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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 June 30, 2024
OR
☐ |
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
Yunhong Green CTI, LTD
Unaudited Condensed Consolidated Balance Sheets
Dollars
(not share data) rounded to nearest thousand $000 for presentation
| |
June 30, 2024 | | |
December 31, 2023 | |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 22,000 | | |
$ | 921,000 | |
Accounts receivable, net | |
| 3,430,000 | | |
| 3,975,000 | |
Inventories, net | |
| 7,444,000 | | |
| 7,791,000 | |
Prepaid expenses | |
| 353,000 | | |
| 332,000 | |
| |
| | | |
| | |
Total current assets | |
| 11,249,000 | | |
| 13,019,000 | |
| |
| | | |
| | |
Property, plant and equipment: | |
| | | |
| | |
Machinery and equipment | |
| 22,066,000 | | |
| 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 | |
| 318,000 | | |
| 112,000 | |
Property, plant and equipment gross | |
| 25,809,000 | | |
| 21,477,000 | |
Less: accumulated depreciation and amortization | |
| (20,733,000 | ) | |
| (20,613,000 | ) |
| |
| | | |
| | |
Total property, plant and equipment, net | |
| 5,076,000 | | |
| 864,000 | |
| |
| | | |
| | |
Other assets: | |
| | | |
| | |
Operating lease right-of-use asset | |
| 3,108,000 | | |
| 3,364,000 | |
Prepaid expenses, non-current | |
| 2,192,000 | | |
| - | |
| |
| | | |
| | |
Total other assets | |
| 5,300,000 | | |
| 3,364,000 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 21,625,000 | | |
$ | 17,247,000 | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Trade payables | |
$ | 847,000 | | |
$ | 917,000 | |
Line of credit | |
| 4,788,000 | | |
| 4,991,000 | |
Notes payable - current portion | |
| 153,000 | | |
| 140,000 | |
Notes payable – related party | |
| 344,000 | | |
| 1,344,000 | |
Notes payable | |
| 344,000 | | |
| 1,344,000 | |
Operating lease liabilities | |
| 543,000 | | |
| 522,000 | |
Advances from investors | |
| - | | |
| 2,000,000 | |
Accrued liabilities | |
| 775,000 | | |
| 226,000 | |
| |
| | | |
| | |
Total current liabilities | |
| 7,450,000 | | |
| 10,140,000 | |
Long-term liabilities: | |
| | | |
| | |
Notes payable – net of current portion | |
| 490,000 | | |
| 533,000 | |
Operating lease liabilities – noncurrent | |
| 2,565,000 | | |
| 2,842,000 | |
Total long-term liabilities | |
| 3,055,000 | | |
| 3,375,000 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 10,505,000 | | |
| 13,515,000 | |
| |
| | | |
| | |
Stockholders’ Equity: | |
| | | |
| | |
| |
| | | |
| | |
Series E Preferred Stock — no par value, 130,000 shares authorized, 130,000 and none issued and outstanding at June 30, 2024 and December 31, 2023, respectively (liquidation preference of $1,300,000) | |
| 816,000 | | |
| - | |
Series F Preferred Stock — no par value, 70,000 shares authorized, 70,000 and none issued and outstanding at June 30, 2024 and December 31, 2023, respectively (liquidation preference of $700,000) | |
| 440,000 | | |
| - | |
Preferred stock, value | |
| 440,000 | | |
| - | |
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 June 30, 2024 and December 31, 2023, respectively | |
| 27,533,000 | | |
| 21,283,000 | |
Paid-in-capital | |
| 7,838,000 | | |
| 6,967,000 | |
Accumulated deficit | |
| (25,346,000 | ) | |
| (24,357,000 | ) |
Less: Treasury stock, 43,658 shares, at cost | |
| (161,000 | ) | |
| (161,000 | ) |
| |
| | | |
| | |
Total Stockholders’ Equity | |
| 11,120,000 | | |
| 3,732,000 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 21,625,000 | | |
$ | 17,247,000 | |
See accompanying notes to condensed consolidated unaudited financial statements
Yunhong Green CTI, LTD
Unaudited Condensed Consolidated Statements of Income (Loss)
Dollars
(not share and per share data) rounded to nearest thousand $000 for presentation
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
For the Three Months Ended June 30, | | |
For the Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
| | |
| | |
| | |
| |
Net sales | |
$ | 4,354,000 | | |
$ | 4,059,000 | | |
$ | 9,248,000 | | |
$ | 9,110,000 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of sales | |
| 3,662,000 | | |
| 3,545,000 | | |
| 7,660,000 | | |
| 7,469,000 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 692,000 | | |
| 514,000 | | |
| 1,588,000 | | |
| 1,641,000 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
General and administrative | |
| 640,000 | | |
| 656,000 | | |
| 1,698,000 | | |
| 1,617,000 | |
Selling | |
| 35,000 | | |
| 33,000 | | |
| 69,000 | | |
| 65,000 | |
Advertising and marketing | |
| 188,000 | | |
| 115,000 | | |
| 344,000 | | |
| 237,000 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 863,000 | | |
| 804,000 | | |
| 2,111,000 | | |
| 1,919,000 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (171,000 | ) | |
| (290,000 | ) | |
| (523,000 | ) | |
| (278,000 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other (expense) income: | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (236,000 | ) | |
| (155,000 | ) | |
| (454,000 | ) | |
| (297,000 | ) |
Other income/(expense) | |
| (7,000 | ) | |
| 296,000 | | |
| (12,000 | ) | |
| 822,000 | |
| |
| | | |
| | | |
| | | |
| | |
Total other (expense)/income, net | |
| (243,000 | ) | |
| 141,000 | | |
| (466,000 | ) | |
| 525,000 | |
| |
| | | |
| | | |
| | | |
| | |
Net (loss) / income | |
$ | (414,000 | ) | |
$ | (149,000 | ) | |
$ | (989,000 | ) | |
$ | 247,000 | |
| |
| | | |
| | | |
| | | |
| | |
Deemed dividends on preferred stock | |
$ | (56,000 | ) | |
$ | - | | |
$ | (70,000 | ) | |
$ | (11,000 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net (loss) / income attributable to Yunhong Green CTI, Ltd. common stockholders | |
$ | (470,000 | ) | |
$ | (149,000 | ) | |
$ | (1,059,000 | ) | |
$ | 236,000 | |
| |
| | | |
| | | |
| | | |
| | |
Basic (loss) / income per common share | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.05 | ) | |
$ | 0.01 | |
| |
| | | |
| | | |
| | | |
| | |
Diluted (loss) / income per common share | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.05 | ) | |
