What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-13 compared with 2025-11-13 · 81 added, 131 removed, 73 unchanged (74% of the section changed)

38 unchanged sentences

in turn could have a material adverse effect on our financial position, results of operations and cash flows.

of Significant Events

October 21, 2024, Yunhong Green CTI Ltd.

received written notice from Nasdaq indicating that the Company’s common stock had not

maintained a minimum closing bid price of $1.00 per share for 30 consecutive business days, thereby failing to comply with Nasdaq Listing

Rule 5550(a)(2).

The notice provided the Company with an initial 180-day grace period, through April 21, 2025, to regain compliance.

the Company did not meet the minimum bid requirement by the end of the initial period, Nasdaq granted a second 180-day compliance period

on April 24, 2025, extending the deadline to October 19, 2025.

To facilitate compliance, the Company implemented a 1-for-10 reverse stock

split effective October 1, 2025, which increased the per-share trading price of its common stock.

October 21, 2025, the Company received a written notice from Nasdaq Listing Qualifications confirming that, for the ten consecutive trading

days ended October 14, 2025, the closing bid price of the Company’s common stock had been at or above $1.00 per share.

the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2), and the matter is now closed.

Credit Facilities

of September 30, 2025, 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.

of March 31, 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.

under the revolving credit facility bear interest at the prime rate plus 7.82% (15.07% as of September 30, 2025), 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, 2025.

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.

September 30, 2025, the Company had $4.6 million outstanding on the revolving facility and $0.6 million on the term loan, with $2.4 million

under the Revolving Credit Facility bear interest at the prime rate + 7.82% (14.57% as of March 31, 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 March 31, 2026.

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.

March 31, 2026, the company had $6.7 million outstanding on the revolving facility and $0.5 million on the term loan, with $0.3 million

of remaining borrowing capacity.

4 unchanged sentences

of Operations

Net sales for the three-month periods ended September 30, 2025 and 2024 were approximately $2,953,000 and $2,540,000, respectively,

representing an increase of $413,000 or 16% quarter-over-quarter.

the three-month period ended September 30, 2025 and 2024, net sales by product category were as follows:

Three Months Ended

September 30, 2025

September 30, 2024

(000) Omitted

Foil Balloons

Film Products

the nine-month period ended September 30, 2025 and 2024, net sales were $13,212,000 and $11,788,000 respectively, representing an increase

of $1,424,000, or 12%.

the nine-month periods ended September 30, 2025 and 2024, net sales by product category were as follows:

Nine Months Ended

September 30, 2025

September 30, 2024

(000) Omitted

Net sales for the three-month periods ended March 31, 2026 and 2025 were approximately $6.2 million and $4.8 million, respectively,

representing an increase of $1.4 million, or 28% year-over-year.

the three-month period ended March 31, 2026 and 2025, net sales by product category were as follows:

Foil Balloons

Film Products

Revenues from the sale of foil balloons increased during the three-month period ended September 30, 2025 to $2,352,000

compared to $2,322,000 during the same period of 2024.

The slight increase in revenue is due to the timing of shipments.

from the sale of foil balloons increased during the nine-month period ended September 30, 2025 to $9,597,000 compared to $8,493,000 during

the same period of 2024.

The main reason for this change can be attributed to the majority of our Valentine’s Day foil balloons

this year were shipped in Q1 2025 whereas last year the majority of our Valentine’s Day foil balloons were shipped in Q4 2023.

The increase is related to the timing of orders and shipments.

Revenues from the sale of commercial films were $253,000 and $1,030,000 during the three and nine month periods ended September 30, 2025,

compared to $129,000 and $605,000 during the same periods of 2024.

Sales in this area have been inconsistent due to a small number of

customers and a significant number of competitors.

Revenues from the sale of other products were $348,000 and $2,585,000 during the three and nine month periods ended September

30, 2025 compared to $89,000 and $2,690,000 during the same periods of 2024.

Other revenues during these periods primarily consisted

(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 main reason for the fluctuation of the sales is due to timing of Valentine’s

Day related shipments, which occurred in December 2024 compared to Q1 2024 for the following year.

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, 2025 and 2024.

Three Months Ended September 30,

Top 3 Customers

Top 10 Customers

Nine Months Ended September 30,

Revenues from the sale of foil balloons decreased during the three-month period ended March 31, 2026 to $3,487,000 compared

to $4,234,000 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.

Revenues from the sale of commercial films decreased during the three-month period ended March 31, 2026 to $39,000 compared to $427,000

during the same period of 2025.

Sales in this area have been inconsistent due to a small number of customers and a significant number

of competitors.

Other revenues increased to $2,628,000 for the three-month period ended March 31, 2026, compared to $141,000 for the same

period in 2025.

The primary reason for the increase was the timing of spring product shipments, which occurred in first quarter of 2026

rather than the second quarter in 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.

Sales to a limited number of customers continue to represent a large percentage of our net sales.

table below illustrates the impact on sales of our top three and ten customers for the three-month periods ended March 31, 2026 and 2025.

Months Ended March 31,

Top 3 Customers

Top 10 Customers

the three and nine months ended September 30, 2025 and 2024, there were two customers whose purchases represented more than 10% of the

Company’s consolidated net sales.

Sales to these customers for the three and nine months ended September 30, 2025 and 2024 are

Three Months Ended September 30,

% of Net Sales

Nine Months Ended September 30,

% of Net Sales

of September 30, 2025, the total amounts owed to the Company by these customers were approximately $2,595,000 or 93% of the Company’s

consolidated net accounts receivable.

The amounts owed September 30, 2024 by these customers were $2,077,000 or 95% of the Company’s

consolidated net accounts receivable.

