Yunhong Green CTI flags going-concern doubt in Q3
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Yunhong Green CTI Ltd. (YHGJ) reported third-quarter 2026 net sales of $3.127 million, up 6% from $2.953 million a year earlier, and net loss of $866,000 compared with $811,000. For the first nine months, sales were $13.180 million versus $13.212 million, and net loss was $1.750 million versus $1.412 million. Operating cash flow was $2.240 million.
At September 30, 2026, cash was $111,000; $4.8 million was outstanding on the revolving facility, with $2.2 million available. Management says cash and expected operating cash are insufficient for anticipated operating needs over the next 12 months without additional financing, and disclosed substantial doubt about continuing as a going concern. Plans include additional capital, potentially through a registered equity offering, and borrowings. The senior facilities mature April 30, 2027.
YHGJ concluded its disclosure controls and internal control over financial reporting were ineffective as of September 30, 2026, due to material weaknesses; planned remediation includes outside accounting support and enhanced management review. Two customers represented 55% and 29% of third-quarter sales, and their receivables were 99% of gross accounts receivable.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter net sales increased 6% to $3.127 million.
Negative
- Major pointManagement disclosed substantial doubt about one-year going-concern continuity.
- Major pointMaterial weaknesses left controls ineffective as of September 30, 2026.
- Moderate pointNine-month net loss rose to $1.750 million from $1.412 million.
- Moderate pointTwo customers represented 55% and 29% of third-quarter sales.
Filing Explained
At September 30, 2026, 903,172 common shares were reserved for preferred conversion; the warrants now expire in March 2029.
Under agreements dated
The restriction ends
The preferred conversion price is the lower of a fixed price and the lowest daily VWAP in the preceding ten trading days, with no stated minimum; 903,172 common shares were reserved for conversion at
Separately, the
Key Figures
Key Terms
going concern financial
borrowing base financial
seasonal overadvance limit financial
volume-weighted average price financial
material weakness regulatory
liquidation preference financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were YHGJ's sales and net loss for the third quarter of 2026?
Why did YHGJ disclose substantial doubt about its ability to continue as a going concern?
What changed under YHGJ's August 2026 credit amendment?
What controls did YHGJ say were ineffective?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
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
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(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 | ||
| The | ||||
| (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.
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).
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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The
number of shares outstanding of the registrant’s common stock, no par value per share, as of November 13, 2026 was
INDEX
| PART I – FINANCIAL INFORMATION | ||
| Item No. 1. | Financial Statements | |
| Unaudited Condensed Consolidated Balance Sheets at September 30, 2026 and December 31, 2025 | 1 | |
| Unaudited Condensed Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2026 and 2025 | 2 | |
| Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025 | 3 | |
| Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2026 and 2025 | 4 | |
| Notes to Unaudited Condensed Consolidated Financial Statements | 5 | |
| Item No. 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 |
| Item No. 3 | Quantitative and Qualitative Disclosures Regarding Market Risk | 15 |
| Item No. 4 | Controls and Procedures | 15 |
| PART II – OTHER INFORMATION | ||
| Item No. 1 | Legal Proceedings | 17 |
| Item No. 1A | Risk Factors | 17 |
| Item No. 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 17 |
| Item No. 3 | Defaults Upon Senior Securities | 17 |
| Item No. 4 | Mine Safety Disclosures | 17 |
| Item No. 5 | Other Information | 17 |
| Item No. 6 | Exhibits | 18 |
| Signatures | 19 | |
| Exhibit 31.1 | ||
| Exhibit 31.2 | ||
| Exhibit 32 | ||
| Table of Contents |
Yunhong Green CTI, Ltd.
Unaudited Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid expenses | ||||||||
| Deferred offering costs | - | |||||||
| Total current assets | ||||||||
| Property, plant and equipment: | ||||||||
| Machinery and equipment | ||||||||
| Office furniture and equipment | ||||||||
| Intellectual property | ||||||||
| Leasehold improvements | ||||||||
| Fixtures and equipment | ||||||||
| Projects under construction | ||||||||
| Property, plant and equipment gross | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property, plant and equipment, net | ||||||||
| Other assets: | ||||||||
| Operating lease right-of-use | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Trade payables | $ | $ | ||||||
| Line of credit | ||||||||
| Notes payable – current portion | ||||||||
| Notes payable related party | ||||||||
| Notes payable | ||||||||
| Operating lease liabilities – current portion | ||||||||
| Advance investor deposits | ||||||||
| Accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Notes payable – net of current portion | - | |||||||
| Operating lease liabilities – noncurrent | ||||||||
| Total long-term liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Series E Preferred Stock — | ||||||||
| Series F Preferred Stock — | ||||||||
| Preferred stock, value | ||||||||
| Common stock - | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Less: Treasury stock, | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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Yunhong Green CTI, Ltd.