$ | 0.01 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of shares and equivalent shares of common stock outstanding: | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 20,895,082 | | |
| 20,034,941 | | |
| 20,833,509 | | |
| 18,822,352 | |
| |
| | | |
| | | |
| | | |
| | |
Diluted | |
| 20,895,082 | | |
| 20,034,941 | | |
| 20,833,509 | | |
| 18,822,352 | |
See
accompanying notes to condensed consolidated unaudited financial statements
Yunhong Green CTI, LTD
Unaudited Condensed Consolidated Statements of Cash Flows
Dollars
rounded to nearest thousand $000 for presentation
| |
2024 | | |
2023 | |
| |
For the Six Months Ended June 30, | |
| |
2024 | | |
2023 | |
| |
| | |
| |
Cash flows from operating activities: | |
| | | |
| | |
Net income/(loss) | |
$ | (989,000 | ) | |
$ | 247,000 | |
Adjustments to reconcile net income/(loss) to net cash (used in) provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 120,000 | | |
| 151,000 | |
Equity compensation expense | |
| 127,000 | | |
| 11,000 | |
Change in assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 545,000 | | |
| (1,341,000 | ) |
Inventories | |
| 347,000 | | |
| 686,000 | |
Prepaid expenses and other assets | |
| (21,000 | ) | |
| (47,000 | ) |
Trade payables | |
| (70,000 | ) | |
| (331,000 | ) |
Accrued liabilities | |
| 49,000 | | |
| (737,000 | ) |
| |
| | | |
| | |
Net cash provided by (used in) operating activities | |
| 108,000 | | |
| (1,361,000 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Purchases of property, plant and equipment | |
| (274,000 | ) | |
| (94,000 | ) |
| |
| | | |
| | |
Net cash used in investing activities | |
| (274,000 | ) | |
| (94,000 | ) |
| |
| | | |
| | |
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 | |
| (30,000 | ) | |
| (90,000 | ) |
Net advances (repayments) on revolving line of credit | |
| (203,000 | ) | |
| 1,499,000 | |
| |
| | | |
| | |
Net cash (used in) provided by financing activities | |
| (733,000 | ) | |
| 1,409,000 | |
| |
| | | |
| | |
Net (decrease) / increase in cash and cash equivalents | |
| (899,000 | ) | |
| (46,000 | ) |
| |
| | | |
| | |
Cash and cash equivalents at beginning of period | |
| 921,000 | | |
| 146,000 | |
| |
| | | |
| | |
Cash and cash equivalents at end of period | |
$ | 22,000 | | |
$ | 100,000 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information and noncash investing and financing activities: | |
| | | |
| | |
Cash payments for interest | |
$ | 454,000 | | |
$ | 259,000 | |
Accretion of dividends on preferred stock | |
$ | 70,000 | | |
$ | 11,000 | |
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 notes and deposits into common stock | |
$ | - | | |
$ | 885,000 | |
Conversion of Series B preferred stock into common stock | |
$ | - | | |
$ | 1,500,000 | |
See accompanying notes to condensed consolidated unaudited financial statementsd
Yunhong
Green CTI, Ltd
Unaudited
Consolidated Statements of Stockholders’ Equity
Dollars
(not share data) rounded to nearest thousand $000 for presentation
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Less | | |
| |
| |
Series
E Preferred Stock | | |
Series
F Preferred Stock | | |
Common
Stock | | |
Paid-in | | |
Accumulated | | |
Treasury
Stock | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
(Deficit)
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 | |
Yunhong
Green CTI, Ltd
Unaudited
Consolidated Statements of Stockholders’ Equity
Dollars
(not share data) rounded to nearest thousand $000 for presentation
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
Less | | |
| |
| |
Series
B Preferred Stock | | |
Common
Stock | | |
Paid-in | | |
Accumulated | | |
Treasury
Stock | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
(Deficit)
Earnings | | |
Shares | | |
Amount | | |
TOTAL | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance
December 31, 2022 | |
| 170,000 | | |
$ | 1,851,000 | | |
| 16,102,749 | | |
$ | 21,283,000 | | |
$ | 3,895,000 | | |
$ | (24,122,000 | ) | |
| (43,658 | ) | |
$ | (161,000 | ) | |
$ | 2,746,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Series
B Convertible Preferred Stock Conversion into Common Stock | |
| (170,000 | ) | |
| (1,862,000 | ) | |
| 1,888,078 | | |
| - | | |
| 1,862,000 | | |
| | | |
| | | |
| | | |
$ | - | |
Common
Stock issued for notes payable and investor deposit | |
| | | |
| - | | |
| 1,908,336 | | |
| | | |
| 884,000 | | |
| | | |
| | | |
| | | |
$ | 884,000 | |
Accrued
Deemed Dividend - Series B Preferred Stock | |
| | | |
| 11,000 | | |
| | | |
| | | |
| (11,000 | ) | |
| | | |
| | | |
| | | |
$ | - | |
Equity
Compensation Charge | |
| | | |
| | | |
| 116,250 | | |
| | | |
| 7,000 | | |
| 2,000 | | |
| | | |
| | | |
$ | 9,000 | |
Net
Income (Loss) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 396,000 | | |
| - | | |
| - | | |
$ | 396,000 | |
Balance
March 31, 2023 | |
| - | | |
$ | - | | |
| 20,015,413 | | |
$ | 21,283,000 | | |
$ | 6,637,000 | | |
$ | (23,724,000 | ) | |
| (43,658 | ) | |
$ | (161,000 | ) | |
$ | 4,035,000 | |
Balance | |
| - | | |
$ | - | | |
| 20,015,413 | | |
$ | 21,283,000 | | |
$ | 6,637,000 | | |
$ | (23,724,000 | ) | |
| (43,658 | ) | |
$ | (161,000 | ) | |
$ | 4,035,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Equity
Compensation Charge | |
| | | |
| | | |
| | | |
| | | |
$ | 5,000 | | |
| (2,000 | ) | |
| | | |
| | | |
| 3,000 | |
Broker
issuance | |
| | | |
| | | |
| 125,000 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
Income (Loss) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (149,000 | ) | |
| - | | |
| - | | |
$ | (149,000 | ) |
Balance
June 30, 2023 | |
| - | | |
$ | - | | |
| 20,140,413 | | |
$ | 21,283,000 | | |
$ | 6,642,000 | | |
$ | (23,875,000 | ) | |
| (43,658 | ) | |
$ | (161,000 | ) | |
$ | 3,889,000 | |
Balance | |
| - | | |
$ | - | | |
| 20,140,413 | | |
$ | 21,283,000 | | |
$ | 6,642,000 | | |
$ | (23,875,000 | ) | |
| (43,658 | ) | |
$ | (161,000 | ) | |
$ | 3,889,000 | |
Yunhong
Green CTI Ltd.