During the three and nine month periods ended September 30, 2025, the cost of sales was $2,886,000 and $11,301,000 compared

to $2,560,000 and $10,220,000, respectively for the same periods of 2024, with the change driven largely by changes in sales volume.

As a percentage of sales, cost of sales was 98% and 86% during the three and nine months ended September 30, 2025, compared to 101% and

87% during the three and nine months ended September 30, 2024.

the three-month period ended March 31, 2026, there were two customers whose purchases represented more than 10% of the Company’s

consolidated net sales.

Sales to these customers for the three-month period ended March 31, 2026 were $2,378,000 and $2,969,000 or 39%

and 48 %, respectively of consolidated net sales.

Sales to these customers for the three months ended March 31, 2025

were $3,091,000 and $523,000, or 64% and 11%, respectively of consolidated net sales.

As of March 31, 2026, the total amount owed to

the Company by these customers was approximately $6,056,000, or 99% of the Company’s consolidated net accounts receivable.

During the three-month period ended March 31, 2026, the cost of sales was $5,138,000, compared to $3,936,000 for the same

period of 2025.

The gross margin for March 31, 2026 is 17% compared to 18% for the same period of 2025, the decrease in gross margin

is related to increase in component prices and raw materials due to escalating fuel prices.

and Administrative .

During the three and nine months ended September 30, 2025, general and administrative expenses were $869,000

and $2,462,000, respectively, compared to $751,000 and $2,449,000 for the same periods in 2024.

The increase was primarily driven by

higher legal and litigation expenses of $44,000 and $43,000, respectively, and an additional $43,000 in public company expenses related

to the reverse stock split.

In addition, audit fees for 2024 were elevated due to re-audit work required following the SEC’s suspension

of the Company’s former independent auditor in May 2024.

During the three-month period ended March 31, 2026, general and administrative expenses were $924,000 as compared

to $839,000 for the same period in 2025.

The largest increase is attributed to increase in audit fee of $65k and increases in variable

rent expenses.

Advertising and Marketing .

During the three and nine month periods ended September 30, 2025, selling, advertising and marketing expenses

were $181,000 and $591,000 as compared to $220,000 and $633,000, respectively, for the same period in 2024.

Selling costs have decreased

by $39,000 and $42,000.

During the three-month period ended March 31, 2026, selling, advertising and marketing expenses were $190,000

as compared to $205,000 for the same period in 2025.

Income (Expense) .

During the three and nine month periods ended September 30, 2025, the Company incurred interest expense of $198,000

and $662,000 as compared to interest expense of $201,000 and $655,000, respectively, during the same periods of 2024.

During the three

and nine month periods ended September 30, 2025, the Company earned other income of $370,000 and $392,000 as compared to other expense

of $1,000 and $13,000, respectively, during the same periods of 2024.

During the three months ended September 30, 2025, the Company received

a dispute settlement amount of $315,000 from a service provider on July 29, 2025, and also received $55,000 relating to an insurance

During the three-month period ended March 31, 2026, the Company incurred interest expense of $242,000 as compared

to interest expense of $237,000 during the same period of 2025.

Condition, Liquidity and Capital Resources

During the nine months ended September 30, 2025, net cash provided by operations was $2,300,000 ,

compared to net cash provided by operations during the nine months ended September 30, 2024 of $862,000.

changes in working capital items during the nine months ended September 30, 2025 included:

decrease in accounts receivable of $2,712,000 compared to a decrease in accounts receivable of $1,779,000 in the same period of 2024

increase in inventory of $187,000 compared to an increase in inventory of $61,000 in 2024.

During the three months ended March 31, 2026, net cash provided by operations was $236,000, compared to net cash provided

in operations during the three months ended March 31, 2025 of $970,000.

changes in working capital items during the three months ended March 31, 2026 included:

increase in accounts receivable of $154,000 compared to a decrease in accounts receivable of $772,000 in the same period of 2025.

decrease in inventory of $732,000 compared to an increase in inventory of $175,000 in 2025.

increase in trade payables of $105,000 compared to an increase in trade payables of $334,000 in 2025.

decrease in prepaid expenses and other assets of $228,000 compared to an increase of $23,000 in 2024.

increase in accrued liabilities of $94,000 compared to an increase in accrued liabilities of $384,000 in 2024.

During the nine months ended September 30, 2025, cash used in investing activity was $68,000, compared to cash used in

investing activity for the same period of 2024 in the amount of $302,000.

During the nine months ended September 30, 2025, cash used in financing activities was $2,065,000 compared to cash used

by financing activities for the same period of 2024 in the amount of $1,476,000.

Financing activity during 2025 consisted principally

of changes in the balances of revolving and term loan debt.

decrease in prepaid expenses and other assets of $45,000 compared to a decrease of $63,000 in 2025.

decrease in accrued liabilities of $358,000 compared to an increase in accrued liabilities of $220,000 in 2025.

During the three months ended March 31, 2026, cash used in investing activity was $27,000, compared to cash used in investing

activity for the same period of 2025 in the amount of $20,000.

During the three months ended March 31, 2026, cash used in financing activities was $128,000 compared to cash used in

financing activities for the same period of 2025 in the amount of $998,000.

Financing activity during 2026 consisted principally of changes

in the balances of revolving and long-term debt.

and Capital Resources .

September 30, 2025, the Company had cash balances of $387,000 compared to cash balances of $5,000 for the same period of 2024.

March 31, 2026, the Company had cash balances of $178,000 compared to cash balances of $172,000 for the same period of 2025.

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,

1 unchanged sentence

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 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.

accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue

as a going concern.

include executing its business plan, continuing to focus on achieving 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

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

Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis