Filed 2026-03-23 · Period ending 2025-12-31 · 37,913 words · SEC EDGAR
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# YUNHONG GREEN CTI LTD. (YHGJ) — 10-K **Filed:** 2026-03-23 **Period ending:** 2025-12-31 **Accession:** 0001493152-26-012156 **Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1042187/000149315226012156/) **Origin leaf:** dd1a06d87391702ead2f83046e272eed5b10b6de07f78b368d9b3851ba7d0389 **Words:** 37,913 --- ** UNITED STATES** **SECURITIES AND EXCHANGE COMMISSION** **WASHINGTON, D.C. 20549** **FORM 10-K** **(Mark One)** | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | **For the fiscal year ended December 31, 2025** **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 | | | | | Lake Barrington, Illinois | | 60010 | | | (Address of principal executive offices) | | (Zip Code) | | Registrants telephone number, including area code: (847) 382-1000 Securities registered pursuant to Section 12(b) of the Act: | Title of each class | | Ticker symbol(s) | | Name of each exchange on which registered | | | Common Stock, no par value per share | | YHGJ | | The NASDAQ Stock Market LLC | | Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No 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 has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b). Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No Based upon the closing price of $7.80 per share of the Registrants Common Stock as reported on NASDAQ Capital Market tier of The NASDAQ Stock Market on June 30, 2025, the aggregate market value of the voting common stock held by non-affiliates of the Registrant was then approximately $10,000,000. (The determination of stock ownership by non-affiliates was made solely for the purpose of responding to the requirements of the Form and the Registrant is not bound by this determination for any other purpose.) The number of shares outstanding of the Registrants Common Stock as of March 23, 2026 was 2,597,363 (excluding treasury shares). DOCUMENTS INCORPORATED BY REFERENCE The Registrants definitive Proxy Statement for the Annual Meeting of Shareholders (the 2025 Proxy Statement) is incorporated by reference in Part III of this Form 10-K to the extent stated herein. The 2025 Proxy Statement, or an amendment to this Form 10-K, will be filed with the SEC within 120 days after December 31, 2025. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as a part hereof. | | | **TABLE OF CONTENTS** **INDEX** FORWARD LOOKING STATEMENTS | Part I | | | | | | | | | | Item No. 1 | Description of Business | 1 | | | Item No. 1B | Unresolved Staff Comments | 10 | | | Item No. 1C | Cybersecurity | 10 | | | Item No. 2 | Properties | 11 | | | Item No. 3 | Legal Proceedings | 11 | | | | | | | | Part II | | | | | | | | | | Item No. 5 | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 11 | | | Item No. 7 | Managements Discussion and Analysis of Financial Condition and Results of Operations | 12 | | | Item No. 7A | Quantitative and Qualitative Disclosures Regarding Market Risk | 19 | | | Item No. 8 | Financial Statements and Supplementary Data | 19 | | | Item No. 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 19 | | | Item No. 9A | Controls and Procedures | 19 | | | Item No. 9B | Other Information | 20 | | | | | | | | Part III | | | | | | | | | | Item No. 10 | Directors and Executive Officers of the Registrant | 20 | | | Item No. 11 | Executive Compensation | 25 | | | Item No. 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 29 | | | Item No. 13 | Certain Relationships and Related Transactions | 30 | | | Item No. 14 | Principal Accounting Fees and Services | 30 | | | | | | | | Part IV | | | | | | | | | | Item No. 15 | Exhibits and Financial Statement Schedules | 31 | | | | | | Table of Contents | | **FORWARD-LOOKING STATEMENTS** This Annual Report on Form 10-K 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 Annual Report on Form 10-K. We disclaim any intent or obligation to update any forward-looking statements after the date of this Annual Report on Form 10-K 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, our participation in highly competitive markets, potential changes in the cost or availability of raw materials, our dependence on a limited number of suppliers, the possible inability to obtain an adequate supply of raw materials, our reliance on a limited number of key customers, the loss of one or more of our key customers, changing consumer demands, developments or changes in technology, risks of international operations and political environments, dependence on our intellectual property, compliance with federal, state or local regulations, the resolution of litigation or other legal proceedings to which we may become involved, restrictions included in the Companys credit facility, the availability of funds under the Companys credit facility, damage to or destruction of one or both of the Companys principal plants, our ability to service our indebtedness, our ability to invest in needed plant or equipment. **PART I** **Item No. 1****Business** **Business Overview** We develop, produce, distribute and sell a number of consumer products throughout the United States and in several other countries, and we produce film products for commercial and industrial uses in the United States. Many of our products utilize flexible films and, for a number of years, we have been a leading developer of innovative products which employ flexible films including novelty balloons, pouches and films for commercial packaging applications. Our principal lines of products include: **Novelty Products** consisting principally of foil and latex balloons and related gift items; and **Flexible Films** for food and other commercial and packaging applications. **Balloon-inspired** gifts and Other Products In addition to these principal product lines, for the past several years, we have engaged in the assembly and sale of balloon-inspired gift items (small gift bouquets of arranged candy items often including ribbons and/or a small foil balloon). During 2023 we expanded to include samples of compostable material intended to replace single-use plastic and other materials. Adding these materials to our Company inspired us to ask our shareholders to include Green in our name and to reflect our name in new trading symbol YHGJ. Our shareholders approved of these actions during August 2023. We leverage our technology to design and develop proprietary products which we develop, market and sell for our customers. We have been engaged in the business of developing flexible film products for over 40 years and have acquired significant technology and know-how in that time. We currently hold several patents related to flexible film products, including specific films, zipper closures, valves and other features of these products. | 1 | | | Table of Contents | | We print, process and convert flexible film into finished products and we produce balloons and novelty items. Our principal production processes include: | | | Coating and laminating rolls of flexible film. Generally, we adhere polyethylene film to another film such as nylon or polyester; | | | | | | | | | | Printing film and latex balloons. We print on plastic films, with a variety of graphics, for use as packaging film or for balloons; | | | | | | | | | | Converting printed film to balloons; | | | | | | | | | | Converting film to flexible containers; | | | | | | | | | | Producing or reselling latex balloons and other latex novelty items; and | | | | | | | | | | Assembling and inflating of novelty products and balloons and Candy Blossoms. | | In 1978, we began manufacturing metalized balloons (often referred to as foil balloons), which are balloons made of a base material (usually nylon or polyester) often having vacuum deposited aluminum and polyethylene coatings. These balloons remain buoyant when filled with helium for much longer periods than latex balloons and permit the printing of graphic designs on the surface. In 1985, we began marketing latex balloons and, in 1988, we began manufacturing latex balloons. In 1999, we acquired an extrusion coating and laminating machine and began production of coated and laminated films, which we have produced since that time. For more than 20 years, we have been engaged in the coating, laminating and printing of flexible films for our novelty and container products and for the production of laminated and printed films we supply to others. We market and sell our foil and latex balloons and related novelty items throughout the United States, Canada and Mexico and in a number of other countries. We supply directly to retail stores and chains and through distributors, who in turn sell to retail stores and chains. Our balloon and novelty products are sold to consumers through a wide variety of retail outlets including general merchandise, discount and drugstore chains, grocery chains, card and gift shops and party goods stores, as well as through florists and balloon decorators. Most of our foil balloons contain printed characters, designs and social expression messages, such as Happy Birthday, Get Well and similar items. We may obtain licenses from time to time for well-known characters and print those characters and messages on our balloons. We provide customized laminated films and printed films to customers who utilize the film to produce bags or pouches for the packaging of food, liquids and other items. In 2014, we began assembling and producing balloon-inspired gifts - containers including candy items and, often, air-inflated balloons. In 2025, our revenues from our product lines, as a percentage of total revenues were: | | Novelty Products | 65% of revenues | | | | Flexible Film Products | 6% of revenues | | | | Balloon-inspired gifts and Other Products | 29% of revenues | | We are an Illinois corporation with our principal offices and plant at 22160 N. Pepper Road, Lake Barrington, Illinois. | 2 | | | Table of Contents | | **Business Strategies and Developments** Our business strategies, and recent developments related to our business, include: | | | Management. During 2024 Ms. Jana Schwan became our Chief Executive Officer after having served as Chief Operating Officer since 2020, Vice President of Operations and a number of other roles of increasing responsibility during her 20 years with the Company. Mr. Yubao Li has been Chairman of the Board of Directors since 2020. | | | | | | | | | | Financing. We entered into a credit facility during September 2021 that was extended during 2025 expiring April 2028. We have been in compliance with this credit facility since inception. | | | | | | | | | | Strategy. Our management determined to focus on achieving growth and profitability within the current scope of our core product lines foil balloons and related products from our United States based business. In addition, we seek to leverage advancements in compostable materials from a group of companies based in China that are directly or indirectly controlled by our Chairman and director, Mr. Yubao Li (collectively, and including LF International plc, these other companies are referred to herein as the Yunhong Companies or Yunhong Group). We believe the combination of traditional product optimization with risk-managed investment in new materials is the right combination for our company. | | | | | | | | | | Focus on our Core Assets and Expertise. We have been engaged in the development, production and sale of film and container products for 40 years and have developed assets, technology and expertise which, we believe, enable us to develop, manufacture, purchase, market and sell innovative products of high quality within our areas of knowledge and expertise. We have focused our efforts on these core assets and areas of expertise film novelty products, specialty film products, laminated films and printed films to develop new products, to market and sell our products and to build our revenues. | | | | | | | | | | Develop New Products, Product Improvements and Technologies. We engage in research, design, innovation and development for the purpose of developing and improving products, materials, methods and technologies within our core product categories. We work to develop and identify new products, to improve existing products and to develop new technologies within our core product areas in order to enhance our competitive position and increase our sales. We seek to leverage our technology to develop innovative and proprietary products. In our novelty product lines, our development work includes new designs, new character licenses, new product developments, new materials and improved production methods. We work with customers to develop custom film products which serve the unique needs or requirements of the customer. We seek to leverage the advancements of other Yunhong Companies. | | | | | | | | | | Develop New Channels of Distribution and New Sales Relationships. We seek to organically develop new channels of distribution and new sales relationships, both for existing and new products. Over the past several years, we have developed new distributors and customers for our products in the United States and in Europe, Mexico, Latin America and Australia. We also look to leverage resources within the Yunhong China Group for a wide range of topics, from sales to sourcing. | | | | | | | | | | Product and Line Extensions. We intend to pursue new product lines and product line extensions, through internal developments. | | | 3 | | | Table of Contents | | **Products** *Foil Balloons*. We have designed, produced and sold foil balloons since 1979 and, we believe, are one of the larger manufacturers of foil balloons in the United States. Currently, we produce several hundred foil balloon designs, in different shapes and sizes. In addition to size and shape, a principal element of our foil balloon products is the printed design or message contained on the balloon. These designs may include figures and licensed characters, but typically are of our own design. We recognize that consumer trends and preferences, and competing products, are constantly changing. In order to compete effectively in this product line we must constantly innovate and develop new designs, shapes and products. *Latex Balloons*. Our former subsidiary in Guadalajara, Mexico, Flexo Universal, S. de R.L. de C.V. (Flexo Universal) manufactures latex balloons in a wide variety of sizes and colors. Flexo Universal was sold during October 2021. The Company currently sources latex products from a foreign supplier and resells those products to customers that seek both foil and latex solutions. *Packaging Films and Custom Film Products.* A large and increasing number of both consumer and commercial products are packaged in pouches or containers utilizing flexible films. Often such containers include printed labels and designs. We produce and sell films that may be utilized for the packaging of a wide variety of products and liquids. We laminate, extrusion coat and adhesive coat flexible films for these purposes and we provide flexographic printing for the films we produce. We can produce a variety of customized film products, and printing services, to meet the specific packaging needs of a wide variety of customers. *Other Products.*In 2014, we began assembly and sale of our balloon-inspired gifts product line (typically a presentation of candy with a balloon in a decorative arrangement for gifting). We have since supplemented this product line with related products. **Markets** *Foil Balloons* The foil balloon came into existence in the late 1970s. During the 1980s, the market for foil balloons grew rapidly. Initially, the product was sold principally to individual vendors, small retail outlets and at fairs, amusement parks, shopping centers and other outdoor facilities and functions. Foil balloons remain buoyant when filled with helium for extended periods of time and they permit the printing and display of graphics and messages. As a result, the product has significant appeal as a novelty and message item. Foil balloons became part of the social expression industry, carrying graphics designs, characters and messages like greeting cards. In the mid-1980s, we and other participants in the market began licensing character and cartoon images for printing on the balloons and directed marketing of the balloons to retail outlets including grocery, general merchandise, discount and drug store chains, card and gift shops, party goods stores as well as florists and balloon decorators. These outlets now represent the principal means for the sale of foil balloons throughout the United States and in a number of other countries, although individual vendors remain a means of distribution in certain areas. Foil balloons are now sold in virtually every region of the world. The United States remains the largest market for these products. Foil balloons are sold in the United States and foreign countries directly by producers to retail outlets and through distributors and wholesalers. Often the sale of foil balloons by the wholesalers/distributors is accompanied by related products including latex balloons, floral supplies, candy containers, mugs, plush toys, baskets and a variety of party goods. | 4 | | | Table of Contents | | *Latex Balloons* For a number of years, latex balloons and related novelty/toy latex items have been marketed and sold throughout the United States and in many other countries. Latex balloons are sold as novelty/toy items for decorative purposes, as part of floral designs and as party goods and favors. In addition to standard size and shape balloons, inflatable latex items include punch balls, water bombs, balloons to be twisted into shapes, and other specialty designs. Often, latex balloons include printed messages or designs. Latex balloons are sold principally in retail outlets, including party goods stores, general merchandise stores, discount chains, gift stores and drugstore chains. Latex balloons are also purchased by balloon decorators and floral outlets for use in decorative or floral designs. Printed latex balloons are sold both in retail outlets and for balloon decoration purposes including floral designs. Latex balloons are sold both through distributors and directly to retail outlets by the producers. *Printed and Specialty Films* The industry and market for printed and specialty films are fragmented and include many participants. There are hundreds of manufacturers of printed and specialty film products in the United States and in other markets. In many cases, companies who provide food and other products in film packages also produce or process the films used for their packages. The market for the Companys film products consists principally of companies who utilize the films for the packaging of their products, including food products and other items, usually by converting the film to a flexible container. **Marketing, Sales and Distribution** *Balloon Products* We work in collaboration with our customers on designs, promotions, and other elements of marketing and selling. Our customers are typically retailers who sell our products to individual consumers. These relationships generally can be terminated unilaterally by either us or our customers. We must maintain good relationships with our customers if this sales model is to be successful. We market and sell our foil balloon, latex balloon and related novelty products throughout the United States and in a number of other countries. We maintain marketing, sales and support staff and a customer service department in the United States. We sell directly to foreign customers from the United States. We sell and distribute our balloon products (i) through our sales staff and customer service personnel in the United States, (ii) through a network of distributors and wholesalers, (iii) through several groups of independent sales representatives, and (iv) to retail chains. Our balloon products are generally sold through retail outlets including grocery, general merchandise and drug store chains, card and gift shops, party goods stores as well as florists and balloon decorators. We sometimes engage in advertising and promotional activities to promote the sale of our balloon products. We produce catalogs of our balloon products and also prepare various flyers and brochures for special or seasonal products, which we disseminate to customers, potential customers and others. We maintain websites which show images of our products. *Printed and Specialty Films* We market and sell printed and laminated films directly and through independent sales representatives throughout the United States. We sell laminated and printed films to companies that utilize these films to produce packaging for a variety of products, including food products, in both solid and liquid form, such as cola syrup, coffee, juices and other items. We seek to identify and maintain customer relationships in which we provide added value in the form of technology or systems. *Other Products* Other products are sold by our internal sales force directly to customers and also by independent