Notes
to Unaudited Condensed Consolidated Financial Statements
Note
1 - Basis of Presentation
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), changes in stockholders’ equity and cash flows for the periods presented
in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) 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 six months ended June 30, 2024 are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 2024. 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, 2023, filed on March 29, 2024, which can be found on the Company’s website (www.ctiindustries.com) or www.sec.gov.
The
financial information presented in these interim 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.
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.
During
the six months ended June 30, 2024, the Company formed a wholly-owned subsidiary, Yunhong Technology (Hubei) Co. Ltd., in the Hubei Province
of China. As further described in Note 4, on June 30, 2024, the Company, through the China subsidiary, acquired certain production assets
pursuant to an Asset Purchase Agreement and in exchange for 5 million shares of the Company’s common stock, which was valued at
$6.25 million.
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. On June 30, 2024, the Company acquired production assets in China (see Note 4) but has not yet commenced any operations
within this subsidiary.
Earnings
per share:
Basic
income (loss) per share is computed by dividing net income (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.
As
of June 30, 2024 and 2023, shares to be issued upon the exercise of warrants aggregated 556,000 and 128,000, respectively. No options
were outstanding for the six months ended June 30, 2024 and 2023. The number of shares included in the determination of earnings on a
diluted basis for the three months ended June 30, 2024 and 2023 were none, as doing so would have been anti-dilutive.
Significant
Accounting Policies:
The
Company’s significant accounting policies are summarized in Note 2 of the Company’s consolidated financial statements for
the year ended December 31, 2023.
The
Financial Accounting Standards Board (“FASB”) issued ASU (2020-06) which was adopted by us on January 1, 2024. The ASU changed
the accounting for convertible instruments. Notably, this guidance removed the beneficial conversion feature (“BCF”) model
that we followed in the past for Convertible Preferred Stock issuances A, B, C and D. There was no beneficial conversion feature charge
to be accounted for upon issuance of the Series E Convertible Preferred Stock and Series F Convertible Preferred Stock during the six
months ended June 30, 2024.
Other
than the above, there were no significant changes to the Company’s accounting policies during the three and six months ended June
30, 2024.
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.
Other
income/expense - The Company applied for Employee Retention Tax Credits during 2021, most of which were factored during 2022 and cash
received. Income related to the factored credit filings was recognized when the returns were processed by the US Government during 2023.
As such, income of $300,000 and $895,000 was recognized during the three and six months ended June 30, 2023, respectively, for which
cash was received during 2022.
Note
2 – Liquidity and Going Concern
The
Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of
assets and liquidation of liabilities in the normal course of business. The Company has a cumulative net loss from inception to June
30, 2024 of approximately $25 million and had less than $0.1 million of cash as of June 30, 2024. 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 COVID-19 pandemic, supply chain challenges, and inflationary pressures have impacted 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 have traditionally been comprised of cash and cash equivalents as well as availability under
the Credit Agreement in place at the time (see Note 3). This credit facility, as amended, matures on September 30, 2025. While we expect
to have sufficient financial resources available on acceptable terms, there can be no assurance this will occur, particularly in light
of increasingly conservative financial markets.
Note
3 - Debt
Senior
Facilities
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 $6 million (the “Maximum Revolver Amount”)
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 believes it has been in compliance with the terms of these Senior Facilities since their inception
in September 2021.
Interest
on the Senior Facilities is set at the prime rate published from time to time published in the Wall Street Journal (8.5% as of June 30,
2024), plus 1.95% per annum, accruing daily and payable monthly. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. The Term Loan Facility shall be repaid by the Company to Lender in 48 equal monthly installments of principal
and interest, each in the amount of $15,000, commencing on November 1, 2021, and continuing on the first day of each month thereafter
until the Term Loan Maturity Date (as defined in the Agreement). Also, the Company paid the Lender collateral monitoring fees of 4.62%
of the eligible accounts receivable, inventory, and equipment supporting the Revolving Credit Facility and the Term Loan.
The
Senior Facilities matured on September 30, 2023 and were amended to extend the maturity date to September 30, 2025. The facility automatically
extends for successive periods of one year each, unless the Company or the Lender gives the other party written notice of termination
not less than 90 days prior to the end of such term or renewal term, as applicable. If the Senior Facilities are renewed, the Company
shall pay the Lender a renewal fee of 1.25% of the Maximum Revolver Amount and the Term Loan Amount upon each renewal on the anniversary
of the Closing Date. The Company has the option to prepay the Term Loan Facility (together with all accrued but unpaid interest and a
Term Loan Prepayment Fee (as defined the Agreement) in whole, but not in part, upon not less than 60 days prior written notice to the
Lender. With the September 30, 2023 amendment, the parties agreed changes in terms including:
- |
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. |
The
Senior Facilities require that the Company maintain Tangible Net Worth of at least $4,000,000 or greater (“Minimum Tangible Net
Worth”). Minimum Tangible Net Worth may be adjusted downward by the Lender, from time to time, in its sole and absolute discretion,
based on the effect of non-cash charges and other factors on the calculation of Tangible Net Worth. Other debt subordinated to Lender
is not considered as a reduction of this calculation. The Company believes it was in compliance with this covenant for all relevant months,
including as of June 30, 2024 and December 31, 2023, respectively.
