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, 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 November 1, 2024 was 25,848,187 (excluding treasury shares).

INDEX

PART I – FINANCIAL INFORMATION

Item No. 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets at September 30, 2024 and December 31, 2023	1
	Unaudited Condensed Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2024 and September 30, 2023	2
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and September 30, 2023	3
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2024 and September 30, 2023	4
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item No. 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item No. 3	Quantitative and Qualitative Disclosures Regarding Market Risk	17
Item No. 4	Controls and Procedures	17

PART II – OTHER INFORMATION

Item No. 1	Legal Proceedings	18
Item No. 1A	Risk Factors	18
Item No. 2	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item No. 3	Defaults Upon Senior Securities	19
Item No. 4	Mine Safety Disclosures	19
Item No. 5	Other Information	19
Item No. 6	Exhibits	19
	Signatures	20
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

	September 30, 2024			December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	5,000		$	921,000
Accounts receivable, net		2,196,000			3,975,000
Inventories, net		7,852,000			7,791,000
Prepaid expenses		355,000			332,000

Total current assets		10,408,000			13,019,000

Property, plant and equipment:
Machinery and equipment		22,246,000			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		166,000			112,000
Property, plant and equipment gross		25,837,000			21,477,000
Less: accumulated depreciation and amortization		(20,794,000	)		(20,613,000	)

Total property, plant and equipment, net		5,043,000			864,000

Other assets:
Operating lease right-of-use asset		2,976,000			3,364,000
Prepaid expenses, non-current		2,192,000			-

Total other assets		5,168,000			3,364,000

TOTAL ASSETS	$	20,619,000		$	17,247,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	1,568,000		$	917,000
Line of credit		4,062,000			4,991,000
Notes payable - current portion		159,000			140,000
Notes payable – related party		344,000			1,344,000
Notes payable		344,000			1,344,000
Operating lease liabilities		554,000			522,000
Advances from investors		585,000			2,000,000
Accrued liabilities		525,000			226,000

Total current liabilities		7,797,000			10,140,000
Long-term liabilities:
Notes payable – net of current portion		467,000			533,000
Operating lease liabilities – noncurrent		2,422,000			2,842,000
Total long-term liabilities		2,889,000			3,375,000

TOTAL LIABILITIES		10,686,000			13,515,000

Stockholders’ Equity:

Series E Preferred Stock — no par value, 130,000 shares authorized, 130,000 and none issued and outstanding at September 30, 2024 and December 31, 2023, respectively (liquidation preference of $1,300,000)		834,000			-
Series F Preferred Stock — no par value, 70,000 shares authorized, 70,000 and none issued and outstanding at September 30, 2024 and December 31, 2023, respectively (liquidation preference of $700,000)		450,000			-
Preferred stock, value		450,000			-
Common Stock – no par value, 2,000,000,000 shares authorized, 25,891,845 and 20,815,595 shares issued and 25,848,187 and 20,771,937 shares outstanding at September 30, 2024 and December 31, 2023, respectively		27,533,000			21,283,000
Paid-in-capital		7,816,000			6,967,000
Accumulated deficit		(26,539,000	)		(24,357,000	)
Less: Treasury stock, 43,658 shares, at cost		(161,000	)		(161,000	)

Total Stockholders’ Equity		9,933,000			3,732,000

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	20,619,000		$	17,247,000

	2024			2023			2024			2023
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2024			2023			2024			2023

Net sales	$	2,540,000		$	1,923,000		$	11,788,000		$	11,033,000

Cost of sales		2,560,000			1,903,000			10,220,000			9,372,000

Gross profit		(20,000	)		20,000			1,568,000			1,661,000

Operating expenses:
General and administrative		751,000			677,000			2,449,000			2,294,000
Selling		36,000			33,000			105,000			98,000
Advertising and marketing		184,000			139,000			528,000			376,000

Total operating expenses		971,000			849,000			3,082,000			2,768,000

Loss from operations		(991,000	)		(829,000	)		(1,514,000	)		(1,107,000	)

Other (expense) income:
Interest expense		(201,000	)		(124,000	)		(655,000	)		(421,000	)
Other income/(expense)		(1,000	)		(14,000	)		(13,000	)		808,000

Total other (expense)/income, net		(202,000	)		(138,000	)		(668,000	)		387,000

Net (loss) / income	$	(1,193,000	)	$	(967,000	)	$	(2,182,000	)	$	(720,000	)

Deemed dividends on preferred stock	$	(28,000	)	$	-		$	(98,000	)	$	(11,000	)

Net (loss) / income attributable to Yunhong Green CTI, Ltd. common stockholders	$	(1,221,000	)	$	(967,000	)	$	(2,280,000	)	$	(731,000	)

Basic (loss) / income per common share	$	(0.05	)	$	(0.05	)	$	(0.10	)	$	(0.04	)

Diluted (loss) / income per common share	$	(0.05	)	$	(0.05	)	$	(0.10	)	$	(0.04	)

Weighted average number of shares and equivalent shares of common stock outstanding:
Basic		25,848,187			20,096,955			22,517,270			19,243,656

Diluted		25,848,187			20,096,955			22,517,270			19,243,656

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

Series E Accrued Deemed Dividend					36,000										(36,000	)										$	-
Series F Accrued Deemed Dividend									20,000						(20,000	)										$	-
Common Stock Issued for Assets Acquired											5,000,000		6,250,000													$	6,250,000
Stock Issuance - Vesting Milestone											76,250															$	-
Equity Compensation Charge									-						5,000			1,000								$	6,000
Net Income (Loss)	-		-		-		-		-		-		-		-			(414,000	)		-			-		$	(414,000	)
Balance June 30, 2024	-		130,000	$	816,000		70,000	$	440,000		25,891,845	$	27,533,000	$	7,838,000		$	(25,346,000	)		(43,658	)	$	(161,000	)	$	11,120,000

Series E Accrued Deemed Dividend					18,000										(18,000	)										$	-
Series F Accrued Deemed Dividend									10,000						(10,000	)										$	-
Common Stock Issued for Assets Acquired											-		-													$	-
Stock Issuance - Vesting Milestone											-															$	-
Equity Compensation Charge									-						6,000			-								$	6,000
Net Income (Loss)	-		-		-		-		-		-		-		-			(1,193,000	)		-			-		$	(1,193,000	)
Balance September 30, 2024	-		130,000	$	834,000		70,000	$	450,000		25,891,845	$	27,533,000	$	7,816,000		$	(26,539,000	)		(43,658	)	$	(161,000	)	$	9,933,000

-	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 which is consistent with the contractual term.

	-	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 September 30, 2024		556,000		1.52

Exercisable at September 30, 2024		556,000	$	1.52

2024 Warrants			556,000
Shares reserved as of September 30, 2024			556,000

	September 30, 2024		December 31, 2023
Raw materials	$	1,197,000	$	1,156,000
Work in process		2,563,000		2,511,000
Finished goods		4,092,000		4,124,000
Total inventories	$	7,852,000	$	7,791,000

	Three Months Ended					Three Months Ended
	September 30, 2024					September 30, 2023
Customer	Net Sales		% of Net Sales			Net Sales		% of Net Sales
Customer A	$	1,731,000		68	%	$	1,097,000		56	%
Customer B	$	129,000		5	%	$	239,000		12	%

	Nine Months Ended					Nine Months Ended
	September 30, 2024					September 30, 2023
Customer	Net Sales		% of Net Sales			Net Sales		% of Net Sales
Customer A	$	6,651,000		56	%	$	6,007,000		53	%
Customer B	$	2,823,000		24	%	$	2,559,000		23	%

	September 30, 2024					September 30, 2023
	$					$
Product Category	(000) Omitted		% of Net Sales			(000) Omitted		% of Net Sales			Variance			% change

Foil Balloons	$	8,493		72	%	$	8,113		74	%	$	380			5	%

Film Products		605		5	%		746		7	%		(141	)		(19	)%

Other		2,690		23	%		2,174		19	%		516			24	%

Total	$	11,788		100	%	$	11,033		100	%	$	755			7	%

	Three Months Ended September 30,
	% of Sales
	2024			2023

Top 3 Customers		79	%		75	%

Top 10 Customers		90	%		87	%

	Nine Months Ended September 30,
	% of Sales
	2024			2023

Top 3 Customers		83	%		80	%

Top 10 Customers		93	%		91	%

	●	An increase in prepaid expenses and other assets of $23,000 compared to an increase of $22,000 in 2023.

	●	An increase in accrued liabilities of $384,000 compared to a decrease in accrued liabilities of $496,000 in 2023.

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