sales representatives. These products are generally sold directly to retail outlets or other intermediaries to the ultimate consumer (for example, to a florist). | 5 | | | Table of Contents | | **Production and Operations** We conduct our operations at our facilities including: (i) our 69,000 square feet facility in Lake Barrington, Illinois, incorporating our headquarters office, production and warehouse space, and (ii) our 69,000 square foot facility in Elgin, Illinois consisting of warehouse, packaging and office space. Our production operations include (i) lamination and extrusion coating of films, (ii) slitting of film rolls, (iii) printing on film and on latex balloons, (iv) converting film to completed products including balloons, flexible containers and pouches, (v) distributing latex balloon products, (vi) inflating of air-filled balloons, and (vii) assembling Candy blossoms. We perform all of the lamination, extrusion coating and slitting activities in our Lake Barrington, Illinois plant. We complete air-filling and assembly of balloons and balloon-inspired gifts in our Elgin, Illinois facility. We warehouse raw materials in Lake Barrington, Illinois and we warehouse finished goods at our facilities in Lake Barrington, Illinois and Elgin, Illinois. We maintain customer service and fulfillment operations at each of our locations. We conduct sales operations for the United States and for all other markets at the Lake Barrington, Illinois facility. We maintain a graphic arts and development department at our Lake Barrington, Illinois facility which designs our balloon products and graphics. Our creative department operates a networked, computerized graphic arts system for the production of these designs and of printed materials including catalogues, advertisements and other promotional materials. As many of our products are custom designed or created to fulfill promotional schedules, we sometimes have excess inventory that must be sold at a discount or disposed of. Any such disposition will typically negatively impact our profit margin. We conduct administrative and accounting functions at our headquarters in Lake Barrington, Illinois. **Raw Materials** The principal raw materials we use in manufacturing our products are (i) petroleum or natural gas-based films, (ii) petroleum or natural gas-based resin, (iii) printing inks, and (iv) bulk candy. The cost of raw materials represents a significant portion of the total cost of our products, with the result that fluctuations in the cost of raw materials have a material effect on our profitability. During the past several years, we have experienced significant fluctuations in the cost of these raw materials. We do not have any long-term agreements for the supply of raw materials and may experience wide fluctuations in the cost of raw materials in the future. Further, although we have been able to obtain adequate supplies of raw materials in the past, there can be no assurance that we will be able to obtain adequate supplies of one or more of our raw materials in the future. Many of the foil balloons we produce and sell are intended to be filled with helium in order to be buoyant. Over the past several years, the price of helium has fluctuated substantially and the availability of helium has, on occasion, been limited. During 2018 and 2019, the availability of helium declined and the cost of helium increased. The supply of helium improved significantly until 2022, when another set of supply disruptions caused significant price escalation of helium. The price of helium has gradually decreased during the second half of 2022 and through 2025. Any future occurrence of limited availability and/or an increase in the cost of helium could adversely affect our sales of foil balloons. | 6 | | | Table of Contents | | **Competition** The balloon and novelty industry is highly competitive, with numerous competitors. We believe the principal manufacturers of foil balloons whose products are sold in the United States include Anagram International, Inc., Pioneer Balloon Company, Convertidora International S.A. de C.V., and Betallic, LLC. Several companies market and sell foil balloons designed by them and manufactured by others for them. In addition, there are several additional foil balloon manufacturers in Europe and China who participate in our markets. We compete for the sale of latex balloons in the United States, Canada, Mexico, Latin America, the United Kingdom, Australia and Europe. There are a number of other companies situated in the United States, Mexico, Asia, South America and Europe who manufacture latex balloons and with whom we compete in the markets in which we participate. The markets are highly competitive with respect to price, quality and terms. The market for films, packaging, and custom products is fragmented, and competition in this area is difficult to gauge. However, there are numerous participants in this market, and the Company can expect to experience intense quality and price competition. Many of the companies in these markets offer products and services that are the same or similar to those offered by us and our ability to compete depends on many factors within and outside our control. There are a number of well-established competitors in each of our product lines, several of which possess substantially greater financial, marketing and technical resources and have established extensive, direct and indirect channels of distribution for their products and services. As a result, such competitors may be able to respond more quickly to new developments and changes in customer requirements, or devote greater resources to the development, promotion and sale of their products and services than we can. Competitive pressures include, among other things, price competition, new designs and product development and copyright licensing. **Patents, Trademarks and Copyrights** We have developed or acquired a number of intellectual property rights which we believe are significant to our business. While intellectual property rights are helpful, we believe that their degree of protection is uncertain. Competitors may violate our intellectual property rights, forcing us to decide whether to challenge them. Such rights may or may not withstand challenge. Conversely, entities may charge us with violating their intellectual property rights. Failure to protect our rights, or conflict with the rights of one or more other entities, may negatively impact our financial and competitive position. *Proprietary Designs and Copyright Licenses.* We design the shapes and graphic designs of most of our foil balloon products. *Trademarks.*We own nine registered trademarks in the United States relating to our balloon products, including trademark applications. Some of these trademarks are registered in foreign countries, principally in the European Union. *Patent Rights.* We own, or have license rights under, or have applied for, patents related to our balloon products, certain film products and certain flexible container products. **Research and Development** We maintain a product development and research group for the development or identification of new products, product designs, product components and sources of supply. Research and development includes (i) creative product development and design, (ii) creative marketing, and (iii) engineering development. During each of the fiscal years ended December 31, 2025, and 2024, we estimate that the total amount spent on research and development activities was approximately $200,000 and $200,000, respectively. | 7 | | | Table of Contents | | **Employees** As of December 31, 2025, the Company had 52 full-time employees in the United States, of whom 12 are executive or supervisory, 2 are in sales, 25 are in manufacturing or warehouse functions and 13 are clerical. The Company is not a party to any collective bargaining agreement in the United States, has not experienced any work stoppages, and believes that its relationship with its employees is satisfactory. The Company expects its local labor market in the US (near Chicago) to continue to become more costly over time, which, if not changed, would negatively impact its future profitability. The Company has introduced additional automation features in its production lines beginning 2022 and expects to continue to implement automation tools. **Regulatory Matters** Our manufacturing operations in the United States are subject to the U.S. Occupational Safety and Health Act (OSHA). We believe we are in material compliance with OSHA. The Company generates liquid, gaseous and solid waste materials in its operations in Lake Barrington, Illinois and the generation, emission or disposal of such waste materials are, or may be, subject to various federal, state and local laws and regulations regarding the generation, emission or disposal of waste materials. We believe we are in material compliance with applicable environmental rules and regulations. Several states have enacted laws limiting or restricting the release of helium filled foil balloons. We do not believe such legislation will have any material effect on our operations. An increasing number of regulations and actions relate to the integrity and security of individually identifiable data. Additionally, we require the effective use of data in running our business. While we are not aware of losses in the past, access of such data by unauthorized persons may expose us to costs, fines, penalties, and loss of customer confidence. **International Operations** The Company formed a wholly owned subsidiary, Yunhong Technology (Hubei) Co., Ltd., in Hubei Province, China (the China subsidiary) to support its international production operations. On June 30, 2024, through this subsidiary, the Company acquired certain production equipment and related manufacturing assets pursuant to an Asset Purchase Agreement. The consideration consisted of 500,000 shares of the Companys common stock, valued at approximately $6.25 million at the time of issuance. On December 2, 2025, the Company entered into a settlement agreement with the seller pursuant to which 175,000 shares of common stock were reacquired and canceled in exchange for the Company surrendering its rights to approximately $2.1 million of prepaid assets representing a working capital credit for the buildout of operations **Available Information** We maintain our corporate website at www.ctiindustries.com and we make available, free of charge, through this website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports that we file with, or furnish to, the Securities and Exchange Commission (SEC), as soon as reasonably practicable after we electronically file that material with, or furnish it to, the SEC. You may also read and copy material filed by us with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, and you may obtain information on the operation of the Public Reference Room by calling the SEC in the U.S. at 1-800-SEC-0330. In addition, the SEC maintains an Internet website, www.sec.gov, which contains reports, proxy and information statements and other information that we file electronically with the SEC. Our website also includes corporate governance information, including our Code of Ethics, Clawback Policy and our Board Committee Charters. The information contained on our website does not constitute a part of this report. | 8 | | | Table of Contents | | **Item No. 1A** **Risk Factors** **Our business and results of operations have been and may continue to be negatively impacted by supply chain disruptions and inflationary pressures and changes in trade policy.** Beginning in 2021 we saw material shortages, supply chain interruption, and a reduced ability to transport goods throughout the United States and globally. These pressures forced us to take steps to ensure product availability, including purchasing materials at higher prices and more aggressively managing lead times. Despite these efforts, our ability to fulfill customer demands was challenged. In addition, changes in U.S. and international trade policies, including the imposition or threat of tariffs, duties, or other trade restrictions, may increase the cost of raw materials, components, and equipment used in our operations. Trade-related uncertainty may also contribute to supply chain volatility, increased freight costs, and reduced availability of key inputs. If tariffs or other trade barriers are imposed or expanded, we may not be able to fully pass these increased costs on to customers, which could adversely affect our margins and profitability. We have passed certain cost increases on to customers in the form of price adjustments; however, continued inflationary pressure, tariff-related cost increases, or supply chain disruptions may negatively impact our sales volumes, financial results, and overall business performance going forward. **Our business and results of operations have been and may continue to be negatively impacted by public health crises or similar issues or similar events.** We sell our products throughout the United States and in many foreign countries and may be impacted by public health crises beyond our control. This could disrupt our operations and negatively impact consumer spending and confidence levels, and supply availability and costs, all of which can affect our financial results, condition, and outlook. Our customers, suppliers and distributors may experience similar disruption. Importantly, the global pandemic resulting from COVID-19 has disrupted global health, economic and market conditions. Throughout 2021 and into 2022 the landscape improved from 2020, but the issue drove elements of disruption in the ability to travel, attract and retain workers, manage production configurations and protocols, the supply chain and customer base. While we cannot predict the duration or scope of any issue similar to the COVID-19 pandemic, the resurgence of infections in one or more markets, or the impact of vaccines across the globe, this has negatively impacted our business and is expected to continue to impact our financial results, condition and outlook in a way that may be material. COVID-19 has also delayed certain strategic transactions the Company intended to close during 2020, most notably its attempted sale of its former subsidiary Flexo Universal which was ultimately realized during October 2021 and the potential relocation of certain activities to the Laredo, Texas area, which is no longer a consideration of the Company. **The price and availability of helium may negatively impact our largest product line.** Helium price volatility has had, and may continue to have, a recurring impact on our business. Our largest product line consists of balloons that are filled with helium by customers. As a result, fluctuations in helium pricing directly affect customer purchasing behavior. When helium prices increase beyond a normal range, customers may temporarily discontinue offering helium-filled balloons or raise prices to end consumers, which can negatively impact overall demand. Although helium prices have fluctuated over time, periods of elevated pricing have historically reduced demand for our products and adversely affected revenue. We believe that sustained increases in helium prices can result in reduced customer orders and lower sales volumes. While helium prices may stabilize or decline during certain periods, volatility remains a risk, and any future increases above normal pricing levels could materially and negatively impact on our revenue and operating results. To the extent helium prices exceed customary market levels for a sustained period, the more significant the potential adverse effect on our business performance. **Staffing levels** As a lean manufacturer our employees perform multiple roles within our company. While we have managed succession in the past and intend to continue doing so, any failure to recruit and retain qualified individuals may negatively impact on our financial results and the ability to perform as intended. **Machinery and Equipment** During the first quarter of 2025 we had multiple instances of equipment failure specifically in third-party print runs. While this equipment has been repaired or replaced, the repair costs and in certain cases the need to run product on third party equipment negatively impacted our financial results. To the extent equipment does not perform as intended, our results may be negatively impacted. **Subsidiary in China** On June 30, 2024, through our wholly owned subsidiary, Yunhong Technology Industry (Hubei) Co., Ltd., we acquired certain manufacturing equipment and related production assets from Yunhong Environmental Protection Technology Co., Ltd. and Yunhong China Group (together, the Selling Parties) pursuant to an Asset Purchase Agreement. As consideration for the acquisition, the Company issued 500,000 shares of its common stock. In addition, the Selling Parties agreed to assume or pay certain specified expenses of the subsidiary as part of the transaction. On December 2, 2025, the Company entered into a settlement agreement with the seller pursuant to which 175,000 shares of common stock were reacquired and canceled in exchange for the Company surrendering its rights to approximately $2.1 million of prepaid assets representing a working capital credit for the buildout of operations Although the subsidiary was established to expand our international manufacturing operations, commercial production has not commenced as of the date of this report due to tariff conditions and broader macroeconomic factors. The timing and extent of future operations in the China subsidiary will depend on market conditions and the Companys strategic evaluation of the subsidiarys viability. During the year ended December 31, 2025, the Company evaluated the carrying value of the acquired equipment and recorded an impairment charge of approximately $351,000. **Our common stock may not trade efficiently** During 2024 we were informed by Nasdaq that the bid price of our common stock had been below $1 for an extended period of time. On October 1, 2025, the Company executed a reverse stock split of its shares of common stock at a ratio of 1-for-10. All of the Companys historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect this 1-for-10 reverse stock split**.** **** On October 21, 2025, the Company received a written notice from Nasdaq Listing Qualifications confirming that, for the ten consecutive trading days ended October 14, 2025, the closing bid price of the Companys common stock had been at or above $1.00 per share. Accordingly, the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2), and the matter is now closed. | 9 | | | Table of Contents | | **Item No. 1B** **Unresolved Staff Comments** As of the filing of this Annual report on Form 10-K, we had no unresolved comments from the staff of the Securities and Exchange Commission. **Item No. 1C -** **Cybersecurity** Our business is subject to risk from cybersecurity threats and incidents, including attempts to gain unauthorized access to our systems and networks, or those of our managers, venture partners and third-party vendors and service providers, to disrupt operations, corrupt data or steal confidential or personal information and other cybersecurity breaches. We consider cybersecurity risk a threat to our assets and thus have put processes in place designed to mitigate the risk and impact of any such cybersecurity threat or incident. Risk Management and Strategy As part of our cybersecurity risk management process, we: Research and consider recommendations and best practices in the field, including procedures with respect to evaluation and monitoring of cybersecurity threats and incidents; Consider whether and when to engage third-party security firms to monitor and respond to cybersecurity threats and incidents, including those associated with our use of third-party vendors and service providers, and conduct periodic penetration tests with the aim of identifying and remediating vulnerabilities. Periodically evaluate and assess cybersecurity risks, including those associated with our use of key third-party business partners, vendors and service providers. We do not control the cybersecurity plans and systems put in place by such third parties and we may have limited contractual protections with such third parties, such as indemnification obligations to us, which could cause us to be negatively impacted as a result; Provide employees with the training, tools and resources designed to protect the Company from cybersecurity threats and incidents and to identify and report such threats and incidents. Our employees receive training and reminders on cybersecurity protocols throughout the year; and Seek to minimize the amount of personal information collected to support business needs and use storage and transfer protocols leveraging encryption of critical information, including confidential or personal information. Our processes for assessing, identifying, and managing material risks from cybersecurity threats and incidents are integrated into our process, which includes direct participation with personnel from our senior leadership team. Existing risks are evaluated for changes, and mitigation strategies are discussed as needed. New risks are discussed and evaluated for consideration as a top risk. Results are discussed with our Board of Directors on an as needed basis. The Company has not identified any cybersecurity threats or incidents that have materially affected or are reasonably likely to materially affect the Company, including with respect to our business strategy, results of operations, or financial condition. While we have implemented measures designed to help mitigate the risk from cybersecurity threats and incidents, we cannot guarantee that we or our tenants, managers or business partners will be successful in preventing a cybersecurity incident, which could result in a data center outage, disrupt our systems and operations or the systems and operations of our tenants, managers or business partners, compromise the confidential or personal information of our employees or partners, which could damage our business relationships and reputation. Although we have implemented various measures designed to manage risks relating to these types of events, these measures and the systems supporting them could prove to be inadequate and, if compromised, could become inoperable for extended periods of time, cease to function properly or fail to adequately secure confidential or personal information. See Risk FactorsOur Legal, Compliance and Regulatory RisksThe occurrence of cybersecurity incidents could disrupt our operations or the operations of the third parties with whom we do business, invest in or lend to, result in the loss of confidential or personal information or damage our or their business relationships and reputation. included in Part I, Item 1A of this Annual Report. Governance Our Board of Directors, directly and through its committees, routinely discusses significant enterprise risks with management and reviews the procedures we have in place designed to manage those risks. At Board and committee meetings, directors engage in analyses and dialogue which can include any aspect of business risk. In addition to the overall risk oversight function administered directly by our Board, the Audit and Compliance Committee of our Board also exercises oversight over managing the Companys cybersecurity risks. Management has primary responsibility for identifying, assessing and managing our exposure to cybersecurity threats and incidents, subject to oversight by our Board of Directors of the processes we establish to assess, monitor and mitigate that exposure. | 10 | | | Table of Contents | | If a potentially material cybersecurity threat or incident is identified or discovered, the Companys Management Team will notify relevant business executives, the Board of Directors, Legal Counsel, and other relevant entities. Our Chief Executive Officer, or that persons designated representative, will work with the appropriate leaders and employees in any impacted business groups, as well as appropriate personnel in our finance, legal and potentially impacted departments, to assess the risks to the Company and potential impact while determining appropriate remediation steps. If management determines that a cybersecurity threat or incident could be material to the Company, our management will notify the Audit Committee, and to our full Board of Directors. **Item No. 2** **Properties** We executed a sale and leaseback transaction during 2021 on our principal plant and offices located in Lake Barrington, Illinois, approximately 45 miles northwest of Chicago, Illinois. The facility includes approximately 69,000 square feet of office, manufacturing and warehouse space. The lease is for ten years, and annual rent increases from $500,000 the first year to $652,000 during the final year. During 2021 we entered into a sublease agreement, which was most recently extended during 2024, now expiring on December 31, 2028 to rent approximately 69,000 square feet of warehouse and assembly space in Elgin, Illinois. The annual lease cost for this facility will rise to $510,000 during the final year of the lease. We believe that our properties have been adequately maintained, are in generally good condition and are suitable for our business as presently conducted. We believe our existing facilities provide sufficient production capacity for our present needs and for our presently anticipated needs in the foreseeable future. We also believe that, with respect to leased properties, upon the expiration of our current leases, we will be able to either secure renewal terms or to enter into leases for alternative locations at market terms. **Item No. 3** **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 No. 4.** **Mine Safety Disclosures** Not Applicable. **PART II** **Item No. 5** **Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities** **Market Information** The Companys common stock was admitted to trading on the NASDAQ SmallCap Market (now the NASDAQ Capital Market) under the symbol CTIB on November 5, 1997. During September 2023 we changed our symbol to YHGJ when we renamed our company Yunhong Green CTI Ltd. These changes did not otherwise impact our shareholders or other attributes. The Company did not pay any cash dividends on its Common Stock during 2025 or 2024 and has no plans to pay dividends in the foreseeable future. Under the terms of the Companys current loan agreements, the amount of dividends the Company may pay is limited by the terms of the financial covenants. On October 21, 2024, Yunhong Green CTI Ltd. received written notice from Nasdaq indicating that the Companys 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. As 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. On October 1, 2025, the Company executed a reverse stock split of its shares of common stock at a ratio of 1-for-10. All of the Companys historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect this 1-for-10 reverse stock split**.** **** On October 21, 2025, the Company received a written notice from Nasdaq Listing Qualifications confirming that, for the ten consecutive trading days ended October 14, 2025, the closing bid price of the Companys common stock had been at or above $1.00 per share. Accordingly, the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2), and the matter is now closed. On March 19, 2026, our common stock closed at $2.96 per share. | 11 | | | Table of Contents | | **Equity Compensation Plan Information** There were no stock option incentive plans outstanding as of December 31, 2025. Effective January 2022, pursuant to the Employment Agreement of former Chief Executive Officer Frank Cesario, the Company granted 25,000 shares of restricted common stock. Of these shares, 2,500 vested immediately, while the remaining 22,500 shares were subject to performance-based vesting conditions and continued employment. During Mr. Cesarios employment, certain performance conditions were achieved, resulting in the vesting of 16,875 additional shares. Accordingly, 19,375 shares in total vested under the award. Mr. Cesario departed the Company in 2024, and the remaining 5,625 unvested shares were forfeited in accordance with the terms of the award agreement. During 2022, the Compensation Committee awarded the Companys then Chief Operating Officer (and current Chief Executive Officer) a grant of 10,000 shares of restricted common stock. Of these shares, 2,000 shares vested during the initial twelve-month period, while the remaining 8,000 shares were subject to performance-based vesting conditions. Based on the achievement of specified performance conditions, 2,000 additional shares vested in 2023 and 4,000 shares vested in 2024, and the remaining 2,000 shares did not vest and were forfeited in 2024. Upon taking the role of Chief Executive Officer during November 2024, Ms. Schwan was granted restricted stock in the amount of 25,000 shares. 2,500 shares vested upon 30 days of service, while the remaining 22,500 are subject to performance conditions as further detailed in the share grant. Specifically, the restrictions on the remaining 22,500 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 5,625 shares of the award will lapse and the award will vest when the Companys trailing-twelve-month EBITDA equals or exceeds $0.7 million at any time on or after January 1, 2026. The restrictions on 5,625 shares of the award will lapse and the award will vest in the event the Companys common shares trade at or above $30/share for ten or more consecutive trading days. The restrictions on 5,625 shares of the award will lapse and the award will vest if Ms. Schwan remains an employee of the Company as of January 1, 2027. The restrictions on 5,625 shares of restricted stock lapse upon the Companys successful refinancing of its credit facility. The refinancing was completed on September 30, 2025, at which time the award vested, however, the shares have not yet been issued. 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. During 2023, the Companys Board of Directors enacted an Executive Compensation Recovery Policy, commonly referred to as a Clawback policy. This policy enhances the Companys ability to recover incentive compensation in the event of a restatement or similar adjustment impacting the achievement of such incentive compensation. **Asset acquisition in exchange for common stock** On June 30, 2024, the Company, through its wholly owned subsidiary Yunhong Technology Industry (Hubei) Co., Ltd., acquired certain manufacturing equipment and related assets from Yunhong Environmental Protection Technology Co., Ltd. and Yunhong China Group (collectively, the Selling Parties), which are affiliated with certain Company stockholders. The transaction was evaluated under ASC 805 and accounted for as an asset acquisition. As consideration, the Company issued 500,000 shares of common stock with an aggregate fair value of $6.25 million. The purchase price was allocated to machinery and equipment of $4.05 million and prepaid expenses of $2.20 million. On December 2, 2025, the Company entered into a settlement agreement pursuant to which 175,000 shares were reacquired and canceled and approximately $2.1 million of prepaid expenses were eliminated. The fair value of the reacquired shares in the amount of $874,000 was recorded as a reduction to common stock and the Company recognized an impairment charge of $1,318,000 to remove the remaining prepaid asset balance. During the year ended December 31, 2025, the Company recorded an impairment charge of $351,000 related to the acquired equipment due to delays in commencing operations arising from tariff and macroeconomic conditions. Depreciation expense of approximately $0.5 million was recorded during 2025. As of December 31, 2025, the carrying value of the machinery and equipment was approximately $3.2 million. Operations have not yet commenced. **Item No. 6** **Selected Financial Data** We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this item. **Item No. 7** **Managements Discussion and Analysis of Financial Condition and Results of Operations** **Overview** The Company produces film products for novelty, packaging container and custom film product applications. These products include foil balloons, latex balloons (sourced from an external party) and related products, films for packaging applications, and custom film products. We produce all of our film products for packaging and container applications at our facilities in Lake Barrington, Illinois. Substantially all of our film products for packaging applications and flexible containers for packaging and storage are sold to customers in the United States. We market and sell our novelty items principally foil balloons and latex balloons in the United States and a number of additional countries. In addition, the Company assembles and sells balloon-inspired gifts (including containers of arranged candy items) in the United States. | 12 | | | Table of Contents | | Recent changes in our capital structure include: **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. In addition, 36,140 warrants to purchase the Companys common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $15.2 per share or 90% of the variable price based on the ten-day volume weighted average price (VWAP) of the Companys common stock. 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. Accrued dividends of $205,000 and $93,000 were recorded as of December 31, 2025 and 2024, respectively. **Series F Convertible Preferred Stock** In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 70,000 shares of Series F Preferred resulting in gross proceeds of $0.7 million from an unrelated third party. As disclosed above certain of these proceeds were received as an advance prior to December 31, 2023. This investment was initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was classified as equity. In addition, warrants to purchase 19,460 shares of the Companys common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $15.2 per share or 90% of the variable price based on the ten-day volume weighted average price (VWAP) of the Companys common stock prior to exercise. 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 Companys discretion, based on the terms of the agreement. Accrued dividends of $110,000 and $50,000 were recorded as of December 31, 2025 and 2024, respectively. **Warrants** As described above, in connection with the Series E and F convertible preferred equity issuances, a total of 55,600 warrants were issued, exercisable for the Companys common stock at the lower of $15.2 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 Companys 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 Companys Common Stock. | 13 | | | Table of Contents | | A summary of the Companys common stock warrant activity is as follows: | | | Shares under Option (warrant) | | | Weighted Average Exercise Price | | | | Balance at December 31, 2024 | | | 55,600 | | | $ | 15.20 | | | | Granted | | | - | | | | - | | | | Cancelled/Expired | | | - | | | | - | | | | Exercised/Issued | | | - | | | | - | | | | Outstanding at December 31, 2025 | | | 55,600 | | | $ | 15.2 | | | | | | | | | | | | | | | Exercisable at December 31, 2025 | | | 55,600 | | | $ | 15.2 | | | As of December 31, 2025 the Company reserved the following shares of its common stock for the exercise of warrants,: | 2025 Common Stock Warrants | | | 55,600 | | | | Shares reserved as of December 31, 2025 | | | 55,600 | | | REVENUE Our revenues from each of our product categories in each of the past two years have been as follows: | | | Year Ended | | | | | | December 31, 2025 | | | December 31, 2024 | | | | | | $ | | | % of | | | $ | | | % of | | | | Product Category | | (000) Omitted | | | Net Sales | | | (000) Omitted | | | Net Sales | | | | | | | | | | | | | | | | | | | Foil Balloons | | $ | 12,764 | | | | 65 | % | | $ | 11,510 | | | | 64 | % | | | | | | | | | | | | | | | | | | | | | | Film Products | | | 1,129 | | | | 6 | % | | | 847 | | | | 5 | % | | | | | | | | | | | | | | | | | | | | | | Other | | | 5,812 | | | | 29 | % | | | 5,596 | | | | 31 | % | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 19,705 | | | | 100 | % | | | 17,953 | | | | 100 | % | | | 14 | | | Table of Contents | | Our primary expenses include the cost of products sold and selling, general and administrative expenses. Cost of products sold primarily consists of expenses related to raw materials, labor, quality control and overhead expenses such as supervisory labor, depreciation, utilities expense and facilities expense directly associated with production of our products, warehousing and fulfillment expenses and shipping costs relating to the shipment of products to customers. Cost of products sold is impacted by the cost of the raw materials used in our products, the cost of shipping, along with our efficiency in managing the production of our products. Selling, general and administrative expenses include the compensation and benefits paid to our employees, all other selling expenses, marketing, promotional expenses, travel and other corporate administrative expenses. These other corporate administrative expenses include professional fees, depreciation of equipment and facilities utilized in administration, occupancy costs, communication costs and other similar operating expenses. Selling, general and administrative expenses can be affected by a number of factors, including staffing levels and the cost of providing competitive salaries and benefits, the cost of regulatory compliance and other administrative costs. Purchases by a limited number of customers represent a significant portion of our total revenues. During 2025 and 2024, respectively, sales to our top 10 customers represented 93% and 93%, respectively, of net revenues for each year. During 2025 and 2024, there were two customers to whom our sales represented more than 10% of net revenues. Our principal customer sales for 2025 and 2024 were: | Customer | | Product | | 2025 Sales | | | % of 2025 Revenues | | | 2024 Sales | | | % of 2024 Revenues | | | | Customer A | | Balloons; Gifts | | $ | 8,282,000 | | | | 41 | % | | $ | 6,476,000 | | | | 36 | % | | | Customer B | | Balloons | | $ | 7,917,000 | | | | 40 | % | | $ | 8,574,000 | | | | 47 | % | | The loss of one or both of these principal customers, or a significant reduction in purchases by one or both of them, could have a material adverse effect on our business. We generally do not have agreements with our customers under which customers are obligated to purchase any specific or minimum amount of product from us. **Year Ended December 31, 2025 Compared to Year Ended December 31, 2024** *Net Sales* For the fiscal year ended December 31, 2025, consolidated net sales of the sale of all products were $19,705,000 compared to consolidated net sales of $17,953,000 for the year ended December 31, 2024, an increase of 10% as more fully described below. Sales of foil balloons were $12,764,000 in 2025 and $11,510,000 in 2024, an increase of 11% was primarily due to being awarded an additional everyday kit assortment at a mass retailer, as well as a slight increase in seasonal foil balloons. Sales of film products were $1,129,000 in 2025 and $847,000 in 2024, an increase of 33%. 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. Sales of other products increased to $5,812,000 in 2025 from $5,596,000 in 2024, an increase of 4%. This category includes sales of balloon inspired gifts, which featured larger holiday orders than the prior year as well as an increase in everyday product. *Cost of Sales* Cost of sales increased to $16,115,000 in 2025 compared to $14,352,000 in 2024, an increase of 12%, which is attributed to increase in sales by 10%. | 15 | | | Table of Contents | | *General and Administrative Expenses* General and administrative expenses increased to $4,938,000 in 2025 from $3,396,000 in 2024, an increase of 45% compared to last year. The main reason for this increase is due to $354,000 impairment expenses related to Hubei long-lived assets and $1,318,000 related to the stock surrender agreement, where we reacquired and cancelled 175,000 shares. *Selling and Marketing* Selling expenses increased to $147,000 in 2025 from $141,000 in 2024. *Other Income or Expense* ** In July 2025, the Company entered into a settlement agreement with a former service provider to resolve certain outstanding disputes. The agreement, executed on July 10, 2025, provided for a cash payment to the Company. The Company received proceeds of $315,000 on July 29, 2025. In accordance with U.S. GAAP, the settlement proceeds were recognized as Other Incom**e** in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2025. During 2025, we incurred net interest expense of $878,000 compared to net interest expense of $862,000 during 2024. **Financial Condition, Liquidity and Capital Resources** *Cash (Used In) Provided By Operating Activities* During 2025, cash used in operating activities amounted to $172,000, compared to cash used in operating activities during 2024 of $1,274,000. Significant changes in working capital items affecting cash flow used in operating activities were: | | | Depreciation and amortization of $641,000 compared to depreciation and amortization for 2024 of $345,000; | | | | | Impairment of Hubei assets of $1,672,000 in 2025 compared to $0 in 2024 | | | | | An increase in inventories of $245,000 in 2025 compared to an increase in inventories of $702,000 in 2024; | | | | | A decrease in advance investor deposits of $900,000 in 2025, compared to an increase of $1,050,000 in 2024; | | | | | An increase in accounts receivable of $552,000 and $1,428,000 in 2025 and 2024, respectively; | | | | | A decrease in prepaid expenses and other assets of $129,000 compared to an increase in prepaid expenses and other assets of $80,000 in 2024; and | | | | | An increase in trade payables of $140,000 compared to an increase in trade payables of $620,000 in 2024. | | *Cash Provided By (Used In) Investing Activities* During fiscal 2025, cash used in investing activities amounted to $83,000 compared to cash used in investing activities during fiscal 2024 of $331,000. This is due to timing of production equipment upgrades and replacement. *Cash Provided By (Used In) Financing Activities* During fiscal 2025, cash provided by financing activities amounted to $132,000, compared to cash provided by financing activities of $904,000 during fiscal 2024. This is primarily due to an increase in revolving credit limit from $6 million to $7 million in 2025. *Going Concern, Liquidity and Financial Condition* The Companys financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has a cumulative net loss from inception to December 31, 2025 of approximately $28.4 million and had approximately $0.1 million of cash as of December 31, 2025. The Companys 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. Managements 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. Supply chain challenges and inflationary pressures have impacted the Companys business operations to some extent and is expected to continue to do so and, these impacts may include reduced access to capital. 