The
Senior Facilities contain certain affirmative and negative covenants that limit the ability of the Company, among other things and subject
to certain significant exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, and acquisitions,
pay dividends and make other restricted payments, or make capital expenditures exceeding $1,000,000 in the aggregate in any fiscal year.
As
of June 30, 2024 and December 31, 2023, the term loan balance amounted to $0.6 and $0.7 million, respectively, which consisted of the
principal and interest payable balance of $0.7 million and deferred financing costs of approximately $30,000. The balance of the Revolving
Line of Credit as of June 30, 2024 and December 31, 2023 amounted to $4,788,000 and $4,991,000, respectively.
Notes
Payable, Related Party
The
Company is party to a note payable to John H. Schwan, Director and former Chairman of the Board, with a loan balance due of $1.3 million
as of December 31, 2023 and an interest rate of 6%. The Company repaid $1 million to Mr. Schwan during January 2024. The parties agreed
to the payment of the remaining $0.3 million at a future date to be determined. This related party note payable is subordinate to the
Senior Facilities.
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,
361,400 warrants to purchase the Company’s common stock were issued with respect to this transaction. These warrants are exercisable
until March 2027, at the lower of $1.52 per share or 90% of the variable price based on the ten day volume weighted average price (“VWAP”)
of the Company’s common stock. Accrued dividends of $36,000 and $45,000 were recorded for the three and six months ended June 30,
2024.
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 194,600
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 $1.52 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 $20,000 and $25,000 were recorded for the three and six months
ended June 30, 2024, respectively.
Deposits
and Note Conversion to Common Stock
In
connection with the 2021 sale and leaseback transaction of the Company’s primary facility in Lake Barrington, IL, the landlord
advanced rent payments in the form of a note. The balance of that note on December 31, 2022 was approximately $172,000. The note paid
3% interest and was due March 2024. In addition, the same entity made investment deposits during 2022 that were recorded as short term
deposit liabilities. On February 1, 2023, our Board of Directors approved the conversion of these liabilities into common stock at a
rate of approximately 84% of the volume weighted average price (VWAP) of the Company’s common stock during the period these deposits
were received. In total, approximately $0.9 million of liabilities were converted into approximately 1.8 million shares of our common
stock during 2023. Upon conversion, both the note and deposit liabilities were fully eliminated.
Warrants
In
connection with the Series D Offering in 2021, the Company issued warrants to purchase 128,000 shares of the Company’s common stock
for $1 per share. During November 2023, the Company issued 675,183 shares of its common stock to retire all outstanding warrants, as
well as a $317,000 deferred liability related to facility rent credits received from the Lake Barrington landlord. The warrants were
converted in a cashless transaction based on the terms of the warrants. The Board of Directors determined the conversion price of the
deferred liability would be consistent with the approach listed above, 84% of the volume weighted average price during the relevant time
period. Both of these items are fully resolved upon this transaction.
As
described above, in connection with the Series E and F convertible preferred equity issuances, a total of 556,000 warrants were issued,
exercisable for the Company’s common stock at the lower of $1.52 per share or 90% of the 10 day VWAP.
The
Company has applied the Black-Scholes model to estimate the fair value these warrants for the purchase of common stock. That model incorporates
various assumptions including 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 instrument. The expected volatility is based on historical volatility of the Company’s Common Stock.
The
valuation assumptions we have applied to determine the fair value of warrants issued in 2024 were as follows:
|
- |
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. |
A
summary of the Company’s stock warrant activity is as follows:
Schedule of
Company’s Stock Warrant Activity
| |
Shares under
Option (warrant) | | |
Weighted Average
Exercise Price | |
Balance at December 31, 2023 | |
| - | | |
$ | - | |
Granted | |
| 556,000 | | |
| 1.52 | |
Cancelled/Expired | |
| - | | |
| - | |
Exercised/Issued | |
| - | | |
| - | |
Outstanding at June 30, 2024 | |
| 556,000 | | |
| 1.52 | |
| |
| | | |
| | |
Exercisable at June 30, 2024 | |
| 556,000 | | |
$ | 1.52 | |
As
of June 30, 2024 the Company reserved the following shares of its common stock for the exercise of warrants, and preferred stock:
Schedule
of Reserved Shares of Exercise Warrants
2024 Warrants | |
| 556,000 | |
Shares reserved as of June 30, 2024 | |
| 556,000 | |
Effective
January 2022, and in accordance with the Employment Agreement of Chief Executive Officer Frank Cesario, a grant of restricted stock was
made in the amount of 250,000 shares. 25,000 shares vested immediately, while the remaining 225,000 are subject to performance conditions
as further detailed in the share grant. Specifically, the restrictions on the remaining 225,000 shares will lapse based on satisfaction
of the following performance goals and objectives and continued employment through the date of meeting such targets:
●
The restrictions on 56,250 shares of the award will lapse and the award will vest when the Company’s trailing-twelve-month EBITDA
equals or exceeds $1 million at any time on or after January 1, 2022. During April 2024 the Compensation Committee determined this condition
had been satisfied.
●
The restrictions on 56,250 shares of the award will lapse and the award will vest in the event the Company’s common shares trade
at or above $5/share for ten or more consecutive trading days.
●
The restrictions on 56,250 shares of the award will lapse and the award will vest when the Company’s operating cash flow, calculated
cumulatively from the date of employment, equals or exceeds $1.5 million. On January 30, 2023, the Compensation Committee determined
this condition had been satisfied.
●
The restrictions on 56,250 shares of the award will lapse and the award will vest in the event the Company is able to refinance its current
lender with a traditional lender on terms and conditions customary for such financing. On August 23, 2022, the Compensation Committee
determined this condition had been satisfied with an amended agreement with the Company’s lender.
During
2022 the Compensation Committee awarded the Chief Operating Officer a grant of 100,000 shares of restricted stock. 20,000 of these shares
vested over a 12 month period while the remaining shares vest 20,000 each based on the performance conditions above.
The
Compensation Committee (as defined in the Plan) shall be responsible for determining when the conditions above have been satisfied. The
Company records compensation expense with each vesting, and records a likelihood of vesting weighted analysis to the extent it has visibility
to do so with a related grant date market value when such visibility is present. Without such visibility, it considers such probability
as de minimis until additional information is available.
Asset
acquisition in exchange for common stock
As
of June 30, 2024, our wholly owned subsidiary, Yunhong Technology Industry (Hubei) Co,. Ltd., acquired certain assets of Yunhong Environmental
Protection Technology Co., Ltd. and Yunhong China Group (together the “Selling Parties”) pursuant to an Asset Purchase Agreement.
The Selling Parties are affiliated entities of certain stockholders of the Company. In accordance with the terms and conditions of the
Asset Purchase Agreement, and transferred 5 million shares of the Company’s common stock having a fair value of $6.25 million as
consideration. The Company has initially assigned a fair value of $4.05 million to machinery and equipment and $2.25 million represents
a prepayment to the Selling Parties for the Company’s anticipated operational expenses, which the Selling Parties will pay on the
Company’s behalf. This prepayment balance is classified as prepaid expenses, non-current on the Condensed Consolidated Balance
Sheets as of June 30, 2024. No other assets or liabilities were transferred as part of this transaction. The Asset Purchase Agreement
was evaluated under the guidance in ASC 805, Business Combinations and management determined this does not constitute the acquisition
of a business. As a result, this transaction was treated as an asset purchase.
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.
Note
6 - Inventories
Schedule of Inventories
| |
June 30, 2024 | | |
December 31, 2023 | |
Raw materials | |
$ | 1,143,000 | | |
$ | 1,156,000 | |
Work in process | |
| 2,522,000 | | |
| 2,511,000 | |
Finished goods | |
| 3,779,000 | | |
| 4,124,000 | |
Total inventories | |
$ | 7,444,000 | | |
$ | 7,791,000 | |
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 six months ended June 30, 2024 and 2023, 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 six months ended June 30, 2024 and 2023 are as follows:
Schedule
of Concentration Risk
| |
Three Months Ended | | |
Three Months Ended | |
| |
June 30, 2024 | | |
June 30, 2023 | |
Customer | |
Net Sales | | |
%
of Net Sales | | |
Net Sales | | |
%
of Net Sales | |
Customer A | |
$ | 2,655,000 | | |
| 60 | % | |
$ | 2,347,000 | | |
| 56 | % |
Customer B | |
$ | 1,040,000 | | |
| 24 | % | |
$ | 668,000 | | |
| 16 | % |
| |
Six Months Ended | | |
Six Months Ended | |
| |
June 30, 2024 | | |
June 30, 2023 | |
Customer | |
Net Sales | | |
%
of Net Sales | | |
Net Sales | | |
%
of Net Sales | |
Customer A | |
$ | 4,921,000 | | |
| 53 | % | |
$ | 4,910,000 | | |
| 54 | % |
Customer B | |
$ | 2,751,000 | | |
| 30 | % | |
$ | 2,320,000 | | |
| 25 | % |
As
of June 30, 2024, the total amounts owed to the Company by these customers were approximately $3,232,000 or 94% of the Company’s
consolidated net accounts receivable. The amounts owed at June 30, 2023 by these customers were approximately $2,008,000 or 73% of the
Company’s consolidated net accounts receivable.
Note
8 - Related Party Transactions
John
H. Schwan, who resigned as Chairman of the Board on June 1, 2020, has made loans to the Company. Mr. Schwan is the father of Jana Schwan,
the Company’s Chief Operating Officer. Note 3 and 4 to these interim financial statements discloses information about the current
outstanding loan and Asset Purchase Agreement, respectively.
Note
9 - Leases
We
adopted ASC Topic 842 (Leases) on January 1, 2019. In July 2020, the Company is party to a lease agreement for a building that, as amended,
extends to December 2025. The monthly lease payments are $35,000. The Company uses the incremental borrowing rate of 11%.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward
Looking Statements
This
Quarterly Report on Form 10-Q includes both historical and “forward-looking statements” within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended. 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, 2023 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. We used to produce our latex balloons and latex products at a majority-owned facility in Guadalajara, Mexico (Flexo Universal,
or Flexo). This facility was sold during October 2021. Now 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
of 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. During 2023 we changed our name to include “Green”, to communicate our intention
to supply biodegradable and compostable materials to the marketplace that our developed by our partners in Asia. We are in the process
of creating a new subsidiary for this purpose.
September
30, 2021 financing, amended and extended to September 30, 2025
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 $6 million (the “Maximum Revolver Amount”)
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. This Agreement and the Senior Facilities were extended on similar terms during September 2023 with a termination
date of September 30, 2025. The Company has been in compliance with the terms of these Senior Facilities since inception in September
2021.
Interest
on the Senior Facilities was set at the prime rate published from time to time published in the Wall Street Journal (8.5% as of June
30, 2024), plus 1.95% per annum, accruing daily and payable monthly. Interest shall be calculated on the basis of a 360-day year for
the actual number of days elapsed. The Term Loan Facility shall be repaid by the Company to Lender in 48 equal monthly installments of
principal and interest, each in the amount of $15,000, commencing on November 1, 2021, and continuing on the first day of each month
thereafter until the Term Loan Maturity Date (as defined in the Agreement). Also, the Company paid the Lender collateral monitoring fees
of 4.62% of the eligible accounts receivable, inventory, and equipment supporting the Revolving Credit Facility and the Term Loan.
