

As of September 30, 2025 the Company reserved the following shares of its common stock for the exercise of warrants, and preferred stock:

2024 Warrants			55,600
Shares reserved as of September 30, 2025			55,600

Restricted Stock Awards

Restricted Stock Units, Performance-Based Restricted Stock Units and Restricted Stock Awards:

Aggregated information regarding RSUs, PSUs and RSAs granted under the Plan is summarized below:

	RSUs, PSUs & RSAs			Weighted Average Grant-Date Fair Value
Outstanding, unvested at December 31, 2024		24,275			5.46
Granted		-
Vested		(3,025	)		7.90
Forfeited		-
Outstanding, unvested at September 30, 2025		21,250			4.51

Note 5 - Legal Proceedings

The Company may be party to certain lawsuits or claims arising in the normal course of business. The ultimate outcome of these matters is unknown but, in the opinion of management, we do not believe any of these proceedings will have, individually or in the aggregate, a material adverse effect upon our financial condition, cash flows or future results of operation.

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Note 6 – Inventories

Schedule of Inventories

	September 30, 2025		December 31, 2024
Raw materials	$	922,000	$	862,000
Work in process		2,604,000		2,444,000
Finished goods		5,154,000		5,187,000
Total inventories	$	8,680,000	$	8,493,000

Note 7 - Concentration of Credit Risk

Concentration of credit risk with respect to trade accounts receivable is generally limited due to the large number of entities comprising the Company’s customer base. The Company performs ongoing credit evaluations and provides an allowance for potential credit losses against the portion of accounts receivable which is estimated to be uncollectible. Such losses have historically been within management’s expectations.

During the three and nine months ended September 30, 2025 and 2024, 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, 2025 and 2024 are as follows:

Schedule of Concentration Risk

	Three Months Ended					Three Months Ended
	September 30, 2025					September 30, 2024
Customer	Net Sales		% of Net Sales			Net Sales		% of Net Sales
Customer A	$	1,433,000		48	%	$	1,731,000		68	%
Customer B	$	723,000		24	%	$	129,000		5	%

	Nine Months Ended					Nine Months Ended
	September 30, 2025					September 30, 2024
Customer	Net Sales		% of Net Sales			Net Sales		% of Net Sales
Customer A	$	6,678,000		50	%	$	6,651,000		56	%
Customer B	$	3,702,000		28	%	$	2,823,000		24	%

As of September 30, 2025, the outstanding accounts receivable balance from these customers was $2.6 million.

Note 8 - Related Party Transactions

Ms. Jana M. Schwan is the Company’s Chief Executive Officer. Her father, John H. Schwan, held several positions with the Company over many years, most recently as Chairman of the Board until June 2020 as discussed in Note 3, Mr. John H. Schwan was owed approximately $0.3 million as of both September 30, 2025 and December 31, 2024, in a note from the Company.

Icy Melon LLC, the landlord of the Company’s Barrington Facility, is also a shareholder of the Company. On January 13, 2025, the Company issued 27,604 common shares, with a fair value of $182,000 to settle rent payable which was included in accrued expenses as of December 31, 2024. Barrington rent expense totaled approximately $141,000 and $417,000 for the three and nine months ended September 30, 2025, respectively, and $137,000 and $405,000 for the three and nine months ended September 30, 2024, respectively. As of September 30, 2025 and December 31, 2024, amounts due to Icy Melon LLC totaled $94,000 and $182,000, respectively, which are included in accrued expenses. As of September 30, 2025, the Company has remaining lease obligations to Icy Melon LLC under the Barrington Facility lease totaling approximately $3,406,000 through the lease term ending April 2031. The Company’s Vice President – Strategy and Business Development also serves as a Manager for Icy Melon LLC.

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Jeffery Leader, who is a shareholder, provided consulting services during the three months ended September 30, 2025. He earned $30,000 in total for his services.

During the nine months ended September 30, 2025, the Company issued 150,000 common shares to Mitzners Consulting, LLC, an existing shareholder of the company, for proceeds of $1,050,000. Such proceeds were received prior to December 31, 2024 and were recorded within advance investor deposit on the consolidated balance sheet as of December 31, 2024. As of September 30, 2025 and December 31, 2024, accrued investor deposits from Mitzners Consulting, LLC totaled $100,000 and $1,050,000 respectively. The Company’s Vice President – Strategy and Business Development also serves as a Manager for Mitzners Consulting, LLC.

The Company formed a wholly owned subsidiary, Yunhong Technology (Hubei) Co. Ltd., in the Hubei Province of China. On June 30, 2024, the Company, through the China subsidiary, acquired certain production assets and prepaid expenses asset pursuant to an Asset Purchase Agreement and in exchange for 500,000 shares of the Company’s common stock, which was valued at $6.25 million. The prepaid expenses asset in the amount of $2.2 million as of September 30, 2025 and December 31, 2024 represents prepayment to the Selling Parties for the Company’s anticipated operational expenses, which the Selling Parties will pay on the Company’s behalf. No start-up operational expenses have been incurred by the China subsidiary as of September 30, 2025.

Note 9 - Leases

We entered lease contracts for certain of our facilities at two locations. Our two leases have remaining lease terms of 3three and six years.

The weighted average discount rate for our operating leases is 14.15%. We calculated the weighted-average discount rate using incremental borrowing rates, which equal the rates of interest that we would pay to borrow funds on a fully collateralized basis over a similar term.

At September 30, 2025, maturities of operating lease liabilities are as follows:

Schedule of Operating Lease Liabilities


2025	$	252,000
2026		1,048,000
2027		1,083,000
2028		1,119,000
2029		627,000
2030		646,000
Thereafter		217,000
Total Lease Payments		4,992,000
Less: Imputed interest		(1,396,000	)
Total Lease Liabilities	$	3,596,000

Note 10 - Subsequent Events

On October 1, 2025, the Company executed a reverse stock split of its shares of common stock at a ratio of 1-for-10. All of the Company’s historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect this 1-for-10 reverse stock split.

On October 21, 2025, the Company received a written notice from Nasdaq Listing Qualifications confirming that, for the ten consecutive trading days ended October 14, 2025, the closing bid price of the Company’s common stock had been at or above $1.00 per share. Accordingly, the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2), and the matter is now closed.

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Item 2. 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 Sec

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