Unaudited Condensed Consolidated Statements of Income (Loss)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Selling | ||||||||||||||||
| Advertising and marketing | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income/(expense) | ||||||||||||||||
| Total other expense (income), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deemed dividends on preferred stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic income (loss) per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted income (loss) per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares and equivalent shares of common stock outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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Yunhong Green CTI, Ltd.
Unaudited Condensed Consolidated Statements of Cash Flows
| 2026 | 2025 | |||||||
| For the Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Equity compensation charge | ||||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other assets | ||||||||
| Trade payables | ||||||||
| Operating leases | ||||||||
| Advance investor deposit | ||||||||
| Accrued liabilities | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property, plant and equipment | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payment of financing costs | ( | ) | - | |||||
| Repayment of note payable | ( | ) | ( | ) | ||||
| Net repayments on revolving line of credit | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash and cash equivalents | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information and noncash investing and financing activities: | ||||||||
| Cash payments for interest | $ | $ | ||||||
| Accretion of dividends on preferred stock | ||||||||
| Incremental fair value upon modification of common stock warrants | $ | - | ||||||
| Conversion of advance received from investors into common stock | ||||||||
| Common stock issued in exchange for rent due to Icy Mellon | - | |||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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Yunhong Green CTI, Ltd
Unaudited Condensed Consolidated Statements of Shareholders’ Equity
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Earnings | Shares | Amount | TOTAL | ||||||||||||||||||||||||||||||||||
| Series E Preferred Stock | Series F Preferred Stock | Common Stock | Paid-in | Accumulated (Deficit) | Less Treasury Stock | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Earnings | Shares | Amount | TOTAL | ||||||||||||||||||||||||||||||||||
| Balance December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Series E Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Series F Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Stock Issuance - Vesting Milestone | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Equity Compensation Charge | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||||
| Balance March 31, 2026 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Series E Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Series F Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Stock Issuance - Vesting Milestone | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Equity Compensation Charge | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||||
| Balance June 30, 2026 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Series E Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Series F Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Stock Issuance - Vesting Milestone | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Equity Compensation Charge | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Incremental fair value upon modification of common stock warrants | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||||
| Balance September 30, 2026 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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Yunhong Green CTI, Ltd
Unaudited Condensed Consolidated Statements of Shareholders’ Equity
| Series E Preferred Stock | Series F Preferred Stock | Common Stock | Paid-in | Accumulated (Deficit) | Less Treasury Stock | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Earnings | Shares | Amount | TOTAL | ||||||||||||||||||||||||||||||||||
| Balance December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Series E Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Series F Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Common Stock Issuance for Rent | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Equity Compensation Charge | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Series E Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Series F Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Common Stock Issuance for Advance Investor Deposit | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Equity Compensation Charge | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||||
| Balance June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Series E Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Series F Accrued Deemed Dividend | - | - | - | - | - | ( | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
| Equity Compensation Charge | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||||
| Balance September 30, 2025 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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Yunhong Green CTI Ltd.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 - Basis of Presentation and Significant Accounting Policies
The accompanying unaudited condensed consolidated interim financial statements have been prepared and, in the opinion of management, contain all material adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the consolidated financial position and the consolidated statements of loss and consolidated cash flows for the periods presented in conformity with generally accepted accounting principles for interim consolidated financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X.
Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2026. 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, 2025, filed on March 23, 2026, which can be found on the Company’s website (www.ctiindustries.com) or www.sec.gov.
The financial information presented in these financial statements has been rounded to the nearest thousand dollars ($000), which is in accordance with our policy to simplify the presentation. The financial information is not presented in thousand-dollar increments.