The
Senior Facilities matured on September 30, 2023 and were amended to extend the maturity date to September 30, 2025. The facility automatically
extends for successive periods of one year each, unless the Company or the Lender gives the other party written notice of termination
not less than 90 days prior to the end of such term or renewal term, as applicable. If the Senior Facilities are renewed, the Company
shall pay the Lender a renewal fee of 1.25% of the Maximum Revolver Amount and the Term Loan Amount upon each renewal on the anniversary
of the Closing Date. The Company has the option to prepay the Term Loan Facility (together with all accrued but unpaid interest and a
Term Loan Prepayment Fee (as defined the Agreement) in whole, but not in part, upon not less than 60 days prior written notice to the
Lender. With the September 30, 2023 amendment, the parties agreed changes in terms including:
- |
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. |
The
Senior Facilities require that the Company maintain Tangible Net Worth of at least $4,000,000 or greater (“Minimum Tangible Net
Worth”). Minimum Tangible Net Worth may be adjusted downward by the Lender, from time to time, in its sole and absolute discretion,
based on the effect of non-cash charges and other factors on the calculation of Tangible Net Worth. Other debt subordinated to Lender
is not considered as a reduction of this calculation. The Company believes it was in compliance with this covenant for all relevant months,
including as of June 30, 2024 and December 31, 2023, respectively.
The
Senior Facilities contain certain affirmative and negative covenants that limit the ability of the Company, among other things and subject
to certain significant exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, and acquisitions,
pay dividends and make other restricted payments, or make capital expenditures exceeding $1,000,000 in the aggregate in any fiscal year.
As
of June 30, 2024 and December 31, 2023, the term loan balance amounted to $0.6 million and $0.7 million, respectively, which consisted
of the principal and interest payable balance of $0.7 million and deferred financing costs of approximately $30,000. The balance of the
Revolving Line of Credit as of June 30, 2024 and December 31, 2023 amounted to $4,788,000 and $4,991,000, respectively.
Note
Payable, Related Party
The
Company is party to a note payable to John H. Schwan, Director and former Chairman of the Board, with a loan balance of $1.3 million
and interest rate of 6% as of December 31, 2023. The Company repaid $1 million to Mr. Schwan during January 2024. The parties agreed
to the payment of the remaining $0.3 million at a future date to be determined. This related party note payable is subordinate to the
Senior Facilities.
Results
of Operations
Net
Sales. For the three month periods ended June 30, 2024 and 2023, net sales were $4,354,000 and $4,059,000, respectively.
For
the three-month period ended June 30, 2024 and 2023, net sales by product category were as follows:
| |
Three Months Ended | | |
| | |
| |
| |
June 30, 2024 | | |
June 30, 2023 | | |
| | |
| |
| |
$ | | |
| | |
$ | | |
| | |
| | |
| |
Product Category | |
(000) Omitted | | |
% of Net
Sales | | |
(000) Omitted | | |
% of Net
Sales | | |
Variance | | |
% change | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Foil Balloons | |
$ | 3,252 | | |
| 75 | % | |
$ | 2,938 | | |
| 72 | % | |
$ | 314 | | |
| 11 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Film Products | |
| 171 | | |
| 4 | % | |
| 589 | | |
| 15 | % | |
| (418 | ) | |
| (71 | %) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other | |
| 931 | | |
| 21 | % | |
| 532 | | |
| 13 | % | |
| 399 | | |
| 75 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total | |
$ | 4,354 | | |
| 100 | % | |
$ | 4,059 | | |
| 100 | % | |
$ | 295 | | |
| 7 | % |
For
the six month periods ended June 30, 2024 and 2023, net sales were $9,248,000 and $9,110,000, respectively.
For
the six month period ended June 30, 2024 and 2023, net sales by product category were as follows:
| |
June 30, 2024 | | |
June 30, 2023 | | |
| | |
| |
| |
$ | | |
| | |
$ | | |
| | |
| | |
| |
Product Category | |
(000) Omitted | | |
% of Net
Sales | | |
(000) Omitted | | |
% of Net
Sales | | |
Variance | | |
% change | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Foil Balloons | |
$ | 6,171 | | |
| 67 | % | |
$ | 6,412 | | |
| 70 | % | |
$ | (241 | ) | |
| (4 | )% |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Film Products | |
| 476 | | |
| 5 | % | |
| 678 | | |
| 7 | % | |
| (202 | ) | |
| (30 | )% |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other | |
| 2,601 | | |
| 28 | % | |
| 2,020 | | |
| 23 | % | |
| 581 | | |
| 29 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total | |
$ | 9,248 | | |
| 100 | % | |
$ | 9,110 | | |
| 100 | % | |
$ | 138 | | |
| 2 | % |
Foil
Balloons. Revenues from the sale of foil balloons increased during the three months period from $2,938,000 ending June 30, 2023 compared
to $3,252,000 during the three month period of 2024. Revenues from the sale of foil balloons decreased during the six month period from
$6,412,000 ending June 30, 2023 compared to $6,171,000 during the six month period of 2024. We believe that our smaller customers are
managing their inventory levels more aggressively, negatively impacting order flow.
Films.
Revenues from the sale of commercial films were $171,000 and $476,000 during the three and six month periods ended June 30, 2024, compared
to $589,000 and $678,000 during the same periods of 2023. Order flow in this area has been historically inconsistent, impacted in part
by consolidation in the industry, including our customers, as well as a large number of competitors.
Other
Revenues. Revenues from the sale of other products were $931,000 and $2,601,000 during the three and six month periods ended June
30, 2024, compared to $532,000 and $2,020,000 during the same periods of 2023. The revenues from the sale of other products during these
periods include (i) sales of a line of balloon-inspired gift items and similar products consisting of candy and small inflated balloons
sold in small containers, (ii) latex balloons, and (iii) the sale of accessories and supply items related to balloon products.
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 month periods ended June 30, 2024 and 2023.
| |
Three Months Ended June 30, | |
| |
% of Sales | |
| |
2024 | | |
2023 | |
| |
| | |
| |
Top 3 Customers | |
| 87 | % | |
| 85 | % |
| |
| | | |
| | |
Top 10 Customers | |
| 93 | % | |
| 96 | % |
| |
Six Months Ended June 30, | |
| |
% of Sales | |
| |
2024 | | |
2023 | |
| |
| | |
| |
Top 3 Customers | |
| 84 | % | |
| 86 | % |
| |
| | | |
| | |
Top 10 Customers | |
| 93 | % | |
| 94 | % |
During
the three and six months ended June 30, 2024 and 2023, 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 six months ended June 30, 2024 and 2023 are as follows:
| |
Three Months Ended | | |
Three Months Ended | |
| |
June 30, 2024 | | |
June 30, 2023 | |
Customer | |
Net Sales | | |
%
of Net Sales | | |
Net Sales | | |
%
of Net Sales | |
Customer A | |
$ | 2,655,000 | | |
| 60 | % | |
$ | 2,347,000 | | |
| 56 | % |
Customer B | |
$ | 1,040,000 | | |
| 24 | % | |
$ | 668,000 | | |
| 16 | % |
| |
Six Months Ended | | |
Six Months Ended | |
| |
June 30, 2024 | | |
June 30, 2023 | |
Customer | |
Net Sales | | |
%
of Net Sales | | |
Net Sales | | |
%
of Net Sales | |
Customer A | |
$ | 4,921,000 | | |
| 53 | % | |
$ | 4,910,000 | | |
| 54 | % |
Customer B | |
$ | 2,751,000 | | |
| 30 | % | |
$ | 2,320,000 | | |
| 25 | % |
As
of June 30, 2024, the total amounts owed to the Company by these customers were approximately $3,232,000 or 94% of the Company’s
consolidated net accounts receivable. The amounts owed at June 30, 2023 by these customers were approximately $2,455,000 or 83% of the
Company’s consolidated net accounts receivable.
Cost
of Sales. During the three and six month period ended June 30, 2024, the cost of sales was $3,662,000 and $7,660,000, compared to
$3,545,000 and $7,469,000 respectively for the same periods of 2023, with the change driven largely by changes in sales volume. As a
percentage of sales, cost of sales was 84% and 83% during the three and six months ended June 30, 2024, compared to 87% and 82% during
the three and six months ended June 30, 2023.
General
and Administrative. During the three and six month period ended June 30, 2024, general and administrative expenses were $640,000
and $1,698,000 compared to $656,000 and $1,617,000, respectively, for the same periods in 2023. The Company had higher than usual audit
fees in both years. Of note are the “re-audit” costs associated with 2023 due to the Company’s former auditor being
suspended from practicing before the SEC during May 2024.
Selling,
Advertising and Marketing. During the three and six month period ended June 30, 2024, selling, advertising and marketing expenses
were $223,000 and $413,000 as compared to $148,000 and $302,000, respectively, for the same periods in 2023. 2023 marked a low point
in these expenses while 2024 inflected higher, including $30,000 in additional sales commissions based on product mix and the payroll
cost associated with new product design.
Other
Income (Expense). During the three and six month period ended June 30, 2024, the Company incurred interest expense of $236,000 and
$454,000 compared to interest expense of $155,000 and $297,000, respectively, during the same periods of 2023. Interest expense increased
as a result of market rate increases that remained elevated throughout 2024. The Company applied for Employee Retention Tax Credits during
2021, most of which were factored during 2022 and cash received. Income related to the factored credit filings was recognized when the
returns were processed by the US Government during 2023. As such, income of $300,000 and $895,000 was recognized during the three and
six months ended June 30, 2023, respectively, for which cash was received during 2022.
Financial
Condition, Liquidity and Capital Resources
Cash
Flow Items.
Operating
Activities. During the six months ended June 30, 2024, net cash provided by operations was $108,000, compared to net cash used in
operations during the six months ended June 30, 2023 of $1,361,000.
Significant
changes in working capital items during the six months ended June 30, 2024 included:
|
● |
A
decrease in accounts receivable of $545,000 compared to an increase in accounts receivable of $1,341,000 in the same period of 2023. |
|
● |
A
decrease in inventory of $347,000 compared to a decrease in inventory of $686,000 in 2023. |
|
● |
A
decrease in trade payables of $70,000 compared to a decrease in trade payables of $331,000 in 2023. |
|
● |
An
increase in prepaid expenses and other assets of $21,000 compared to an increase of $47,000 in 2023. |
|
|
|
|
● |
An
increase in accrued liabilities of $49,000 compared to a decrease in accrued liabilities of $737,000 in 2023. |
Investing
Activity. During the six months ended June 30, 2024, cash used in investing activity was $274,000, compared to cash used investing
activity for the same period of 2023 in the amount of $94,000.
Financing
Activities. During the six months ended June 30, 2024, cash used in financing activities was $733,000 compared to cash provided by
financing activities for the same period of 2023 in the amount of $1,409,000. Uses of cash in financing activity during the six months
ended June 30, 2024 consisted principally of changes in the balance of revolving debt of $0.2 million and a $1.0 million repayment of
the related party note payable. $0.5 million of cash was provided by the issuances of convertible preferred stock during the six months
ended June 30, 2024.
Liquidity
and Capital Resources.
At
June 30, 2024, the Company had cash balances of $22,000 compared to a cash balance of $921,000 as of June 30, 2023.
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 executing its business plan, 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 COVID-19 pandemic, supply chain constraints, inflationary pressures, and the cost and commercial availability of
helium have impacted 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 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.
The
Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under
the Credit Agreement. We believe that we have been in compliance with covenants since refinancing with Line Financial in September 2021.
That Credit Agreement expires per its terms on September 30, 2025, unless it is extended by the parties or replaced. While the Company
expects to have access to needed capital at reasonable cost, there can be no assurance of success, and as such, might negatively impact
the Company’s ability to continue as a going concern.
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, 2023, 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, 2023.
Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure
On
April 1, 2024, the Company made a change with respect to its independent auditing firm, ending the relationship with BF Borgers, CPA
PC (BFB) and engaging Wolf & Company, P.C. On May 3, 2024, the Company became aware that BFB had agreed to be suspended from appearing
or practicing before the SEC. Because of this, the Company may no longer use audit reports or consent from BFB in future filings. Without
the 2023 audit report, the Company’s new auditors need to perform procedures related to 2023 balances in order to be able to perform
an effective review of required 2024 filings, including the Form 10-Q for the periods ended March 31, 2024 and June 30, 2024. Until this
was completed, the Company was not able to issue filings during 2024. The Nasdaq provided the Company until September 27, 2024 to file
its delinquent filings including this Form 10-Q for the period ended June 30, 2024. Failure to file within the provided time would result
in the delisting of the Company’s shares from Nasdaq, subject to the opportunity to appeal the result to a Hearings Panel. This
filing is the second of two addressing this requirement.