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. | 16 | | | Table of Contents | | The Companys 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. This credit facility, as amended, matures on April 30, 2027. On September 30, 2021 (the Closing Date), the Company entered into a loan and security agreement (the Agreement) with Line Financial (the Lender), which provides for a senior secured financing consisting of a revolving credit facility (the Revolving Credit Facility) in an aggregate principal amount of up to $7.0 million as amended (the Maximum Revolver Amount), subject to borrowing base provisions, and term loan facility (the Term Loan Facility) in an aggregate principal amount of $731,250 (Term Loan Amount and, together with the Revolving Credit Facility, the Senior Facilities). The Senior Facilities are secured by substantially all assets of the Company. The Company has remained in compliance with all material covenants since inception. Borrowings under the Revolving Credit Facility bear interest at the prime rate + 7.82% (14.57% as of December 31, 2025), payable monthly in arrears. The Term Loan Facility bears interest at the prime rate + 1.45% (8.2% as of December 31, 2025) and is repaid in 48 monthly installments of approximately $15,000, beginning November 1, 2021. The Company also pays collateral monitoring fees of 4.62% of the eligible accounts receivable, inventory, and equipment supporting both facilities. Originally maturing September 30, 2023, the Senior Facilities were extended to April 30, 2027 pursuant to a Fifth Amendment executed on September 30, 2025, which also increased the revolving commitment from $6.0 million to $7.0 million and added a 0.75% renewal fee, payable in two equal installments in October 2025 and September 2026. A $12,500 commitment fee was also incurred. All other material terms, including borrowing base, collateral, and covenants, remained unchanged. The facility automatically renews for successive one-year periods unless either party provides written notice of termination not less than 90 days prior to the end of the then-current term. The Company may prepay the Term Loan Facility (together with accrued interest and any applicable prepayment fee) in whole, but not in part, upon at least 60 days prior written notice At December 31, 2025 and 2024, the term loan balance was approximately $0.5 and $0.6 million, respectively, and the revolving balance was $6.8 million and $6.6 million, respectively. We had $0.2 million remaining available for borrowing under the Revolving Credit Facility as of December 31, 2025. The Agreement requires the Company to maintain minimum tangible net worth of $4.0 million, subject to adjustment by the Lender. The Company was in compliance with this covenant as of December 31, 2025 and 2024. The Agreement also limits additional indebtedness, liens, dividends, mergers, and annual capital expenditures exceeding $1.0 million. **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 for an initial amount 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. **Seasonality** In the foil balloon product line, sales have historically been seasonal. Approximately half of these sales are considered everyday in nature while the other half tend to be event driven (certain holidays, graduation season, and other events). Since 2022, we have seen an enhanced impact of seasonality, with increased order flow related to events. **Critical Accounting Estimates** The financial statements of the Company are based on the selection and application of significant accounting policies which require management to make various estimates and assumptions. The following are some of the more critical judgment areas in the application of our accounting policies that currently affect our financial condition and results of operation. | 17 | | | Table of Contents | | *Allowance for Doubtful Accounts.* We estimate our allowance for doubtful accounts based on an analysis of specific accounts, an analysis of historical trends, payment and write-off histories. Our credit risks are continually reviewed, and management believes that adequate provisions have been made for doubtful accounts. However, unexpected changes in the financial condition of customers or changes in the state of the economy could result in write-offs which exceed estimates and negatively impact our financial results. *Inventory Valuation.*Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard costs and determined on a first-in, first out basis. Standard costs are reviewed and adjusted at the time of introduction of a new product or design, periodically and at year-end based on actual direct and indirect production costs. On a periodic basis, the Company reviews its inventory levels for estimated obsolescence or unmarketable items, in reference to future demand requirements and shelf life of the products. As of December 31, 2025 and 2024, the Company had established a reserve for obsolescence, marketability or excess quantities with respect to inventory in the aggregate amount of $194,000 and $155,000 respectively. In addition, on a periodic basis, the Company disposes of inventory deemed to be obsolete or unsaleable and, at such time, charges reserve for the value of such inventory. *Recoverability and Impairment of Long-Lived Assets*: The Company reviews long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable. Determining whether an impairment exists requires significant management judgment, including estimates of future cash flows, expected asset utilization, and assumptions about market and economic conditions. The Company evaluates recoverability by comparing the carrying value of an asset group to the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset group. If the carrying value exceeds those estimated undiscounted future cash flows, an impairment loss is recognized based on the amount by which the carrying value exceeds the asset groups estimated fair value. During 2025, the Company recorded an impairment charge of $354,000 related to certain long-lived assets associated with the Hubei asset group. Changes in assumptions regarding future operating performance or market conditions could result in additional impairment charges in future periods. *Income Taxes and Deferred Tax Assets.* Income taxes are accounted for as prescribed in U.S. GAAP. Under the asset and liability method of U.S. GAAP, the Company recognizes the amount of income taxes currently payable. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years these temporary differences are expected to be recovered or settled. We evaluate all available positive and negative evidence in each tax jurisdiction regarding the recoverability of any asset recorded in our Consolidated Balance Sheets and provide valuation allowances to reduce our deferred tax assets to an amount we believe is more likely than not to be realized. We regularly review our deferred tax assets for recoverability considering historical profitability, our ability to project future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. If we continue to operate at a loss in certain jurisdictions or are unable to generate sufficient future taxable income within the defined lives of such assets, we could be required to increase our valuation allowance against all or a significant portion of our deferred tax assets. This increase in valuation allowance could result in substantial increases in our effective tax rate and could have a material adverse impact on our operating results. Conversely, if and when our operations in some jurisdictions become sufficiently profitable before what we have estimated in our current forecasts, we would be required to reduce all or a portion of our current valuation allowance and such reversal would result in an increase in our earnings in such period. As of December 31, 2025 and 2024, the amount of the net deferred tax asset was none, as we continued to record a full valuation allowance against the gross value of the deferred tax asset. Each quarter and year-end, management makes a judgment to determine the extent to which the deferred tax asset will be recovered from future taxable income. | 18 | | | Table of Contents | | **Item No. 7A** **Qualitative and Quantitative Disclosures Regarding Market Risk** Not applicable. **Item No. 8** **Financial Statements and Supplementary Data** Reference is made to the Consolidated Financial Statements contained in Part IV hereof. **Item No. 9** **Changes in and Disagreements with Accountants on Accounting and Financial Disclosure** None. **Item No. 9A** **Controls and Procedures** **(a) Evaluation of 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 Commissions 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 Commissions 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) 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 December 31, 2025. Based on this evaluation, the Chief Executive Officer (principal executive officer) concluded that our disclosure controls and procedures were not effective as of December 31, 2025, the end of the period covered by this Annual Report on Form 10-K, due to the material weaknesses described below. **(b) Managements 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 December 31, 2025. 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). | 19 | | | Table of Contents | | 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 registrants 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 the application of new accounting standards as well as significant, unusual transactions that resulted in misapplications of GAAP, 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 December 31, 2025. **Plan for Remediation of Material Weakness** In 2024, a material weakness was identified in our internal control over financial reporting, specifically related to the accuracy of standard labor and overhead cost calculations. As of December 31, 2025, management has concluded that this material weakness has been remediated through the implementation of enhanced processes and controls to ensure that standard labor and overhead costs are calculated appropriately and accurately. These improvements include, but are not limited to, periodic monitoring and analysis of variances between actual and standard manufacturing costs, overseen by the Chief Executive Officer. The Company believes that the combination of responsibilities held by the Chief Executive Officer and the Corporate Controller strengthens financial oversight, enhances internal control effectiveness, and promotes leadership continuity. 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 and remediation measures already in place. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by its registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permits the Company to provide only managements report in this quarterly report. *(c) Changes in Internal Control over Financial Reporting* There were no 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 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. **Item No. 9B** **Other Information** None **PART III** **Item No. 10** **Directors, Executive Officers and Corporate Governance of the Registrant** The members of our Board of Directors (the Board), and our executive officers, together with their respective ages and certain biographical information are set forth below. Directors hold office until the next annual meeting of our shareholders and until their successors have been duly elected and qualified. Our executive officers are elected by and serve at the designation and appointment of the Board. The following is a brief account of the business experience of each of our directors and executive officers during the past five years or more. | Name | | Age | | Position | | | Gerald (J.D.) Roberts, Jr. | | 67 | | Interim Chairman of the Board of Directors | | | Jana M. Schwan | | 49 | | Chief Executive Officer | | | Iris Chan | | 39 | | Director | | | Darlene Chiu Bryant | | 63 | | Director | | | Jeff Leader | | 64 | | Director | | | 20 | | | Table of Contents | | *Gerald (J.D.) Roberts, Jr.,*age 67, Interim Chairman of the Board of Directors. Mr. Roberts is Vice President of Strategy and Business Development at a Fortune 50 Corporation, having served in that capacity since 2018, and has served as a director of the Company since January 2022. In the previous 20 years, he held several senior roles at Aerojet Rocketdyne Holdings, Inc. and GenCorp/Aerojet. His career began in the aerospace and electronics industries in the United States and Australia, where he worked with companies including E-Systems, McDonnell Douglas, Northrop-Grumman, Gulfstream, Learjet and Hawker de Havilland. Mr. Roberts combined his credentials in engineering, finance and operations and his significant experience in strategic planning, organizational restructuring, and mergers, acquisitions, and divestitures to build value in international business opportunities. He received his MBA (Finance) from the University of California, Davis, and his B.S. in Mechanical Engineering from Virginia Tech. *Jana M. Schwan, age 49*. Ms. Schwan has been Chief Executive Officer since November 2024 and has been employed by the Company in progressively more responsible roles in operational, purchasing, and product development capacities since September 2002, and currently leads its Sales, Marketing and Business Development activities in addition to all Operations of the Company. Ms. Schwan was named Vice President of Operations in 2017 and Chief Operating Officer in 2020. *Iris Chan, age*39, Ms. Chan has over 10 years of experience leading finance teams in the consumer products distribution and property development industries in Canada and Hong Kong. She previously worked in the audit practice of a Big Four accounting firm. Ms. Chan is a Certified Professional Accountant in both Canada and Hong Kong and holds a Master of Laws (LLM) from The University of Hong Kong. Her expertise in financial reporting, internal controls, compliance, and corporate governance supports the Boards oversight of the Companys financial reporting and regulatory matters. *Darlene Chiu Bryant, age 63,*is a partner at Access Point Advisors, an advisory firm established to support the growth of companies offering sustainable solutions. She is founder of GlobalSF, a non-profit organization established to support San Franciscos economic development efforts with global partners. Appointed by the late San Francisco Mayor Edwin M. Lee to head up ChinaSF, a public private partnership of the City of San Francisco, she oversaw efforts that brought in more than $5.1 billion in Foreign Direct Investment, created more than 800 jobs and recruited more than 100 companies to San Francisco Bay Area. Darlene has had a diverse career in both the public and private sectors. She worked overseas in the pharma and biotech space for German, Japanese and Chinese multinational firms. Back in her native San Francisco, she worked in communications and public affairs for then San Francisco Mayor Gavin Newsom, East West Bank, United Commercial Bank and Pacific Gas & Electric Company. Bryant is a current Trustee of the Chinese American International School in San Francisco, Past board member of Angel Island Immigration Station Foundation, founding Chair and board member of AAPI Lead, founding board member of Asian Pacific American Leadership Foundation and CALNET, and Advisory board member of the University of San Francisco Center for Asia Pacific Studies. *Jeff Leader*, age 64, is chairman of Hermes Deployment Corporation, a business advisory and execution firm specializing in facilitating U.S.-China technology transfer, merger, and cross-border market-entry projects. Mr. Leader also serves as China Trade & Affairs Advisor to members of the United States Congress and California state constitutional and legislative office holders. He has been a Program Lecturer at Stanford University on strategic public-private collation development for Chinese companies in support of U.S. market entry and sustainable growth. Mr. Leader is frequently called upon to serve other entities within the U.S. federal and California state governments on China-specific matters including the U.S. Department of State, the U.S. Department of Commerce, the U.S. Department of Homeland Security, and other federal and state departments. Prior to forming Hermes, he served over 20 years in California state government where he was Director of International Relations for the State Assembly. Jeff Leader possesses (U.S.) Juris Doctor of Law and Bachelor of Arts in Marketing and Communications degrees. | 21 | | | Table of Contents | | **Executive Officers Other Than Nominees** Jana Schwan is the daughter of John Schwan, who prior to his retirement from the Company served in several capacities, including as Chairman of the Board of Directors. Except as disclosed in this Item 10 or Item 13 (Certain Relationships and Related Transactions, and Director Independence), there are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our directors or members of senior management were selected as such. In addition, there are no family relationships among our executive officers and directors. Our future success depends, in significant part, on the continued service of certain key execute officers, managers, and others in various aspects of our business. We may not be able to find an appropriate replacement for any of our key personnel. Any loss or interruption of our key personnels service to the Company could adversely affect our ability to implement our business plan. **Corporate Governance** The business and affairs of the Company are managed under the direction of the Board of Directors in accordance with the Illinois Business Corporation Act and the Articles of Incorporation and By-laws of the Company, as amended. Members of the Board of Directors are kept informed of the Companys business through discussions with the Chairman of the Board of Directors, the Chief Executive Officer, the President and other officers, by reviewing materials provided to them and by participating in meetings of the Board of Directors and its committees. As of the date of this report, the Company has five directors. The Board has affirmatively determined that four of the five directors are independent within the meaning of the listing standards of The Nasdaq Stock Market. The Board of Directors met fourteen times during 2025. No Director was absent for more than one meeting during 2025. **Board Leadership Structure** Yubao Li is Former Chairman of the Board of Directors and Jana Schwan is Chief Executive Officer. Ms. Schwan is responsible for senior management functions and reports into the Board of Directors. The Board of Directors believes that this combination and allocation of roles provides the most efficient and effective leadership model for the Company, providing perspective and direction with regard to business strategies and plans to both the Board and management. The Company has no bylaw or policy in place that mandates that an officer serve as Chairman of the Board. The Board of Directors periodically evaluates its leadership structure. Mr. Wong, the former Lead Independent Director. Mr. Wong was responsible for (i) communicating regularly with the Chief Executive Officer and other officers of the Company on behalf of the Board of Directors, and particularly the independent members of the Board of Directors, and (ii) calling separate meetings of the independent directors of the Company. At any such meetings, only independent directors are present and the independent directors are free to discuss any aspect of the Companys business and risk management without the influence of interested directors or management. All members of the Companys Audit, Compensation and Nominating and Governance Committees have been determined to be independent based on application of the rules and standards