All
of the Company’s historical share and per share information related to issued and outstanding common stock, outstanding share based
awards and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect
the
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 balloon products, and (iii) operate systems for the production, lamination, coating and printing of films used for food packaging and other commercial uses and for conversion of films to flexible packaging containers and other products.
The condensed consolidated financial statements include the accounts of Yunhong Green CTI Ltd., CTI Supply, Inc., and Yunhong Technology Industry (Hubei) Co., Ltd. All intercompany accounts and transactions have been eliminated in consolidation. See Note 2 to the consolidated financial statements included in Form 10-K for the fiscal year ended December 31, 2025.
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 amounts 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 recoverability and impairment of long-lived assets, valuation allowances for doubtful accounts, inventory valuation and valuation of deferred tax assets.
Segments:
The
Company views its operations and manages its business as
| 5 |
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Earnings per share:
Basic (loss) per share is computed by dividing net loss attributable to common shareholders 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 attributable to common shareholders by the weighted average number of shares of common stock and equivalents (stock options and warrants), unless antidilutive, during each period. In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive.
For
both September 30, 2026 and 2025, common shares to be issued upon the exercise of warrants aggregated
Revenue recognition:
Net sales include revenues from sales of products and shipping and handling charges, net of estimates for product returns. Revenue is measured at the amount of consideration the Company expects to receive in exchange for the transferred products. Revenue is recognized at the point in time when we transfer the promised products to the customer and the customer obtains control over the products. The Company recognizes revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight are included in cost of sales, as we have elected the practical expedient included in ASC 606.
The Company provides for product returns based on historical return rates. While we incur costs for sales commissions to our sales employees and outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than one year and we have elected the practical expedient included in ASC 606. We do not incur incremental costs to obtain contracts with our customers. Our product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Therefore, the product warranties are not a separate performance obligation and are accounted for as described herein. Sales taxes assessed by governmental authorities are accounted for on a net basis and are excluded from net sales.
Note 2 – Liquidity and Going Concern
The
Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”)
applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
The Company has a cumulative net loss from inception to September 30, 2026 of approximately $
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 include raising additional capital, including through a potential registered offering of equity securities, as well as borrowings, continuing to focus on attaining profitable operations, and exploring alternative funding sources on an as needed basis. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The supply chain challenges, inflationary pressures and tariffs have impacted on the Company’s business operations to some extent and is expected to continue to do so and these impacts may include reduced access to capital. The ability of the Company to continue as a going concern may be dependent upon its ability to successfully secure other sources of financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Senior Facilities described in Note 3 mature on April 30, 2027, within one year after the date these financial statements are issued, and the Company’s ability to continue as a going concern also depends on renewing, extending or refinancing the Senior Facilities on or before that date.
The
Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under
a Credit Agreement. The Credit Agreement with Line Financial, as most recently amended in September 2025, includes a revolving credit
facility for up to $
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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 $
Borrowings
under the Revolving Credit Facility bear interest at the prime rate +
Originally
maturing
On
August 24, 2026, the Company entered into a Sixth Amendment to increase the seasonal overadvance limit from $
The facility automatically renews for successive one-year periods unless either party provides written notice of termination not less than 90 days prior to the end of the then-current term. The Company may prepay the Term Loan Facility (together with accrued interest and any applicable prepayment fee) in whole, but not in part, upon at least 60 days’ prior written notice.
The
Agreement requires the Company to maintain minimum tangible net worth of $
Notes payable, Related Party
The
Company is party to a note payable to John H. Schwan, former Director and former Chairman of the Board, for an initial amount of $
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Note 4 - Shareholders’ Equity
Series E Convertible Preferred Stock
The
Company’s Articles of Incorporation, as amended, authorized the issuance of
Series F Convertible Preferred Stock
The
Company’s Articles of Incorporation, as amended, authorized the issuance of
Each
Certificate limits conversion so that the holder’s beneficial ownership does not exceed
Warrants
As
described above, in connection with the Series E and F convertible preferred equity issuances, a total of
On
September 29, 2026, in connection with a proposed public offering, the Company entered into a Conversion Restriction and Waiver Agreement
with each of Wickbur Holdings LLC (Series E Preferred and Warrant E-1) and Agile Wisdom International Limited (Series F Preferred and
Warrant F-1). Each holder agreed not to convert its preferred stock, exercise its warrant or transfer either security, other than to
a permitted transferee bound by the agreement, during a restricted period. The restricted period ends 61 days after the holder gives
written notice of termination, which may be given no earlier than the later of the final closing or abandonment of the offering and the
second anniversary of the agreement. Each holder consented to the offering and waived its piggyback registration rights for the offering.