Item
3. Quantitative and Qualitative Disclosures Regarding Market Risk
Not
applicable.
Item
4. Controls and Procedures
(a)
Disclosure Controls and Procedures
We
maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act
of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the reports filed
or submitted under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the Commission’s
rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be
disclosed in our reports filed or submitted under the Exchange Act are properly recorded, processed, summarized and reported within the
time periods required by the Commission’s rules and forms.
We
carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer
(principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation
of these disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of June 30, 2024. Based on this
evaluation, the Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) concluded
that our disclosure controls and procedures were not effective as of June 30, 2024, the end of the period covered by this Quarterly Report
on Form 10-Q due to the material weaknesses described below.
(b)
Management’s Report on Internal Control over Financial Reporting
Management
of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act.
Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management
has assessed the effectiveness of our internal control over financial reporting as of June 30, 2024. In making our assessment of the
effectiveness of internal control over financial reporting, management used the criteria set forth in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
A
material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements
will not be prevented or detected on a timely basis. As a result of our evaluation of our internal control over financial reporting,
management identified the following material weaknesses in our internal control over financial reporting:
|
● |
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. |
As
a result of the material weaknesses, we have concluded that we did not maintain effective internal control over financial reporting as
of June 30, 2024.
Part
II. OTHER INFORMATION
Item
1. 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.
Item
1A. Risk Factors
Not
applicable.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
Not
applicable.
Item
3. Defaults Upon Senior Securities
None.
Item
4. Mine Safety Disclosures
Not
applicable.
Item
5. Other Information
None.
Item
6. Exhibits
The
following are being filed as exhibits to this report:
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date:
September 26, 2024 |
Yunhong
CTI Ltd. |
|
|
|
|
By: |
/s/
Frank J. Cesario |
|
|
Frank
J. Cesario |
|
|
Acting
Chief Financial Officer |
|
By: |
/s/
Frank J. Cesario |
|
|
Frank
J. Cesario |
|
|
Chief
Executive Officer |
EXHIBIT 31.1
CERTIFICATIONS
I, Frank J. Cesario, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Yunhong CTI Ltd.
(the “Company”).
2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer
and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the condensed consolidated financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer
and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial revporting. |
Date: September 26, 2024
|
/s/ Frank J. Cesario |
|
Frank J. Cesario |
|
Chief Executive Officer |
EXHIBIT
31.2
CERTIFICATIONS
I,
Frank J. Cesario, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Yunhong CTI Ltd. (the “Company”).
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) |
Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared; |
b) |
Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the condensed consolidated
financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report
any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
a) |
All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not
material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting. |
Date:
September 26, 2024
|
By: |
/s/
Frank J. Cesario |
|
|
Frank J. Cesario |
|
|
Acting Chief Financial Officer |
EXHIBIT
32
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report on Form 10-Q of Yunhong CTI Ltd. (the “Company”) for the quarterly period ended June
30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of Frank J. Cesario,
Chief Executive Officer of the Company, and Frank J. Cesario, Acting Chief Financial Officer of the Company, hereby certifies, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained
in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date:
September 26, 2024
/s/
Frank J. Cesario |
|
Frank J. Cesario |
|
Acting Chief Financial Officer |
|
|
|
/s/ Frank
J. Cesario |
|
Frank J. Cesario |
|
Chief Executive Officer |
|
v3.24.3
Cover - shares
|
6 Months Ended |
|
Jun. 30, 2024 |
Sep. 17, 2024 |
Cover [Abstract] |
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Document Period End Date |
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|
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Document Fiscal Period Focus |
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|
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Document Fiscal Year Focus |
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|
|
Current Fiscal Year End Date |
--12-31
|
|
Entity File Number |
000-23115
|
|
Entity Registrant Name |
YUNHONG
GREEN CTI LTD.
|
|
Entity Central Index Key |
0001042187
|
|
Entity Tax Identification Number |
36-2848943
|
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Entity Incorporation, State or Country Code |
IL
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Entity Address, Address Line One |
22160
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Entity Address, City or Town |
Barrington
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Entity Address, State or Province |
IL
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Entity Address, Postal Zip Code |
60010
|
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City Area Code |
(847)
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Local Phone Number |
382-1000
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Title of 12(b) Security |
Common
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|
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Trading Symbol |
YHGJ
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Security Exchange Name |
NASDAQ
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- DefinitionThe type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word 'Other'.
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- DefinitionAddress Line 1 such as Attn, Building Name, Street Name
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- DefinitionCode for the postal or zip code
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- DefinitionName of the state or province.
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- DefinitionA unique 10-digit SEC-issued value to identify entities that have filed disclosures with the SEC. It is commonly abbreviated as CIK.
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- DefinitionIndicate number of shares or other units outstanding of each of registrant's classes of capital or common stock or other ownership interests, if and as stated on cover of related periodic report. Where multiple classes or units exist define each class/interest by adding class of stock items such as Common Class A [Member], Common Class B [Member] or Partnership Interest [Member] onto the Instrument [Domain] of the Entity Listings, Instrument.
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- DefinitionIndicate 'Yes' or 'No' whether registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. This information should be based on the registrant's current or most recent filing containing the related disclosure.
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- DefinitionIndicate if registrant meets the emerging growth company criteria.
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- DefinitionCommission file number. The field allows up to 17 characters. The prefix may contain 1-3 digits, the sequence number may contain 1-8 digits, the optional suffix may contain 1-4 characters, and the fields are separated with a hyphen.
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- DefinitionIndicate whether the registrant is one of the following: Large Accelerated Filer, Accelerated Filer, Non-accelerated Filer. Definitions of these categories are stated in Rule 12b-2 of the Exchange Act. This information should be based on the registrant's current or most recent filing containing the related disclosure.
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