The agreements conformed the securities purchase agreements’ conversion terms to the Certificates of Designation, and each holder
released claims based on the former conversion terms. During the restricted period, the Company waived its right to require exercise
of the warrants and agreed to suspend its option to pay Series F dividends in common stock. Dividends on both series continue to accrue
at
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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, 2025 | $ | |||||||
| Granted | - | - | ||||||
| Cancelled/Expired | - | - | ||||||
| Exercised/Issued | - | - | ||||||
| Outstanding at September 30, 2026 | ||||||||
| Exercisable at September 30, 2026 (1) | - | $ | ||||||
| (1) |
As of September 30, 2026 the Company was required under the Certificates of Designation to reserve the following shares of its authorized but unissued common stock for conversion of the preferred stock and exercise of the warrants:
Schedule of Reserved Shares For Exercise of Warrants and Preferred Stock
| 2025 Common Stock Warrants | ||||
| Shares reserved for warrants as of September 30, 2026 |
| Security | Preferred Shares Authorized/ Outstanding | Conversion Price | Common Shares Reserved | |||||||||
| Series E Preferred Stock | $ | |||||||||||
| Series F Preferred Stock | $ | |||||||||||
| Shares reserved for Preferred Stock as of September 30, 2026 | ||||||||||||
The
Certificates of Designation require the Company to reserve at least
Restricted Stock Awards
Restricted Stock Units, Performance-Based Restricted Stock Units and Restricted Stock Awards:
Aggregated information regarding RSUs, PSUs and RSAs granted under the Plan is summarized below:
Summary of Aggregated Information Regarding RSUs, PSUs and RSAs Granted
| RSUs, PSUs & RSAs | Weighted Average Grant- Date Fair Value | |||||||
| Outstanding, unvested at December 31, 2025 | $ | |||||||
| Granted | - | - | ||||||
| Vested | ( | ) | $ | |||||
| Forfeited | - | - | ||||||
| Outstanding, unvested at September 30, 2026 | $ | |||||||
Differences between the amount of vested awards and shares of common stock issued are attributable to timing differences.
Note 5 - Legal Proceedings
The Company may be party to certain lawsuits or claims arising in the normal course of business. The ultimate outcome of these matters is unknown but, in the opinion of management, we do not believe any of these proceedings will have, individually or in the aggregate, a material adverse effect upon our financial condition, cash flows or future results of operation.
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Note 6 – Inventories
Schedule of Inventories
| September 30, 2026 | December 31, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Total inventories | $ | $ | ||||||
Note 7 - Concentration of Credit Risk
Concentration of credit risk on trade accounts receivable is concentrated in a limited number of customers with higher sales volumes; the remaining receivables are spread across a large number of customers. The Company performs ongoing credit evaluations and provides an allowance for potential credit losses against the portion of accounts receivable which is estimated to be uncollectible. Such losses have historically been within management’s expectations.
During the three and nine months ended September 30, 2026 and 2025, there were two customers whose purchases represented more than 10% of the Company’s consolidated net sales. Sales to these customers for the three and nine months ended September 30, 2026 and 2025 are as follows:
Schedule of Concentration Risk
| Three Months Ended | Three Months Ended | |||||||||||||||
| September 30, 2026 | September 30, 2025 | |||||||||||||||
| Customer | Net Sales | % of Net Sales | Net Sales | % of Net Sales | ||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
| Customer B | $ | % | $ | % | ||||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2026 | September 30, 2025 | |||||||||||||||
| Customer | Net Sales | % of Net Sales | Net Sales | % of Net Sales | ||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
| Customer B | $ | % | $ | % | ||||||||||||
As
of September 30, 2026, the outstanding accounts receivable balance from these two customers was $
Note 8 - Related Party Transactions
Ms.
Jana M. Schwan is the Company’s Chief Executive Officer. Her father, John H. Schwan, held several positions with the Company over
many years, most recently as Chairman of the Board until June 2020 as discussed in Note 3, Mr. John H. Schwan was owed approximately
$
Icy
Mellon LLC, the landlord of the Company’s Barrington Facility, is a shareholder of the Company. The Company’s Vice President
– Strategy and Business Development also serves as a Manager of Icy Mellon LLC. On January 13, 2025, the Company issued
During
the nine months ended September 30, 2026, the Company received a cash advance of $
Note 9 - Leases
We
enter into lease contracts for certain of our facilities at two locations. Our leases have remaining lease terms of
The
weighted average discount rate for our operating leases is
At September 30, 2026, maturities of operating lease liabilities are as follows:
Schedule of Maturities of Operating Lease Liabilities
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total Lease Payments | ||||
| Less: Imputed interest | ( | ) | ||
| Total Lease Liabilities | $ |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q includes both historical and “forward-looking statements” within the meaning of federal securities law. All such statements are qualified by this cautionary note, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. 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, 2025 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. 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 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. The Company incorporated “Green” into the Company name to communicate our intention to supply biodegradable and compostable materials to the marketplace that are developed by our partners in Asia. We created a new subsidiary, in part, for this purpose. In recent periods, the U.S. government has imposed tariffs on certain goods imported from countries including China. Existing and future trade tariffs, import duties and quotas could also materially increase our costs of procuring the materials we use and disrupt the markets for the products we handle, which in turn could have a material adverse effect on our financial position, results of operations and cash flows.
Senior Credit Facilities
As of September 30, 2026, the Company maintained senior secured credit facilities with Line Financial, consisting of a $7.0 million revolving credit facility and a $0.7 million term loan. The facilities are secured by substantially all Company assets.
Borrowings under the Revolving Credit Facility bear interest at the prime rate + 7.82% (14.82% as of September 30, 2026) while the term loan bears interest at the prime rate plus 1.45% and is repaid in monthly installments of approximately $15,000. The facilities include standard financial and operational covenants, including a minimum tangible net worth requirement of $4.0 million, with which the Company was in compliance as of September 30, 2026.
In September 2025, the Company executed a Fifth Amendment extending maturity to April 30, 2027, and increasing the revolving commitment from $6.0 million to $7.0 million. The amendment also introduced a 0.75% renewal fee payable in two equal installments (October 2025 and September 2026) and a $12,500 commitment fee associated with the expanded facility.
On August 24, 2026, the Company entered into a Sixth Amendment to increase the seasonal overadvance limit from $250,000 to $300,000, effective August 28, 2026. The Sixth Amendment also required a one-time payment of $20,000. The seasonal overadvance limit will expire on December 31, 2026, and all outstanding overadvance amounts must be repaid in full by January 31, 2027. Except as described above, all other material terms, including borrowing base, collateral, and covenants, remained unchanged.
At September 30, 2026, the company had $4.8 million outstanding on the revolving facility and $0.4 million on the term loan, with $2.2 million of remaining borrowing capacity.
Note Payable, Related Party
The Company also has a subordinated note payable to former Director and former Chairman John H. Schwan bearing 6% interest, with a balance of $0.3 million remaining after a $1.0 million repayment in January 2024.
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Results of Operations
Net Sales: Net sales for the three-month periods ended September 30, 2026 and 2025 were approximately $3,127,000 and $2,953,000, respectively, representing an increase of $174,000 or 6% quarter-over-quarter. The increase is primarily attributable to the timing of sales. In addition, foil balloon volumes have increased during quarter-over-quarter, however, overall for the nine month period it reduced by 10% as one of our mass retail customers adjusted its replenishment practices beginning in the second half of 2025, which affected the three- and nine-month periods.
For the three-month period ended September 30, 2026 and 2025, net sales by product category were as follows:
| Three Months Ended | ||||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | |||||||||||||||||||||||
| Product Category | $ (000) Omitted | % of Net Sales | $ (000) Omitted | % of Net Sales | Variance | % change | ||||||||||||||||||
| Foil Balloons | $ | 2,520 | 81 | % | $ | 2,352 | 80 | % | $ | 168 | 7 | % | ||||||||||||
| Film Products | 69 | 2 | % | 253 | 8 | % | (184 | ) | -73 | % | ||||||||||||||
| Other | 538 | 17 | % | 348 | 12 | % | 190 | 55 | % | |||||||||||||||
| Total | $ | 3,127 | 100 | % | $ | 2,953 | 100 | % | $ | 174 | 6 | % | ||||||||||||
For the nine-month periods ended September 30, 2026 and 2025, net sales were $13,180,000 and $13,212,000 respectively, representing a decrease of $32,000, or 0%.
For the nine-month periods ended September 30, 2026 and 2025, net sales by product category were as follows:
| Nine Months Ended | ||||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | |||||||||||||||||||||||
| Product Category | $ (000) Omitted | % of Net Sales | $ (000) Omitted | % of Net Sales | Variance | % change | ||||||||||||||||||
| Foil Balloons | $ | 8,624 | 66 | % | $ | 9,597 | 73 | % | $ | (973 | ) | -10 | % | |||||||||||
| Film Products | 317 | 2 | % | 1,030 | 8 | % | (713 | ) | -69 | % | ||||||||||||||
| Other | 4,239 | 32 | % | 2,585 | 19 | % | 1,654 | 64 | % | |||||||||||||||
| Total | $ | 13,180 | 100 | % | $ | 13,212 | 100 | % | $ | (32 | ) | 0 | % | |||||||||||
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Foil Balloons. Revenues from the sale of foil balloons increased during the three-month period ended September 30, 2026 to $2,520,000 compared to $2,352,000 during the same period of 2025. The increase is related to the timing of orders and shipments.
Revenues from the sale of foil balloons decreased during the nine-month period ended September 30, 2026 to $8,624,000 compared to $9,597,000 during the same period of 2025. The decrease is related to the timing of orders and shipments. In the second half of 2025 one of our large mass retail customers made some adjustments to their replenishment system due to a surplus in their supply chain.
Films. Revenues from the sale of commercial films were $69,000 and $317,000 during the three and nine month periods ended September 30, 2026, compared to $253,000 and $1,030,000 during the same periods of 2025. Sales in this area have been inconsistent due to a small number of customers and a significant number of competitors. Generally, our customers have experienced lower sales in this area compared to previous years, which has negatively impacted our sales, and we are uncertain whether demand in this segment will recover.
Other Revenues: Revenues from the sale of other products were $537,000 and $4,239,000 during the three and nine month periods ended September 30, 2026 compared to $348,000 and $2,585,000 during the same periods of 2025. Other revenues during these periods primarily consisted of: (i) sales of balloon-inspired gift products, including candy and small inflated balloons packaged in small containers; and (ii) sales of accessories and supply items related to balloon products. The increase in other revenues was primarily attributable to the timing of Valentine’s Day-related shipments, as a greater portion of shipments associated with the 2025 Valentine’s Day season occurred in December 2024, resulting in lower other revenues during 2025.
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 and nine month periods ended September 30, 2026 and 2025.
| Three Months Ended September 30, | ||||||||
| % of Sales | ||||||||
| 2026 | 2025 | |||||||
| Top 3 Customers | 87 | % | 78 | % | ||||
| Top 10 Customers | 94 | % | 92 | % | ||||
| Nine Months Ended September 30, | ||||||||
| % of Sales | ||||||||
| 2026 | 2025 | |||||||
| Top 3 Customers | 87 | % | 82 | % | ||||
| Top 10 Customers | 94 | % | 93 | % | ||||
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During the three and nine months ended September 30, 2026 and 2025, there were two customers whose purchases represented more than 10% of the Company’s consolidated net sales. Sales to these customers for the three and nine months ended September 30, 2026 and 2025 are as follows:
| Three Months Ended September 30, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Customer | Net Sales | % of Net Sales | Net Sales | % of Net Sales | ||||||||||||
| Customer A | $ | 1,762,000 | 55 | % | $ | 1,433,000 | 48 | % | ||||||||
| Customer B | $ | 930,000 | 29 | % | $ | 723,000 | 24 | % | ||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Customer | Net Sales | % of Net Sales | Net Sales | % of Net Sales | ||||||||||||
| Customer A | $ | 5,945,000 | 44 | % | $ | 6,678,000 | 50 | % | ||||||||
| Customer B | $ | 5,434,000 | 40 | % | $ | 3,702,000 | 28 | % | ||||||||
As of September 30, 2026, the total amounts owed to the Company by these customers were approximately $3,101,000 or 99% of the Company’s consolidated gross accounts receivable. The amounts owed at September 30, 2025 by these customers were $2,595,000 or 93% of the Company’s consolidated accounts receivable. This concentration also affects the Company’s liquidity: eligible accounts receivable from these customers constitute a substantial portion of the borrowing base under the Revolving Credit Facility, and the loss of, or significant payment delays by, either customer would reduce availability thereunder.
Cost of Sales. During the three and nine month periods ended September 30, 2026, the cost of sales was $2,796,000 and $11,296,000 compared to $2,886,000 and $11,301,000 respectively for the same periods of 2025, with the change driven largely by changes in sales volume. As a percentage of sales, cost of sales was 89% and 86% during the three and nine months ended September 30, 2026, compared to 98% and 86% during the three and nine months ended September 30, 2025. The decrease in cost of sales during the three months ended September 30, 2026 is attributed to product mix that provides better margins.
General and Administrative. During the three and nine month periods ended September 30, 2026, general and administrative expenses were $868,000 and $2,466,000 as compared to $869,000 and $2,462,000, respectively, for the same periods of 2025.
Selling, Advertising and Marketing: During the three and nine month periods ended September 30, 2026, selling, advertising and marketing expenses were $153,000 and $525,000 as compared to $181,000 and $591,000, respectively, for the same period in 2025. Selling, advertising and marketing costs have decreased by $28,000 and $66,000.
Other Income (Expense): During the three and nine month periods ended September 30, 2026, the Company incurred interest expense of $183,000 and $650,000 as compared to interest expense of $198,000 and $662,000, respectively, during the same periods of 2025.
Financial Condition, Liquidity and Capital Resources
Cash Flow Items.
Operating Activities. During the nine months ended September 30, 2026, net cash provided by operations was $2,240,000, compared to net cash provided by operations during the nine months ended September 30, 2025 of $2,300,000.
Significant changes in working capital items during the nine months ended September 30, 2026 included:
| ● | A decrease in accounts receivable of $2,878,000 compared to a decrease in accounts receivable of $2,712,000 in the same period of 2025. | |
| ● | A decrease in inventory of $598,000 compared to an increase in inventory of $187,000 in 2025. | |
| ● | An increase in trade payables of $142,000 compared to an increase in trade payables of $212,000 in 2025. | |
| ● | A decrease in prepaid expenses and other assets of $71,000 compared to a decrease of $228,000 in 2025. | |
| ● | A decrease in accrued liabilities of $286,000 compared to an increase in accrued liabilities of $94,000 in 2025.
| |
| ● | An increase in advance investor deposits of $75,000 compared to an increase of $100,000 in 2025. |
Investing Activity. During the nine months ended September 30, 2026, cash used in investing activity was $106,000, compared to cash used in investing activity for the same period of 2025 in the amount of $68,000.
Financing Activities. During the nine months ended September 30, 2026, cash used in financing activities was $2,120,000 compared to cash used in financing activities for the same period of 2025 in the amount of $2,065,000. Financing activity during 2026 consisted principally of changes in the balances of revolving and principal repayments on term loan debt.
Liquidity and Capital Resources.
At September 30, 2026, the Company had cash balances of $111,000 compared to cash balances of $387,000 for the same period of 2025.
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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 raising additional capital, including through a potential registered offering of equity securities, as well as borrowings, continuing to focus on attaining profitable operations, and exploring alternative funding sources on an as needed basis. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The supply chain constraints, inflationary pressures and tariffs are expected to impact to some extent our operations and 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. Although the Company remained in compliance with all financial covenants under the Credit Agreement as of September 30, 2026, management concluded that substantial doubt exists because anticipated operating cash flows and liquidity remain dependent upon obtaining additional financing or achieving sustained profitability.
The Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under the Credit Agreement. The Senior Facilities mature on April 30, 2027. There can be no assurance that the Company will be able to renew, extend or refinance the Senior Facilities, or obtain additional financing, on acceptable terms or at all.
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, 2025, 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, 2025.
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 and Corporate Controller (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 September 30, 2026. Based on this evaluation, the Chief Executive Officer (principal executive officer) and Corporate Controller (principal financial officer) concluded that our disclosure controls and procedures were not effective as of September 30, 2026, the end of the period covered by this Quarterly Report on Form 10-Q, due to the material weaknesses described below.
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(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 September 30, 2026. 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 lack a sufficient number of accounting professionals with the necessary knowledge, experience and training to adequately account for the application of new accounting standards as well as significant, unusual transactions particularly with regard to equity financing arrangements and the timing of recognition of certain non-cash charges. |
Accordingly, management concluded that we did not maintain effective internal control over financial reporting as of September 30, 2026.
Plan for Remediation of Material Weakness
The Company intends to remediate the material weakness through measures that are expected to include engaging outside technical accounting resources with respect to significant and unusual transactions, including equity financing arrangements; enhancing management review procedures over the application of new accounting standards and the timing of recognition of non-cash charges; and periodic reporting to the Audit Committee on remediation progress. As management continues to evaluate and refine our internal control framework, additional steps may be taken to address any remaining deficiencies or to further strengthen remediation measures already in place.
(c) Changes in Internal Control over Financial Reporting
Based on the evaluation described above, and to the best of management’s knowledge, we did not identify any changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that we believe have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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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
The following supplements the risk factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. Our Series E and Series F preferred stock and related warrants could dilute our common shareholders. The conversion price of our Series E and Series F preferred stock varies with the market price of our common stock and has no stated minimum. A decline in our common stock price could increase the number of shares issuable on conversion, subject to the ownership and issuance limits in the Certificates of Designation. Under the September 29, 2026 agreements described in Note 4, the holders may not convert their preferred stock or exercise the related warrants during the restricted period, which ends 61 days after a holder gives notice following the later of the second anniversary of its agreement and the final closing or abandonment of our proposed offering. Once the restrictions end, shares issued on conversion or exercise could reduce existing shareholders’ ownership and voting percentages, and sales of those shares could put downward pressure on our stock price.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On September 29, 2026, the Company amended Warrants E-1 and F-1, held by Wickbur Holdings LLC and Agile Wisdom International Limited and covering 36,140 and 19,460 shares of common stock, respectively, to extend their expiration date from March 11, 2027 to March 11, 2029. The exercise price and number of shares were not changed. The amendments were made in consideration of the holders’ agreements described in Note 4 to the condensed consolidated financial statements. No cash consideration was received, and no commission or other remuneration was paid. The Company relied on the exemption from registration in Section 4(a)(2) of the Securities Act of 1933 for a transaction with two existing holders, each an accredited investor, without general solicitation. The Company did not repurchase any of its equity securities during the quarter.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
The following are being filed as exhibits to this report:
Exhibit Number |
Description | |
| 4.1* | Amendment to Warrant No. E-1, dated September 29, 2026, between Yunhong Green CTI Ltd. and Wickbur Holdings LLC (included as Exhibit C to Exhibit 10.1). | |
| 4.2* | Amendment to Warrant No. F-1, dated September 29, 2026, between Yunhong Green CTI Ltd. And Agile Wisdom International Limited (included as Exhibit C to Exhibit 10.2). | |
| 10.1* | Conversion Restriction and Waiver Agreement, dated September 29, 2026, between Yunhong Green CTI Ltd. and Wickbur Holdings LLC | |
| 10.2* | Conversion Restriction and Waiver Agreement, dated September 29, 2026, between Yunhong Green CTI Ltd, and Agile Wisdom International Limited | |
| 10.3* | Sixth Amendment to Loan and Security Agreement, dated August 24, 2026, between Yunhong Green CTI Ltd. And Line Financial | |
| 31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith). | |
| 31.2* | Certification of Corporate Controller and Principal Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith). | |
| 32** | Certification of Chief Executive Officer, Corporate Controller and Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). | |
| 101* | Interactive Data Files, including the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (Loss), (iii) the Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Shareholders’ Equity, and (v) the Notes to Consolidated Financial Statements. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |
| * | Filed herewith | |
| ** | furnished herewith |
| 18 |
| Table of Contents |
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: November 13, 2026 | Yunhong Green CTI Ltd. | |
| By: | /s/ Jana M. Schwan | |
| Jana M. Schwan | ||
| Chief Executive Officer | ||
| By: | /s/ Sree Kommana | |
| Sree Kommana | ||
| Corporate Controller and Principal Financial Officer | ||
| 19 |