of the NASDAQ Stock Market. | 22 | | | Table of Contents | | **Board Role in Risk Oversight** The Board of Directors plays an active role, as a whole and at the committee level, in overseeing management of the Companys risks. The Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. The Audit Committee oversees management of financial risks through regular meetings with the Companys independent registered public accounting firm and the Companys Chief Executive Officer, President and Corporate Controller. The Companys Compensation Committee evaluates and addresses risks relating to executive compensation, our incentive compensation plans and other compensatory arrangements. The Nominating and Governance Committee manages risks associated with the independence of the Board of Directors and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of those risks, the entire Board of Directors is regularly informed through management, and committee reports to the full Board about these and other operational risks. **Committees of the Board of Directors** The Board of Directors has standing Audit, Compensation, and Nominating and Governance Committees. **Audit Committee** Since 2000, the Company has had a standing Audit Committee, which is presently composed of Mr. Wong (Former Chairman), Ms. Bryant and Mr. Roberts. Each of the members of the Audit Committee is independent based on the application of the rules and standards of the NASDAQ Stock Market and Rule 10a-3(b) under the Securities Exchange Act of 1934. Mr. Wong has been designated as, and is, the Companys Audit Committee Financial Expert in accordance with Item 407(d)(5) of Regulation S-K and meets the requirements for an audit committee expert as set forth in that item. The Audit Committee has primary responsibility meetings with management and independent auditors to discuss the Companys financial statements. The Companys Board of Directors has adopted a written charter, as amended, for the Companys Audit Committee, a copy of which has been posted and can be viewed on the Companys Internet website at http://www.ctiindustries.com under the section entitled Investor Relations. In addition, the Audit Committee has adopted a complaint monitoring procedure to enable confidential and anonymous reporting to the Audit Committee of concerns regarding, among other things, questionable accounting or auditing matters. The Audit Committee has primary responsibility for: Appointing, compensating, and retaining our registered independent public accounting firm; Overseeing the work performed by any outside accounting firm; Assisting the Board of Directors in fulfilling its responsibility by reviewing the financial reports provided by us to the SEC, our shareholders, or to the general public, as well as the Companys internal financial and accounting controls; and Recommending, establishing, and monitoring procedures designed to improve the quality and reliability of the disclosure of our financial condition and results of operations. The Audit Committee met four times during 2025. **Compensation Committee** The Compensation Committee is composed of Mr. Roberts (Chairman), Ms. Bryant and Mr. Wong (Former Director). The Board has determined that each of the members of the Compensation Committee is independent as defined in the listing standards for the NASDAQ Stock Market. The Compensation Committee reviews and acts on the Companys executive compensation and employee benefit and retirement plans, including their establishment, modification and administration. It also recommends to the Board of Directors the compensation of the Chief Executive Officer and certain other executive officers. The Compensation Committee has a charter which has been posted and can be viewed on the Companys Internet website at http://www.ctiindustries.com under the section entitled Investor Relations. The Compensation Committee met once in 2025. | 23 | | | Table of Contents | | **Nominating and Governance Committee** In 2005, the Company established a Nominating and Governance Committee. The Nominating and Governance Committee consists of Mr. Bosley (Chairman), Mr. Roberts and Mr. Wong (Former Director). The Nominating and Governance Committee does not have a charter. The Board of Directors has determined that each of the members of the Nominating and Governance Committee is independent as defined in the listing standards for the NASDAQ Stock Market. The Nominating and Governance Committee has not adopted a formal policy with regard to consideration of director candidates recommended by security holders. The Company believes that continuing service of qualified incumbent members of the Board of Directors promotes stability and continuity at the Board level, contributes to the Boards ability to work as a collective body and provides the benefit of familiarity and insight into the Companys affairs. Accordingly, the process of the Nominating and Governance Committee for identifying nominees reflects the Companys practice of re-nominating incumbent directors who continue to satisfy the criteria for membership on the Board. For vacancies that are anticipated on the Board of Directors, the Nominating and Governance Committee intends to seek out and evaluate potential candidates from a variety of sources that may include recommendations by security holders, members of management, the Board of Directors, consultants and others. The minimum qualifications for potential candidates for the Board of Directors include demonstrated business experience, decision-making abilities, personal integrity and a good reputation. The Boards statement regarding diversity is below. This has become a larger factor in the Nominating Committees evaluation of potential candidates. While there is no formal policy for considering diversity when nominating a potential director, it is a consideration that is evaluated along with other qualifications of potential candidates, and broadly a goal of the Company. In light of the foregoing, it is believed that a formal, written policy and procedure with regard to consideration of director candidates recommended by security holders is not necessary in order for the Nominating and Governance Committee to perform its duties. The Nominating Committee did not meet in 2025. All of the independent directors of the Board of Directors participated in the nominating process and, in separate session, voted in favor of recommending to the Board of Directors the nomination of each of the nominees for election as directors. | 24 | | | Table of Contents | | **Section 16(a) Beneficial Ownership Reporting Compliance** Section 16(a) of the Securities Exchange Act of 1934 requires the Companys officers and directors, and persons who own more than ten percent of a registered class of the Companys equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and with the NASDAQ Stock Market. Officers, directors and greater than ten-percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of such forms furnished to the Company, the Company believes that during calendar year 2025, all Section 16(a) filing requirements applicable to the officers, directors and ten-percent beneficial shareholders were satisfied. **Code of Ethics** The Company has adopted a code of ethics that applies to its senior executive and financial officers. The Companys Code of Ethics seeks to promote (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, (ii) full, fair, accurate, timely and understandable disclosure of information to the Commission, (iii) compliance with applicable governmental laws, rules and regulations, (iv) prompt internal reporting of violations of the Code to predesignated persons, and (v) accountability for adherence to the Code. A copy of the Code of Ethics has been posted and may be viewed on the Companys Internet website at http://www.ctiindustries.com under the heading Investor Relations. The Company will provide to any person without charge upon request a copy of the Code of Ethics. You may make such request by sending a written request to the Corporate Secretary at 22160 N. Pepper Road, Lake Barrington, Illinois 60010 and providing a return address. **Executive Compensation Recovery (Clawback) Policy** During 2023, the Company adopted an Executive Compensation Recovery (Clawback) Policy, wherein certain performance-based executive compensation may be recovered by the Company if subsequent restatement or other adjustment negatively impacts the awarding of such incentive compensation during a three year lookback period and under certain conditions as further defined in the policy. **Item No. 11** **Executive Compensation** The following table sets forth summary compensation information with respect to the Principal Executive Officer and each of the two other most highly compensated executive officers. These individuals, including the Principal Executive Officer, are collectively referred to in this proxy statement as the Named Executive Officers. | | | | | | | | | | | | Non-Equity | | | | | | | | | | | | | | | | | | Stock | | | Incentive Plan | | | All other | | | | | | | Name/Title | | Year | | | Salary | | | Awards | | | Compensation | | | compensation | | | Total | | | | | | | | | | | | (1) | | | (2) | | | (3) | | | | | | | Jana M. Schwan | | | 2025 | | | $ | 275,000 | | | $ | 18,096 | | | $ | - | | | $ | 10,500 | | | $ | 303,596 | | | | Chief Executive Officer (4) | | | 2024 | | | $ | 239,500 | | | $ | 48,657 | | | $ | - | | | $ | 9,500 | | | $ | 297,657 | | | **SUMMARY COMPENSATION TABLE** | (1) | Reflects the compensation expense recognized in 2025 and 2024 for stock awards under ASC Topic 718 as reported in the Companys audited financial statements. | | | (2) | Amounts determined under the Companys incentive compensation program. | | | (3) | Insurance premiums | | | (4) | Ms. Schwan became Chief Operating Officer during 2020 and Chief Executive Officer in 2024. | | | 25 | | | Table of Contents | | **Narrative Disclosure for Summary Compensation Table** **Employment Agreements with Our Named Executive Officers** **** Mr. Cesario resigned from his employment with the Company in November 2024. Ms. Jana Schwan entered into an employment agreement with the Company during November 2024. That agreement includes a base salary of $275,000 per year. Ms. Schwan received an inducement grant of stock in the amount of 25,000 shares, 2,500 of which vested immediately, with the remaining shares scheduled to vest based upon the achievement of certain goals and objectives as set forth in the agreement. Ms. Schwan was eligible to receive a performance-based bonus of $250,000. In the event that Ms. Schwan is terminated without cause, she is eligible to receive twelve (12) months of salary in accordance with the agreement. **Information Relating to Cash Incentives** The Board of Directors previously had adopted an Incentive Compensation Plan providing for annual incentive compensation to be paid to executive and managerial employees of the Company. Under the Plan, designated Named Executive Officers and several other executive officers and managers may receive incentive compensation payments, determined on a quarterly and annual basis, based upon the income of the Company before provision for income tax or for incentive compensation if the net income exceeds a threshold amount of profit for any quarter of $100,000 and, for the year, of $250,000. The benefits under the Plan are divided into two Pools of compensation. Pool I (representing the largest pool of incentive compensation) covers senior executive officers and managers who participate in the pool of incentive compensation based upon a percentage allocation recommended by the Compensation Committee and determined by the Board of Directors each year. Pool II covers other executives and managers who are selected to participate in proportions determined by management. The Compensation Committee recommends the amount of the incentive compensation awards which, in the aggregate, may not exceed sixteen percent of the net income of the Company (before provision for income tax or incentive compensation under the Plan). Further, the amount of incentive compensation to any participant may not exceed the annual base compensation of the participant. The Compensation Committee believed such incentive compensation motivates participants to achieve strong profitability which is viewed as the most significant element of corporate performance, provides rewards for strong corporate performance and aligns the incentive with the interests of the shareholders. Incentive compensation participation levels are generally determined during the first quarter of each fiscal year. In determining the executives who participate in the incentive compensation awards in Pool I each year, and the relative amount of the award to each participant, the Compensation Committee considers and takes into account (i) the position of the executive, (ii) the level of responsibility and authority of the executive, (iii) the performance of the executive, and (iv) the extent to which the executive is in a position to affect the financial results and profitability of the Company. The current Board of Directors is considering a revised incentive plan and terminating the plan described in this section. No replacement plan has yet been adopted, but the Board of Directors and Management have both indicated their desire to change this program. **Long-Term Equity Incentives** The Board of Directors adopted and approved a new incentive option plan in April 2018 which was submitted to, and approved by, our shareholders at the annual meeting of shareholders on June 8, 2018 (the Plan). This Plan updated and replaced the prior Stock Incentive Plan from 2009. Under the Plan, the Compensation Committee of the Board of Directors is authorized to issue incentive options, non-statutory options, restricted stock awards and stock grants to officers, directors, management personnel and consultants of the Company. The Board of Directors determined that no further options would be granted under the 2009 Incentive Stock Plan. | 26 | | | Table of Contents | | Stock awards and option grants under the Plan will be determined from time to time by the Compensation Committee in consultation with management. The actual grant for each executive is determined by taking into consideration (i) individual performance, (ii) corporate performance and (iii) prior grants to, or stock ownership of the Company by, the executive or director. Generally, stock options are granted with an exercise price equal to or greater than the closing price of the Companys common stock on the NASDAQ Stock Market on the date of the grant. During 2025, based on numbers of months the independent Directors have been granted 1,417 shares of restricted stock that vest over 12 months. During 2024, each of the three independent Directors was granted 500 shares of restricted stock that vest over 12 months. **Retirement Benefits** The Company maintains a 401(k) employee savings plan in which all salaried employees are eligible to participate. The plan is a tax qualified retirement plan. Under the 401(k) Plan, employees may contribute up to 15% of their eligible compensation to the Plan and the Company will contribute a matching amount to the Plan each year. Participating employees may direct the investment of individual and company contributions into one or more of the investment options offered by the Plan. The Company has the ability to make matching contributions under the Plan, but none were made during 2025 or 2024. These are unvested restricted stock awards provided to Jana M. Schwan, and will be vested based on milestone performance goals set by the Board of Directors. **OUTSTANDING EQUITY AWARDS** | | | Number of Securities Underlying | | | | Name | | Unvested Performance Grants | | | | Jana M. Schwan | | | 22,275 | | | **EQUITY COMPENSATION PLAN INFORMATION** The total approved equity compensation plan is for 500,000 shares, out of these unvested shares are 20,158 outstanding at December 31, 2025. Vested and unissued shares are 4,117, total shares outstanding and unissued are 24,275 as of December 31, 2025. **Payments Upon Termination or Change of Control** The employment agreement with Jana Schwan, effective November 2024, includes payment of twelve months salary upon termination except for cause as is defined by that agreement. | 27 | | | Table of Contents | | **Director Compensation** The following table sets forth the compensation of directors of the Company during the year ended December 31, 2025: **DIRECTOR COMPENSATION** | Name | | Directors Fees | | | Stock Awards (1) | | | All other compensation | | | Total | | | | | | | | | | | | | | | | | | | Yubao Li | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | Jana M Schwan | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | Douglas Bosley | | $ | 4,000 | | | $ | 788 | | | $ | - | | | $ | 4,788 | | | | | | | | | | | | | | | | | | | | | | | JD Roberts | | $ | 12,000 | | | $ | 3,150 | | | $ | - | | | $ | 15,150 | | | | | | | | | | | | | | | | | | | | | | | Philip Wong | | $ | 12,000 | | | $ | 3,150 | | | $ | - | | | $ | 15,150 | | | | | | | | | | | | | | | | | | | | | | | Jeffrey Leader | | $ | 1,000 | | | $ | 213 | | | $ | 30,000 | | | $ | 31,213 | | | | | | | | | | | | | | | | | | | | | | | Darlene Chiu Bryant | | $ | 6,000 | | | $ | 1,225 | | | $ | - | | | $ | 7,225 | | | | | (1) | Reflects the compensation expense recognized in 2025 for stock awards under ASC Topic 718 as reported in the Companys audited financial statements. | | **Narrative Description of Director Compensation** Payments to non-employee directors were suspended during 2019, and restarted as of January 2022. **Agreements Between Third Parties and Directors** There are no agreements or arrangements by which any directors or nominees are to receive compensation or other payments from third parties in return for serving on the Board of Directors. | 28 | | | Table of Contents | | **Item No. 12** **Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters** **BENEFICIAL OWNERSHIP OF SHARES BY MANAGEMENT** **AND SIGNIFICANT SHAREHOLDERS** The following table provides information concerning the beneficial ownership of the Companys Common Stock by each director and nominee for director, certain executive officers, and by all directors and officers of the Company as a group as of December 31, 2025. In addition, the table provides information concerning the current beneficial owners, if any, known to the Company to hold more than 5 percent of the outstanding Common Stock of the Company. The amounts and percentage of stock beneficially owned are reported based on regulations of the Securities and Exchange Commission (SEC) governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days after December 31, 2025. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities in which he has no economic interest. The percentage of Common Stock beneficially owned is based on 2,600,327 shares of Common Stock outstanding as of December 31, 2025. | Name of Beneficial Owners | | Number of Shares | | | Percent of Class | | | | Directors and Executive Officers | | | | | | | | | | | Gerald (J.D.) Roberts, Jr., Interim Chairman, Director | | | 1,500 | | | | * | | | | Jeffrey Leader, Director*** | | | 10,000 | | | | * | | | | Jana Schwan, Chief Executive Officer | | | 11,073 | | | | * | | | | Darlene Chui Bryant, Director | | | - | | | | * | | | | Iris Chin, Director | | | - | | | | * | | | | | | | | | | | | | | | All directors and executive officers as a group (5 persons) | | | 22,573 | | | | 0.9 | % | | | | | | | | | | | | | | Other Principal Shareholders | | | | | | | | | | | Yubao Li** | | | 1,035,000 | | | | 39.8 | % | | | Mr. Shuai Wang | | | 188,808 | | | | 7.3 | % | | | Icy Mellon LLC | | | 210,244 | | | | 8.1 | % | | | Mitzners Consulting | | | 306,469 | | | | 11.8 | % | | | Yaping Zhang | | | 100,000 | | | | 3.8 | % | | | Tu Li | | | 76,659 | | | | 3.0 | % | | | Others | | | 657,610 | | | | 25.3 | % | | | Total Other Principal Shareholders | | | 2,574,790 | | | | 99.1 | % | | | | | | | | | | | | | | Total Shareholders | | | 2,597,363 | | | | 100.0 | % | | Notes: * Less than 1% of beneficial ownership ** Includes shares held by LF International PTE, a Singapore private limited company controlled by Mr. Li, as well Yunhong Environmental Protection Technology Co., Ltd. as part of the Yunhong China Group controlled by Mr. Li. *** Jeffrey Leader was appointed as a Director on November 25, 2025 | 29 | | | Table of Contents | | **Item No. 13** **Certain Relationships and Related Transactions** As of December 2017, Mr. John H. Schwan was owed a total of $1.1 million, with additional accrued interest of $0.4 million, by the Company. Mr. Schwan is the father of Jana Schwan. As part of the December 2017 financing with PNC Bank, Mr. Schwan executed a subordination agreement related to these amounts due to him, as evidenced by a related note representing the amount owed to Mr. Schwan. During January 2019, Mr. Schwan and the Company agreed to an exchange of $0.6 million of his debt for approximately 181,000 shares of CTI common stock at the then market rate of $3.32 per share. As of December 31, 2023, the balance of Mr. Schwans note was approximately $1.3 million, including accrued interest. Per agreement between the parties, this note was repaid in installments: $0.5 million on January 2, 2024, another $0.5 million on January 16, 2024, with the remaining $0.3 million outstanding as of December 31, 2025 with an ultimate payment date subject to mutual determination by the parties. The Company formed a wholly owned subsidiary, Yunhong Technology (Hubei) Co. Ltd., in the Hubei Province of China. On June 30, 2024, the Company, through the China subsidiary, acquired certain production assets pursuant to an Asset Purchase Agreement and in exchange for 500,000 of the Companys common stock, which was valued at $6.25 million. In December 2025, pursuant to an amendment to the Asset Purchase Agreement, 175,000 of the shares previously issued were cancelled, and approximately $2.2 million of prepaid assets recorded in connection with the transaction were removed from the Companys books. Relationships and transactions in which the Company and its directors and executive officers or their immediate family members are participants or have conflicts of interest are reviewed and approved by the Audit Committee. While the Audit Committee has not adopted a written policy for the review and approval of related party transactions, in determining whether to approve or ratify any such transaction, the Audit Committee considers, in addition to such other factors it may deem appropriate in the circumstances, whether (i) the transaction is fair and reasonable to the Company, (ii) under all of the circumstances, the transaction is in, or not inconsistent with, the Companys best interests, and (iii) the transaction will be on terms no less favorable to the Company than could have been obtained in an arms length transaction with an unrelated third party. The Audit Committee, in its discretion, may request information from any party to facilitate its consideration of the matter. The Audit Committee does not allow a director to participate in any review, approval or ratification of any transaction if he or she, or his or her immediate family member, has a direct or indirect material interest in the transaction. **Item No. 14** **Principal Accountant Fees and Services** The following table sets forth the amount of fees billed to us by Wolf, our current auditor for professional services during the years ended December 31, 2025 and 2024, respectively, as described below: | | | 2025 | | | 2024 | | | | Audit Fees Wolf & Company, P.C. (1) | | $ | 357,000 | | | $ | 629,500 | | | | Audit Related Fees (2) | | | - | | | | - | | | | All Other Fees (3) | | | - | | | | - | | | | | | | | | | | | | | | Total Fees | | $ | 357,000 | | | $ | 629,500 | | | (1) Includes the annual financial statement audit and limited quarterly reviews and expenses. (2) Includes fees and expenses for other audit-related activities. (3) May represent tax services and other consulting services. All audit, tax and other services to be performed for the Company must be pre-approved by the Audit Committee. The Audit Committee reviews the description of services and an estimate of the anticipated costs to perform those services. Services not previously approved cannot commence until such approval has been granted. Pre-approval is granted usually at regularly scheduled meetings. If unanticipated items arise between meetings of the Audit Committee, the Audit Committee has delegated approval authority to the Chairman of the Audit Committee, in which case the Chairman communicates such pre-approvals to the full Committee at its next meeting. The Audit Committee of the Board of Directors reviews all relationships with its independent auditors, including the provision of non-audit services, which may relate to the independent registered public accounting firms independence. | 30 | | | Table of Contents | | **PART IV** **Item No. 15** **Exhibits and Financial Statement Schedules** (a)(1) The following documents are filed under pages F-1 through F-20 and are included as part of this Form 10-K: | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-1 | | | CONSOLIDATED BALANCE SHEETS | F-2 | | | CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | F-3 | | | CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY | F-4 | | | CONSOLIDATED STATEMENTS OF CASH FLOWS | F-5 | | | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | F-6 | | (a)(2) All financial statement schedules are omitted because the information is inapplicable or presented in the notes to the financial statements, except for Schedule II Valuation and qualifying accounts. (a)(3) Exhibits required by Item 601 of Regulation S-K are incorporated herein by reference and are listed on the attached Exhibit Index. | 31 | | | Table of Contents | | | Exhibit Number | | Document | | | | | | | | 3.1 | | Restated Articles of Incorporation (Incorporated by reference to Exhibit A to Registrants Schedule 14A Definitive Proxy Statement filed April 29, 2015). | | | 3.2 | | Amended and Restated By-Laws of Yunhong CTI, Ltd (Incorporated by reference to Exhibit 3.2, contained in Registrants Form 8-K filed on March 17, 2017). | | | 3.3 | | Amended and Restated By-Laws of Yunhong Green CTI Ltd (Incorporated by reference to Exhibit 3.2 contained in Registrants Form 8-K filed on September 6, 2023) | | | 3.4 | | Amended and Restated Certificate of Designation of Series A Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1, contained in the Registrants form 8-K filed on February 19, 2020). | | | 3.5 | | Articles of Amendment to the Registrants Articles of Incorporation (Incorporated by reference to Exhibit 3.1, contained in the Registrants form 8-K filed on March 16, 2020). | | | 3.6 | | Certificate of Designations, Preferences and Rights of Series B Redeemable Convertible Preferred Stock, No Par Value (Incorporated by reference to Exhibit 3.1 contained in Registrants Form 8-K/A filed on May 5, 2021). | | | 3.7 | | Certificate of Designations of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 contained in Registrants Form 8-K/A filed on May 5, 2021). | | | 3.8 | | Certificate of Designations of Series D Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 contained in Registrants Form 8-K filed on December 7, 2021). | | | 4.1 | | Form of Yunhong CTI, Ltd common stock certificate (Incorporated by reference to Exhibit 4.1 contained in Registrants Report on Form 10-K dated March 31, 2017). | | | 10.1 | | Yunhong CTI, Ltd 2018 Stock Incentive Plan (Incorporated by Reference to Schedule A contained in Registrants 14A Definitive Proxy Statement, as filed with the Commission on April 30, 2018) | | | 10.2 | | Subscription Agreement among Registrant and John H. Schwan dated December 21, 2018 (Incorporated by reference to Exhibit 10.1, contained in Registrants form 8-K filed on January 17, 2019). | | | 10.3 | | Stock Purchase Agreement, dated as of January 3, 2020 (Incorporated by reference to Exhibit 10.1, contain in Registrants form 8-K filed on January 3, 2020). | | | 10.4 | | Amendment No. 1 to Securities Purchase Agreement, dated as of February 24, 2020 (Incorporated by reference to Exhibit 10.1, contained in the Registrants form 8-K filed on February 26, 2020). | | | 10.5 | | Amendment No.2 to Securities Purchase Agreement dated as of April 13, 2020 (Incorporated by reference to Exhibit 10.1, contained in Registrants form 8-K filed on April 17, 2020. | | | 10.6 | | Stock Purchase Agreement (Incorporated by reference to Exhibit 10.1 contained in Registrants Form 8-K filed on November 25, 2020). | | | 10.7 | | Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 contained in Registrants Form 8-K filed on January 15, 2021). | | | 10.8 | | Purchase and Sale Agreement (Incorporated by reference to Exhibit 10.1 contained in Registrants Form 8-K filed on April 29, 2021). | | | 10.9 | | Lease Agreement (Incorporated by reference to Exhibit 10.2 contained in Registrants Form 8-K filed on April 29, 2021). | | | 10.10 | | Promissory Note (Incorporated by reference to Exhibit 10.3 contained in Registrants Form 8-K filed on April 29, 2021). | | | 10.11 | | Stock Redemption Agreement (Incorporated by reference to Exhibit 10.1 contained in Registrants Form 8-K filed on August 5, 2021). | | | 10.12 | | Loan and Security Agreement (Incorporated by reference to Exhibit 10.1 contained in Registrants Form 8-K filed on October 6, 2021). | | | 10.13 | | Stock Purchase Agreement (Incorporated by reference to Exhibit 10.1 contained in Registrants Form 8-K filed on December 7, 2021). | | | 10.14 | | Warrant (Incorporated by reference to Exhibit 10.2 contained in Registrants Form 8-K filed on December 7, 2021). | | | 10.15 | | Employment Agreement (Offer Letter) between Frank Cesario and the Company dated December 29, 2021 (Incorporated by reference to Exhibit 10.1 contained in Registrants Report on Form 8-K filed on January 11, 2022). | | | 10.16 | | Exclusive Distribution Agreement, dated as of January 28, 2023 (Incorporated by reference to Exhibit 99.1 contained in Registrants Form 8-K filed on February 2, 2023). | | | 14.1 | | Code of Ethics (Incorporated by reference to Exhibit 14 contained in the Registrants Form 10-K/A Amendment No. 2, as filed with the Commission on October 13, 2004). | | | 23.1 | | Consent of Independent Registered Public Accounting Firm, Wolf & Company, P.C. | | | 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 Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith). | | | 32.1 | | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). | | | 97 | | Incentive compensation recovery (Clawback) policy | | | 101 | | Interactive Data Files, including the following materials from the Companys Annual Report on Form 10-K for the year ended December 31, 2023, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to Consolidated Financial Statements. | | | 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) | | | | (a) | The Exhibits listed in subparagraph (a)(3) of this Item 15 are attached hereto unless incorporated by reference to a previous filing. | | | | (b) | The Schedule listed in subparagraph (a)(2) of this Item 15 is attached hereto. | | **Item No. 16** **Summary** **None.** | 32 | | | Table of Contents | | **SIGNATURES** In accordance with Section 13 or 15(d) of the Exchange Act the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized on March 23, 2026. | | Yunhong Green CTI, LTD | | | | | | | | | By: | /s/ Jana M. Schwan | | | | | Chief Executive Officer | | | | | | | | | By: | /s/ Sree Kommana | | | | | Corporate Controller and Principal Financial Officer | | In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. | Signatures | | Title | | Date | | | | | | | | | | /s/ Y Gerald (J.D.) Roberts, Jr. | | Interim Chairman of the Board of Directors | | 03/23/2026 | | | Gerald (J.D.) Roberts, Jr. | | | | | | | | | | | | | | /s/ Darlene Chui Bryant | | Director | | 03/23/2026 | | | Darlene Chui Bryant | | | | | | | | | | | | | | /s/ Jeff Leader | | Director | | 03/23/2026 | | | Jeff Leader | | | | | | | | | | | | | | /s/ Iris Chan | | Director | | 03/23/2026 | | | Iris Chan | | | | | | | 33 | | | Table of Contents | | **Yunhong Green CTI LTD** Consolidated Financial Statements Years Ended December 31, 2025 and 2024 **Contents** | Consolidated Financial Statements: | | | | Report of Independent Registered Public Accounting Firm (PCAOB ID # 392) | F-1 | | | Consolidated Balance Sheets as of December 31, 2025 and 2024 | F-2 | | | Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 and 2024 | F-3 | | | Consolidated Statements of Shareholders Equity for the years ended December 31, 2025 and 2024 | F-4 | | | Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 | F-5 | | | Notes to Consolidated Financial Statements for the years ended December 31, 2025 and 2024 | F-6 | | Financial Statement Schedule: All other schedules for which a provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. | 34 | | | Table of Contents | | **Report of Independent Registered Public Accounting Firm** To the Shareholders and the Board of Directors of Yunhong Green CTI Ltd. **Opinion on the Financial Statements** We have audited the accompanying consolidated balance sheets of Yunhong Green CTI Ltd. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, shareholders equity and cash flows for each of the two years in the period ended December 31, 2025, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. **Substantial Doubt about the Companys Ability to Continue as a Going Concern** The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has an accumulated deficit. This raises substantial doubt about the Companys ability to continue as a going concern. Managements plans in regard to these matters also are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. **Basis for Opinion** These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. **Critical Audit Matters** The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. *Impairment of long-lived assets* ** During the year ended December 31, 2025, management identified indicators of impairment for machinery and equipment intended for use at the planned manufacturing facility in Hubei, China, as further disclosed in Note 2 to the financial statements. The Company measured the impairment of the Hubei machinery and equipment by engaging a third-party appraiser to inspect the machinery and equipment and provide an appraisal report. An impairment charge was then recorded based on the results of the appraisal which applied a replacement cost methodology to establish the fair value of the asset group. Auditing the impairment involved especially challenging and subjective judgment due to the significance of the assumptions applied by management and managements experts to derive the appraised value of the asset group. To address this critical audit matter, we performed procedures including, among others: (i) evaluating impairment indicators and changes in managements plans for the Hubei manufacturing facility; (ii) evaluating the qualifications of the third-party experts used by management; (iii) assessing the appropriateness of the valuation methodology applied; (iv) testing the mathematical accuracy of the appraisal and testing the completeness and accuracy of key inputs; and (iv) evaluating the reasonableness of significant assumptions applied. Finally, we evaluated the appropriateness of the Companys presentation and disclosure of the impairment event. | /s/ Wolf & Company, P.C. | | | We have served as the Companys auditor since 2024. Boston, Massachusetts March 23, 2026 | F-1 | | | Table of Contents | | **Yunhong Green CTI, Ltd** **Consolidated Balance Sheets** **As of December 31** | | | 2025 | | | 2024 | | | | ASSETS | | | | | | | | | | | Current assets: | | | | | | | | | | | Cash and cash equivalents | | $ | 97,000 | | | $ | 220,000 | | | | Accounts receivable, net | | | 5,955,000 | | | | 5,403,000 | | | | Inventories | | | 8,738,000 | | | | 8,493,000 | | | | Prepaid expenses | | | 283,000 | | | | 412,000 | | | | Total current assets | | | 15,073,000 | | | | 14,528,000 | | | | | | | | | | | | | | | Property, plant and equipment: | | | | | | | | | | | Machinery and equipment | | | 21,993,000 | | | | 22,246,000 | | | | Office furniture and equipment | | | 2,122,000 | | | | 2,084,000 | | | | Intellectual property | | | 783,000 | | | | 783,000 | | | | Leasehold improvements | | | 39,000 | | | | 39,000 | | | | Fixtures and equipment | | | 518,000 | | | | 518,000 | | | | Projects under construction | | | 140,000 | | | | 196,000 | | | | Property, plant and equipment gross | | | 25,595,000 | | | | 25,866,000 | | | | Less: accumulated depreciation and amortization | | | (21,599,000 | ) | | | (20,958,000 | ) | | | | | | | | | | | | | | Total property, plant and equipment, net | | | 3,996,000 | | | | 4,908,000 | | | | | | | | | | | | | | | Other assets: | | | | | | | | | | | Operating lease right-of-use asset | | | 3,393,000 | | | | 3,950,000 | | | | Prepaid expenses, noncurrent | | | - | | | | 2,192,000 | | | | | | | | | | | | | | | Total other assets | | | 3,393,000 | | | | 6,142,000 | | | | | | | | | | | | | | | TOTAL ASSETS | | $ | 22,462,000 | | | $ | 25,578,000 | | | | | | | | | | | | | | | LIABILITIES AND SHAREHOLDERS EQUITY | | | | | | | | | | | Current liabilities: | | | | | | | | | | | Trade payables | | $ | 1,677,000 | | | $ | 1,537,000 | | | | Line of credit | | | 6,822,000 | | | | 6,578,000 | | | | Notes payable - current portion | | | 146,000 | | | | 606,000 | | | | Notes payable - related party | | | 344,000 | | | | 344,000 | | | | Notes payable | | | 344,000 | | | | 344,000 | | | | Operating lease liabilities current portion | | | 596,000 | | | | 480,000 | | | | Advance investor deposit | | | 150,000 | | | | 1,050,000 | | | | Accrued liabilities | | | 950,000 | | | | 810,000 | | | | | | | | | | | | | | | Total current liabilities | | | 10,685,000 | | | | 11,405,000 | | | | | | | | | | | | | | | Long-term liabilities: | | | | | | | | | | | Notes payable net of current portion | | | 348,000 | | | | - | | | | Operating lease liabilities noncurrent | | | 2,873,000 | | | | 3,470,000 | | | | | | | | | | | | | | | Total long-term liabilities | | | 3,221,000 | | | | 3,470,000 | | | | | | | | | | | | | | | TOTAL LIABILITIES | | $ | 13,906,000 | | | $ | 14,875,000 | | | | | | | | | | | | | | | SHAREHOLDERS EQUITY | | | | | | | | | | | Series E Convertible Preferred Stock no par value, 130,000 shares authorized, 130,000 issued and outstanding at December 31, 2025 and 2024 (liquidation preference of $1,300,000) | | | 976,000 | | | | 864,000 | | | | Series F Convertible Preferred Stock no par value, 70,000 shares authorized, 70,000 issued and outstanding at December 31, 2025 and 2024, respectively (liquidation preference of $700,000) | | | 525,000 | | | | 465,000 | | | | Preferred Stock value | | | 525,000 | | | | 465,000 | | | | | | | | | | | | | | | Common stock - no par value, 2,000,000,000 shares authorized, 2,601,788 and 2,599,185 shares issued and 2,597,362 and 2,594,759 shares outstanding at December 31, 2025 and 2024, respectively | | | 27,891,000 | | | | 27,533,000 | | | | Additional paid-in-capital | | | 7,711,000 | | | | 7,858,000 | | | | Accumulated deficit | | | (28,386,000 | ) | | | (25,856,000 | ) | | | Less: Treasury stock, 4,426 shares, at cost | | | (161,000 | ) | | | (161,000 | ) | | | | | | | | | | | | | | TOTAL SHAREHOLDERS EQUITY | | | 8,556,000 | | | | 10,703,000 | | | | | | | | | | | | | | | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY | | $ | 22,462,000 | | | $ | 25,578,000 | | | See report of independent registered public accounting firm and notes to consolidated financial statements. Reflects a 1-for-10 reverse stock split of the Companys common stock, effective October 1, 2025 | F-2 | | | Table of Contents | | **Yunhong Green CTI, Ltd** **Consolidated Statements of Operations and Comprehensive Loss** **For the years ended December 31** | | | 2025 | | | 2024 | | | | | | | | | | | | | Net Sales | | $ | 19,705,000 | | | $ | 17,953,000 | | | | | | | | | | | | | | | Cost of Sales | | | 16,115,000 | | | | 14,352,000 | | | | | | | | | | | | | | | Gross profit | | | 3,590,000 | | | | 3,601,000 | | | | | | | | | | | | | | | Operating expenses: | | | | | | | | | | | General and administrative | | | 4,938,000 | | | | 3,396,000 | | | | Selling | | | 147,000 | | | | 141,000 | | | | Advertising and marketing | | | 555,000 | | | | 676,000 | | | | | | | | | | | | | | | Total operating expenses | | | 5,640,000 | | | | 4,213,000 | | | | | | | | | | | | | | | Loss from operations | | | (2,050,000 | ) | | | (612,000 | ) | | | | | | | | | | | | | | Other (expense) income: | | | | | | | | | | | Interest expense | | | (878,000 | ) | | | (862,000 | ) | | | Other income/(expense) | | | 398,000 | | | | (25,000 | ) | | | | | | | | | | | | | | Total other expense, net | | | (480,000 | ) | | | (887,000 | ) | | | | | | | | | | | | | | Net Loss | | $ | (2,530,000 | ) | | $ | (1,499,000 | ) | | | | | | | | | | | | | | Deemed dividends on preferred stock | | | (172,000 | ) | | | (143,000 | ) | | | | | | | | | | | | | | Net loss attributable to Yunhong CTI Ltd common shareholders | | | (2,702,000 | ) | | | (1,642,000 | ) | | | | | | | | | | | | | | Basic income (loss) per common share | | $ | (1.01 | ) | | $ | (0.07 | ) | | | Diluted income (loss) per common share | | $ | (1.01 | ) | | $ | (0.07 | ) | | | | | | | | | | | | | | Weighted average number of shares and equivalent shares of common stock outstanding: | | | | | | | | | | | Basic | | | 2,671,813 | | | | 2,336,738 | | | | | | | | | | | | | | | Diluted | | | 2,671,813 | | | | 2,336,738 | | | See report of independent registered public accounting firm and notes to consolidated financial statements. Reflects a 1-for-10 reverse stock split of the Companys common stock, effective October 1, 2025 | F-3 | | | Table of Contents | | **Yunhong Green CTI, Ltd** **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 | | | Additional Paid-in | | | Accumulated (Deficit) | | | Less Treasury Stock | | | | | | | | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Earnings | | | Shares | | | Amount | | | TOTAL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance December 31, 2023 | | | - | | | $ | - | | | | - | | | $ | - | | | | 2,081,560 | | | $ | 21,283,000 | | | $ | 6,967,000 | | | $ | (24,357,000 | ) | | | (4,426 | ) | | $ | (161,000 | ) | | $ | 3,732,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Series E Preferred Stock Issuance | | | 130,000 | | | | 771,000 | | | | - | | | | - | | | | - | | | | - | | | | 529,000 | | | | - | | | | - | | | | - | | | | 1,300,000 | | | | Series F Preferred Stock Issuance | | | - | | | | - | | | | 70,000 | | | | 415,000 | | | | - | | | | - | | | | 285,000 | | | | - | | | | - | | | | - | | | | 700,000 | | | | Series E Accrued Deemed Dividend | | | - | | | | 93,000 | | | | | | | | - | | | | - | | | | - | | | | (93,000 | ) | | | - | | | | - | | | | - | | | | - | | | | Series F Accrued Deemed Dividend | | | - | | | | - | | | | - | | | | 50,000 | | | | - | | | | - | | | | (50,000 | ) | | | - | | | | - | | | | - | | | | - | | | | Stock Issuance | | | - | | | | - | | | | - | | | | - | | | | 10,000 | | | | - | | | | 60,000 | | | | - | | | | - | | | | - | | | | 60,000 | | | | Common Stock Issued for Assets Acquired | | | - | | | | - | | | | - | | | | - | | | | 500,000 | | | | 6,250,000 | | | | - | | | | - | | | | - | | | | - | | | | 6,250,000 | | | | Stock Issuance - Vesting Milestone | | | - | | | | - | | | | - | | | | - | | | | 7,625 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | Equity Compensation Charge | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 160,000 | | | | - | | | | - | | | | - | | | | 160,000 | | | | Net Loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,499,000 | ) | | | - | | | | - | | | | (1,499,000 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance December 31, 2024 | | | 130,000 | | | $ | 864,000 | | | | 70,000 | | | $ | 465,000 | | | | 2,599,185 | | | $ | 27,533,000 | | | $ | 7,858,000 | | | $ | (25,856,000 | ) | | | (4,426 | ) | | $ | (161,000 | ) | | $ | 10,703,000 | | | **Yunhong Green CTI, Ltd** **Consolidated Statements of Shareholders Equity** | | | Series E Preferred Stock | | | Series F Preferred Stock | | | Common Stock | | | Additional Paid-in | | | Accumulated (Deficit) | | | Less Treasury Stock | | | | | | | | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Earnings | | | Shares | | | Amount | | | TOTAL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance December 31, 2024 | | | 130,000 | | | $ | 864,000 | | | | 70,000 | | | $ | 465,000 | | | | 2,599,185 | | | $ | 27,533,000 | | | $ | 7,858,000 | | | $ | (25,856,000 | ) | | | (4,426 | ) | | $ | (161,000 | ) | | $ | 10,703,000 | | | | Balance | | | 130,000 | | | $ | 864,000 | | | | 70,000 | | | $ | 465,000 | | | | 2,599,185 | | | $ | 27,533,000 | | | $ | 7,858,000 | | | $ | (25,856,000 | ) | | | (4,426 | ) | | $ | (161,000 | ) | | $ | 10,703,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Series E Accrued Deemed Dividend | | | - | | | | 112,000 | | | | | | | | - | | | | - | | | | - | | | | (112,000 | ) | | | - | | | | - | | | | - | | | | - | | | | Series F Accrued Deemed Dividend | | | - | | | | - | | | | - | | | | 60,000 | | | | - | | | | - | | | | (60,000 | ) | | | - | | | | - | | | | - | | | | - | | | | Common Stock Issuance for Rent | | | | | | | - | | | | - | | | | - | | | | 27,604 | | | | 182,000 | | | | - | | | | - | | | | - | | | | - | | | | 182,000 | | | | Equity Compensation Charge | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 25,000 | | | | - | | | | - | | | | - | | | | 25,000 | | | | Common Stock Issuance for Advance Investor Deposit | | | | | | | - | | | | - | | | | - | | | | 150,000 | | | | 1,050,000 | | | | - | | | | - | | | | - | | | | - | | | | 1,050,000 | | | | Acquisition and cancellation of common stock | | | | | | | | | | | | | | | | | | | (175,000 | ) | | | (874,000 | ) | | | | | | | | | | | | | | | | | | | (874,000 | ) | | | Net Loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,530,000 | ) | | | - | | | | - | | | | (2,530,000 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance December 31, 2025 | | | 130,000 | | | $ | 976,000 | | | | 70,000 | | | $ | 525,000 | | | | 2,601,788 | | | $ | 27,891,000 | | | $ | 7,711,000 | | | $ | (28,386,000 | ) | | | (4,426 | ) | | $ | (161,000 | ) | | $ | 8,556,000 | | | | Balance | | | 130,000 | | | $ | 976,000 | | | | 70,000 | | | $ | 525,000 | | | | 2,601,788 | | | $ | 27,891,000 | | | $ | 7,711,000 | | | $ | (28,386,000 | ) | | | (4,426 | ) | | $ | (161,000 | ) | | $ | 8,556,000 | | | See report of independent registered public accounting firm and notes to consolidated financial statements. Reflects a 1-for-10 reverse stock split of the Companys common stock, effective October 1, 2025 | F-4 | | | Table of Contents | | **Yunhong Green CTI, Ltd** **Consolidated Statements of Cash Flows** **For the years ended December 31** | | | For the years ended December 31, | | | | | | 2025 | | | 2024 | | | | Cash flows from operating activities: | | | | | | | | | | | Net loss | | $ | (2,530,000 | ) | | $ | (1,499,000 | ) | | | Adjustments to reconcile net loss to net cash provided by (used in) operating | | | | | | | | | | | Depreciation and amortization | | | 641,000 | | | | 345,000 | | | | Impairement of Hubei assets | | | 1,672,000 | | | | - | | | | Issuance of common stock for consulting services | | | - | | | | 60,000 | | | | Equity compensation charge | | | 25,000 | | | | 160,000 | | | | Non-cash interest and fees | | | - | | | | 116,000 | | | | Change in assets and liabilities: | | | | | | | | | | | Accounts receivable | | | (552,000 | ) | | | (1,428,000 | ) | | | Inventories | | | (245,000 | ) | | | (702,000 | ) | | | Prepaid expenses and other assets | | | 129,000 | | | | (80,000 | ) | | | Trade payables | | | 140,000 | | | | 620,000 | | | | Advance investor deposit | | | 150,000 | | | | 1,050,000 | | | | Operating leases | | | 76,000 | | | | - | | | | Accrued liabilities | | | 322,000 | | | | 84,000 | | | Net cash (used in) provided by operating activities | | | (172,000 | ) | | | (1,274,000 | ) | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | Purchases of property, plant and equipment | | | 271,000 | | | (331,000 | ) | | | Net cash (used in) provided by investing activities | | | 271,000 | | | (331,000 | ) | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | Stock issuance | | | | | | 500,000 | | | | Repayment of note payable, related party | | | - | | | | (1,000,000 | ) | | | Repayment of note payable | | | (112,000 | ) | | | (183,000 | ) | | | Net advances (repayments) on revolving line of credit | | | 244,000 | | | | 1,587,000 | | | | Net cash provided by (used in) financing activities | | | 132,000 | | | | 904,000 | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 231,000 | | | (701,000 | ) | | | | | | | | | | | | | | Cash and cash equivalents at beginning of period | | | 220,000 | | | | 921,000 | | | | | | | | | | | | | | | Cash and cash equivalents at end of period | | $ | 451,000 | | | $ | 220,000 | | | | Supplemental disclosure of cash flow information and noncash investing and financing activities: | | | | | | | | | | | Cash payments for interest | | 878,000 | | | 862,000 | | | | Accretion of dividends on preferred stock | | | 172,000 | | | | 143,000 | | | | Common stock issued in exchange for assets acquired | | | - | | | | 6,250,000 | | | | Reduction of prepaid expense, in exchange for surrender of common stock | | | (874,000 | ) | | | | | | | Allocation of proceeds from preferred stock financing to the issuance of warrants for preferred stock | | | - | | | | 814,000 | | | | Reclassification of advances upon issuances of preferred stock | | | - | | | | 1,500,000 | | | | Conversion of advance received from investor into common stock | | | 1,050,000 | | | | - | | | | Common stock issued in exchange for rent due to Icy Melon | | | 182,000 | | | | - | | | | Conversion of preferred stock into common stock | | | | | | 1,130,000 | | | See report of independent registered public accounting firm and notes to the consolidated financial statements. Reflects a 1-for-10 reverse stock split of the Companys common stock, effective October 1, 2025. | F-5 | | | Table of Contents | | Yunhong Green CTI Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2025 and 2024 **1. Nature of Business** **Nature of Operations** Yunhong Green CTI Ltd. its (inactive) subsidiary CTI Supply, Inc., and its wholly-owned subsidiary, Yunhong Technology (Hubei) Co. Ltd., in the Hubei Province of China (collectively, the Company) (i) design, manufacture and distribute metalized and latex balloon products throughout the world and (ii) 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 including balloon-inspired gift products. The Company is exploring ways to commercialize compostable and biodegradable materials, as well as sourcing additional products and materials through its subsidiary. The Company formed a wholly owned subsidiary, Yunhong Technology (Hubei) Co., Ltd., in Hubei Province, China (the China subsidiary) to support its international production operations. On June 30, 2024, through this subsidiary, the Company acquired certain production equipment and related manufacturing assets pursuant to an Asset Purchase Agreement. The consideration consisted of 500,000 shares of the Companys common stock, valued at approximately $6.25 million at the time of issuance. On December 2, 2025, the Company entered into a settlement agreement with the counterparty in the Asset Purchase Agreement pursuant to which 175,000 shares of common stock were reacquired and canceled in exchange for the Company surrendering its rights to approximately $2.1 million of prepaid assets representing a working capital credit for the buildout of operations The timing and extent of future operations in the China subsidiary will depend on market conditions and the Companys strategic evaluation of the subsidiarys viability. During the year ended December 31, 2025, the Company evaluated the carrying value of the acquired equipment in the China subsidiary and recorded an impairment charge of approximately $351,000. See Note 2. **2. Summary of Significant Accounting Policies** **Basis of Presentation** The accompanying financial statements and accompanying notes have been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and are presented in conformity with U.S. generally accepted accounting principles (U.S. GAAP). 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. **Principles of Consolidation** 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 consolidated financial statements include the accounts of Yunhong Green CTI Ltd., CTI Supply, Inc., and Yunhong Technology (Hubei) Co., Ltd. **Foreign Currency Translation** Substantially all activities occur in US Dollars. Operations have not yet begun at Yunhong Technology (Hubei) Co, Ltd. **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 Companys significant estimates include recoverability and impairment of long-lived assets, valuation allowances for doubtful accounts, inventory valuation, and valuation of deferred tax assets. **Cash and Cash Equivalents** Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less. **Accounts Receivable and Allowance for Doubtful Accounts** Trade receivables are carried at the original invoice amount less an estimate for doubtful receivables based on a review of all outstanding amounts on a monthly basis. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for a period in excess of the customers normal terms. Our allowance for doubtful accounts represents our estimate of expected credit losses related to our trade receivables. We pool our trade receivables based on similar risk characteristics, such as the age of receivables. To estimate our allowance for doubtful accounts, we leverage information on historical losses, asset-specific risk characteristics, current conditions, and reasonable and supportable forecasts of future conditions. Account balances are written off against the allowance when we deem the amount is uncollectible. Accounts receivable are stated at their estimated net realizable value $5,955,000, $5,403,000 and $3,975,000 for December 31, 2025, December 31, 2024 and January 1, 2024, respectively. No allowance for credit losses was recorded as of December 31, 2025, December 31, 2024 and January 1, 2024. **Inventories** Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard costs and is determined on a first-in first-out basis, to reflect the actual cost of production of inventories. Production costs of work in process and finished goods include material, labor and overhead. Inventory is not recorded in excess of net realizable value. | F-6 | | | Table of Contents | | **Property, Plant and Equipment** Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to operations as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized on a straight-line method over the lesser of the estimated useful life or the lease term. The estimated useful lives range as follows: Schedule of Property Plant and Equipment | | | (in years) | | | | Building | | | 25-30 | | | | Machinery and equipment | | | 3-15 | | | | Projects that prolong the life and increase efficiency of machinery | | | 3-5 | | | | Light machinery | | | 5-10 | | | | Heavy machinery | | | 10-15 | | | | Office furniture and equipment | | | 5-8 | | | | Intellectual property | | | 9-15 | | | | Leasehold improvements | | | 5-8 | | | Light machinery consists of forklifts, scissor lifts, and other warehouse machinery. Heavy machinery consists of production equipment including laminating, printing and converting equipment. Projects in process represent those costs capitalized in connection with construction of new assets and/or improvements to existing assets including a factor for interest on funds committed to projects in process of $140,000 and $196,000 for the years ended December 31, 2025 and 2024, respectively. Upon completion, these costs are reclassified to the appropriate asset class. **Valuation of Long-Lived Assets** The Company evaluates whether events or circumstances have occurred which indicates that the carrying amounts of long-lived assets (principally noncurrent prepaid expenses and property, plant and equipment) may be impaired or not recoverable. The significant factors that are considered that could trigger an impairment review include: changes in business strategy, market conditions, or the manner of use of an asset; underperformance relative to historical or expected future operating results; and negative industry or economic trends. In evaluating an asset for possible impairment, management estimates that assets future undiscounted cash flows and appraised values to measure whether the asset is recoverable. As further discussed in Note 13, during 2025 the Company reevaluated its plans to open a production facility in Hubei, China and management indefinitely deferred plans for the facility to open. The Company also executed a Stock Surrender Agreement (also see Note 13) that released the counterparty from the working capital credit recorded as prepaid expenses, noncurrent, on the consolidated balance sheet in exchange for the surrender of 175,000 shares of common stock reacquired by the Company. The balance of the working capital credit (prepaid expense) in excess of the fair value of common shares reacquired was recognized as impairment in the amount of $1,318,000 during 2025. Furthermore, management determined that the current circumstances involving the Hubei subsidiary represented an indicator of impairment for the related machinery and equipment. The Company measured the impairment of the Hubei machinery and equipment using an appraised value, which applied a replacement cost methodology. Upon completing its impairment evaluation, the Company recognized an impairment charge of $354,000 on the machinery and equipment during 2025. The Company recognized these impairment charges within general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss). **Leases** We account for our leases in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 842, Leases (ASC 842). ASC 842 requires a lessee to recognize assets and liabilities on the balance sheet for all leases, with the result being the recognition of a right of use (ROU) asset and a lease liability. The lease liability is equal to the present value of the minimum lease payments for the term of the lease, including any optional renewal periods determined to be reasonably certain to be exercised, using a discount rate determined at lease commencement. This discount rate is the rate implicit in the lease, if known; otherwise, the incremental borrowing rate for the expected lease term is used. Our incremental borrowing rate approximates the rate we would have to pay to borrow on a collateralized basis over a similar term at lease inception. The value of the ROU asset is equal to the initial measurement of the lease liability plus any lease payments made to the lessor at or before the commencement date and any unamortized initial direct costs incurred by the lessee, less any unamortized lease incentives received. Our lease contracts may include options to extend the lease term and we include the renewal options for these leases in the determination of the ROU asset and lease liability when the likelihood of renewal is determined to be reasonably certain. We enter into leases in the course of ordinary business including warehouses and manufacturing facilities, as well as vehicles and equipment used in our operations. Leases with an initial term of 12 months or less are not recorded on the balance sheet as we recognize lease expense for these leases on a straight-line basis over the lease term. The depreciable life of assets and related improvements are limited by the expected lease term, unless there is a reasonably certain expected transfer or title or purchase option. Some lease agreements include renewal options at our sole discretion. Any guaranteed residual value is included in our lease liability. There are two types of leases, operating leases and finance leases. Lease classification is determined at lease commencement. We have made an accounting policy election to apply the short-term exception, which does not require the capitalization of leases with terms of 12 months or less. All of our leases are classified as operating leases. Operating lease expense is recognized on a straight-line basis over the lease term and included in general and administrative expense on the consolidated statement of operations. ROU assets are classified as such on the consolidated balance sheets, short-term lease liabilities and long-term lease liabilities are classified as such in the consolidated balance sheets. In the consolidated statements of cash flow, payments for operating leases and related amortization of the ROU assets are presented net within operating activities. | F-7 | | | Table of Contents | | **Stock-Based Compensation** The Company has stock-based incentive plans which may grant stock option, restricted stock and unrestricted stock awards. The Company recognizes stock-based compensation expense based on the grant date fair value of the award and the related vesting terms. The recognition of compensation expense associated with performance-based restricted stock units requires judgment in assessing the probability of meeting the performance goals, as well as defined criteria for assessing achievement of the performance-related goals. For purposes of measuring compensation expense, the number of shares ultimately expected to vest is estimated at each reporting date based on managements expectations regarding the relevant performance criteria. The performance shares begin vesting only upon the achievement of the performance criteria. The achievement of the performance goals can impact the valuation and associated expense of the restricted stock units. The assumptions used in accounting for the share-based payment awards represent managements best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if circumstances change and we use different assumptions, our stock-based compensation expense could be materially different in the future. See Note 13 for additional information. **Investor Advances** The Company has received advances from investors during recent years prior to the execution of a related financing arrangement. Such advances are treated as current liabilities until such time as a final investment vehicle is executed by the parties. **Earnings per share** Basic income (loss) per share is computed by dividing net income (loss) attributable to Yunhong Green CTI Ltd. Common shareholders by the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing the net loss attributable to Yunhong Green CTI Ltd. Common shareholders 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 December 31, 2025, and 2024, shares to be issued upon the exercise of warrants aggregated 55,600 and 55,600, respectively. No options were outstanding as of December 31, 2025 and 2024. The number of shares included in the determination of earnings on a diluted basis for the year ended December 31, 2025, and 2024 were none, as doing so would have been anti-dilutive. **Fair Value Measurements** Current professional accounting guidance applies to all assets and liabilities that are being measured and reported on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The requirements prescribe a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value. A Level 1 input includes a quoted market price in an active market or the price of an identical asset or liability. Level 2 inputs are market data other than Level 1 inputs that are observable either directly or indirectly including quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data. The carrying value amounts of the Companys cash and cash equivalents, accounts receivable, accounts payable and other current liabilities are reasonable estimates of their fair values due to the short-term nature of these instruments. **Deferred Financing Costs** Deferred financing costs are amortized over the term of the loan. Upon refinancing, existing unamortized deferred financing costs are expensed. | F-8 | | | Table of Contents | | **Income Taxes** The Company accounts for income taxes using the asset and liability method. As such, deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the anticipated reversal of these differences is scheduled to occur. Deferred tax assets are reduced by a valuation allowance when management cannot determine, in its opinion, that it is more likely than not that the Company will recover that recorded value of the deferred tax asset. The Company is subject to U.S. Federal, state and local taxes as well as certain foreign taxes in China. U.S. income tax expense and foreign withholding taxes are provided on remittances of foreign earnings and on unremitted foreign earnings that are not indefinitely reinvested. No interest and penalties related to uncertain tax positions were incurred during 2025 and 2024. Tax years ended December 31, 2022 or later remain subject to examination by the IRS and state taxing authorities. We utilize a two step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. See Note 9 for further discussion. **Revenue Recognition** We recognize revenue in accordance with ASC 606 Revenue from Contracts with Customers (ASC 606). The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to recognize revenue and requires judgment and estimates within the revenue recognition process, including identifying contracts with customers, identifying performance obligations in the contract, determining and estimating the amount of any variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation and recognizing revenue when the entity satisfies each performance obligation. Net sales consist primarily of revenues from the sale of products, including shipping and handling charges billed to customers, net of estimates for product returns. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to customers. Revenue is recognized at a point in time when control of the product transfers to the customer, which generally occurs upon shipment. The Company has elected the practical expedient under ASC 606-10-25-18B to account for shipping and handling activities that occur after the customer obtains control of the product as fulfillment activities rather than as a separate performance obligation. Accordingly, shipping and handling charges billed to customers are included in net sales, and the related outbound freight costs are included in cost of sales. In most cases, the Companys contracts with customers contain a single performance obligation related to the sale and delivery of its products. Accrued product returns are estimated based on historical experience and current information. The Company provides for product returns based on historical return rates. While the Company incurs costs for sales commissions paid to its sales employees and outside agents, these commission costs are recognized concurrent with the related revenue, as the amortization period is less than one year. The Company has elected the practical expedient under ASC 606-10-25-4 to expense incremental costs of obtaining a contract when the amortization period would have been one year or less. The Company does not incur any other incremental costs to obtain contracts with its customers. The Companys product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Accordingly, these warranties are not accounted for as a separate performance obligation. Sales taxes assessed by governmental authorities are accounted for on a net basis and excluded from net sales. A disaggregation of product net sales is presented in Note 14. **Research and Development** The Company conducts product development and research activities which include (i) creative product development and (ii) engineering. The Company conducts product development and research activities that include (i) creative product development and (ii) engineering. For the years ended December 31, 2025 and 2024, total research and development expenses were approximately $200,000 in each year. These costs are included within operating expenses, with approximately $53,000 classified within General and Administrative expenses and approximately $147,000 classified within Advertising and Marketing expenses. **Advertising Costs** The Company expenses advertising costs as incurred. **Note 3** **Liquidity and Going Concern** The Companys financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has a cumulative net loss from inception to December 31, 2025 of approximately $28.4 million and had approximately $0.1 million of cash as of December 31, 2025. The accompanying financial statements for the year ended December 31, 2025 have been prepared assuming the Company will continue as a going concern. The Companys cash resources may be insufficient to meet its anticipated needs during the next twelve months. The Company may require additional funding on acceptable terms to support its planned future operations. Managements plans include executing on its business plan and raising external funds to the extent needed. These factors are indicators that there is substantial doubt about the ability to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Companys 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 $7 million and a term loan of $0.7 million, all supported by the majority of our assets. This Agreement was extended during September 2025, to mature April 30, 2027, under substantially similar terms. We also made structural changes to our business, removing the cash required to support subsidiaries that are no longer part of our group and other operating improvements. | F-9 | | | Table of Contents | | **4. New Accounting Pronouncements** *Recent Accounting Pronouncements* **Recent Accounting Guidance Adopted in the Current Year** In December 2023, the FASB issued Accounting Standards Update (ASU) 2023-09, Improvements to Income Tax Disclosures, which requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. ASU 2023-09 is effective for Public Business Entities (PBEs) as defined in the Master Glossary of the Codification for annual periods beginning after December 15, 2024. We adopted prospectively ASU 2023-09 in the fourth quarter of 2025 and have provided the required disclosures. See Note 9, Income Taxes **Recent Accounting Guidance Not Yet Adopted** In November 2024, FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted. We are currently evaluating the provisions of this ASU. In July 2025, the FASB issued ASU 2025-05, which amends ASC 326-20 to provide a practical expedient (for all entities) relating to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact that this ASU will have on our consolidated financial statements. No other new accounting pronouncements recently adopted or issued had or are expected to have a material impact on the consolidated financial statements. **5. Fair Value Disclosures** U.S. GAAP clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. U.S. GAAP also requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based upon the best information available. U.S. GAAP establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows: | | | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | | | | | | | | | | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs are observable for the asset or liability, or unobservable but corroborated by market data, for substantially the full term of the financial instrument. | | | | | | | | | | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. | | A financial instruments categorization within the valuation hierarchy is based upon the lowest level of the input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no assets or liabilities measured in the fair value hierarchy as of December 31, 2025 or 2024. | F-10 | | | Table of Contents | | **6. Major Customers** For the year ended December 31, 2025, the Company had two customers that accounted for approximately 41% and 40% of consolidated net sales. For the year ended December 31, 2024, those same two customers accounted for approximately 47% and 36% of consolidated net sales. As of December 31, 2025, the outstanding accounts receivable balance from these customers was $5.85 million. **7. Inventories** The components of inventories are as follows: Schedule of Inventories | | | December 31, 2025 | | | December 31, 2024 | | | | Raw Materials | | $ | 749,000 | | | $ | 862,000 | | | | Work in Process | | | 2,569,000 | | | | 2,444,000 | | | | Finished Goods | | | 5,420,000 | | | | 5,187,000 | | | | | | | | | | | | | | | Total inventories | | $ | 8,738,000 | | | $ | 8,493,000 | | | **8. 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 $7 million, as amended (the Maximum Revolver Amount), subject to borrowing base provisions, and term loan facility (the Term Loan Facility) in an aggregate principal amount of $731,250 (Term Loan Amount and, together with the Revolving Credit Facility, the Senior Facilities). The Senior Facilities are secured by substantially all assets of the Company. The Company has remained in compliance with all material covenants since inception. Borrowings under the Revolving Credit Facility bear interest at the prime rate + 7.82% (14.57% as of December 31, 2025), payable monthly in arrears. The Term Loan Facility bears interest at the prime rate + 1.45% (8.2% as of December 31, 2025) and is repaid in 48 monthly installments of approximately $15,000, beginning November 1, 2021. The Company also pays collateral monitoring fees of 4.62% of the eligible accounts receivable, inventory, and equipment supporting both facilities. Originally maturing September 30, 2023, the Senior Facilities were extended to April 30, 2027 pursuant to a Fifth Amendment executed on September 30, 2025, which also increased the revolving commitment from $6.0 million to $7.0 million and added a 0.75% renewal fee, payable in two equal installments in October 2025 and September 2026. A $12,500 commitment fee was also incurred. All other material terms, including borrowing base, collateral, and covenants, remained unchanged. The facility automatically renews for successive one-year periods unless either party provides written notice of termination not less than 90 days prior to the end of the then-current term. The Company may prepay the Term Loan Facility (together with accrued interest and any applicable prepayment fee) in whole, but not in part, upon at least 60 days prior written notice At December 31, 2025 and 2024, the term loan balance was approximately $0.5 and $0.6 million, respectively, and the revolving balance was $6.8 million and $6.6 million, respectively. We had $0.2 million remaining available for borrowing under the Revolving Credit Facility as of December 31, 2025. The Agreement requires the Company to maintain minimum tangible net worth of $4.0 million, subject to adjustment by the Lender. The Company was in compliance with this covenant as of December 31, 2025 and 2024. The Agreement also limits additional indebtedness, liens, dividends, mergers, and annual capital expenditures exceeding $1.0 million. **Notes payable, Related Party** The Company is party to a note payable to John H. Schwan, Director and former Chairman of the Board, for an initial amount 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. | F-11 | | | Table of Contents | | **9. Income Taxes** In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. We adopted ASU 2023-09 in the fourth quarter of 2025. We account for income taxes under the liability method; under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. We utilize a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. Due to an ownership change in the first quarter of 2020, the future utilization of certain post-change income tax attributes of Yunhong CTI Ltd , including net operating loss carryovers, are anticipated to be limited for U.S. income tax purposes. For financial reporting purposes, Income (Loss) before provision for income taxes, includes the following components: Schedule of Income (Loss) Before Provision for Income Taxes | | | 2025 | | | 2024 | | | | | | Year Ended December 31, | | | | | | 2025 | | | 2024 | | | | Domestic | | $ | (452,000 | ) | | $ | (1398,000 | ) | | | Foreign | | | (2,078,000 | ) | | | 101,000 | | | | Total loss before income taxes | | $ | (2,530,000 | ) | | $ | (1,499,000 | ) | | Income tax provision (benefit) differs from the amounts computed by applying the statutory income tax rate of 21% to pretax loss as follows: Schedule of Income Tax Provision (Benefit) Related to Operations | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | U.S. Federal provision (benefit) | | 2025 | | | 2024 | | | | At Statutory Rate | | $ | (531,000 | ) | | | 21.00 | % | | $ | (315,000 | ) | | | 21.00 | % | | | Change in Valuation Allowance | | | (135,000 | ) | | | 5.32 | % | | | 110,000 | | | | (7.33 | )% | | | Foreign Tax Effects | | | 18,000 | | | | (0.72 | )% | | | 21000 | | | | (1.40 | )% | | | Nontaxable or Nondeductible Items | | | 6,000 | | | | (0.23 | )% | | | 47,000 | | | | (3.10 | )% | | | Net Operating Loss Adjustment | | | - | | | | - | | | | 56000 | | | | (3.77 | )% | | | Fixed Asset Impairment | | | 418,000 | | | | (16.52 | )% | | | - | | | | - | | | | Expiring Tax Attributes | | | 224,000 | | | | (8.85 | )% | | | 81,000 | | | | (5.40 | )% | | | Total provision (benefit) | | $ | | | | - | | | $ | | | | | - | | | | F-12 | | | Table of Contents | | **Deferred Tax Assets and Liabilities** Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows: Schedule of Deferred Tax Assets and Liabilities | | | 2025 | | | 2024 | | | | | | Year Ended December 31, | | | | | | 2025 | | | 2024 | | | | Deferred Tax Assets: | | | | | | | | | | | Federal & State NOL Carryforward | | $ | 5,421,000 | | | $ | 5,391,000 | | | | Foreign Tax Credit & Other Credits | | | - | | | | 224,000 | | | | Capitalized R&D | | | 146,000 | | | | 128,000 | | | | Reserves and Accruals | | | 188,000 | | | | 140,000 | | | | Capital Loss Carryforward | | | 2,360,000 | | | | 2,360,000 | | | | Unicap 263A Adjustment | | | 254,000 | | | | 246,000 | | | | Lease liability | | | 1,058,000 | | | | 1,232,000 | | | | Foreign NOL Carryforward | | | 129,000 | | | | 28,000 | | | | Fixed Assets & Intangibles | | | 286,000 | | | | 279,000 | | | | Total Gross deferred tax assets | | | 9,842,000 | | | | 10,028,000 | | | | Less: Val. Allowance | | | (8,713,000 | ) | | | (8,702,000 | ) | | | Total Deferred Tax Assets | | | 1,129,000 | | | | 1,326,000 | | | | | | | | | | | | | | | Deferred Tax Liabilities: | | | | | | | | | | | Right of use operating leases | | | 1,129,000 | | | | 1,326,000 | | | | Total Gross deferred tax liabilities | | | 1,129,000 | | | | 1,326,000 | | | | Net Deferred Tax Assets | | $ | - | | | $ | - | | | Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Because of our lack of U.S. earnings history, the net U.S. deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $0.01 million and $0.23 million during the years ended December 31, 2025 and 2024, respectively. As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the change in valuation allowance line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance: Schedule of Reconciliation Total Change in Valuation Allowance | | | 2025 | | | 2024 | | | | | | Year Ended December 31, | | | | | | 2025 | | | 2024 | | | | Beginning Balance | | $ | 8,702,000 | | | $ | 8,476,000 | | | | Change charged to income tax expense | | | 11,000 | | | | 226,000 | | | | Ending Balance | | $ | 8,713,000 | | | $ | 8,702,000 | | | **Net Operating Loss and Tax Credit Carryforwards** As of December 31, 2025, we had a net operating loss carryforward for federal income tax purposes of approximately $17 million, of which $0.2 million is subject to expiration beginning 2037. We had a total state net operating loss carryforward of approximately $19.6 million, with various expiration dates. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the change in ownership provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization. We have no federal and state tax credits as of December 31, 2025 and 2024. **Tax Legislation** **** On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the United States. The legislation includes certain provisions related to the full expensing of qualified United States research and experimental costs and other depreciable property. The legislation also includes changes to the determination of the amount of United States interest expense that is deductible for United States tax purposes. The legislation did not have a material impact on the Companys income tax expense for the year ended December 31, 2025, and did not materially change its effective income tax rate for 2025. | F-13 | | | Table of Contents | | **10. Related Party Transactions** Ms. Jana M. Schwan is the Companys 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 8, Mr. John H. Schwan was owed approximately $0.3 million as of both December 31, 2025, and 2024, respectively in a note from the Company. Icy Mellon LLC, the landlord of the Companys Barrington Facility, is a shareholder of the Company. On January 13, 2025, the Company issued 27,604 shares of common stock with an aggregate fair value of approximately $182,000 to settle rent payable that had been included in accrued expenses as of December 31, 2024. As of December 31, 2025 and 2024, amounts due to Icy Mellon LLC totaled approximately $234,000 and $182,000, respectively, and are included in accrued expenses in the consolidated balance sheets. Rent expense for Barrington Facility totaled approximately $557,000 and $541,000 for the years ended December 31, 2025, and 2024, respectively. As of December 31, 2025, remaining lease obligations under the Barrington Facility lease total approximately $3.3 million through the lease term ending April 2031. The Companys Vice President Strategy and Business Development also serves as a Manager of Icy Mellon LLC. During 2025, the Company received $150,000 from Icy Mellon LLC as an advance for undefined purposes until an agreement is executed. This advance has been recorded as an advance investor deposit. Jeffery Leader, a shareholder and newly appointed Director in 2025, provided consulting services during the year ended December 31, 2025. He was paid $30,000 in total for his services. During the year ended December 31, 2025, the Company issued 150,000 common shares to Mitzners Consulting, LLC, an existing shareholder of the company, for proceeds of $1,050,000. Such proceeds were received prior to December 31, 2024 and were recorded within advance investor deposit on the consolidated balance sheet as of December 31, 2024. As of December 31, 2025 and 2024, accrued investor deposits from Mitzners Consulting, LLC totaled $0 and $1,050,000 respectively. The Companys Vice President Strategy and Business Development also serves as a Manager for Mitzners Consulting, LLC. The Company formed a wholly owned subsidiary, Yunhong Technology Industry (Hubei) Co. Ltd., and 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 with certain stockholders of the Company. The assets were acquired in exchange for 500,000 shares of the Companys common stock, which was valued at $6.25 million. On December 2, 2025, the Company entered into a settlement agreement with the seller pursuant to which 175,000 shares of common stock were canceled and approximately $2.1 million of related prepaid assets were eliminated, thereby adjusting the terms of the original transaction. The settlement adjusted the original transaction terms. See Notes 1, 2 and 13 for additional information. | F-14 | | | Table of Contents | | **11. Leases** We enter into lease contracts for certain of our facilities at two locations. Our leases have remaining lease terms of 2two and five years. On December 18th, 2024, our lease agreement for the Elgin facility was extended through December 31st, 2028. The table below describes our lease position as of December 31, 2025 and 2024: Schedule of Lease Positions | Operating Leases | | 2025 | | | 2024 | | | | Right of use assets | | $ | 3,393,000 | | | $ | 3,950,000 | | | | Lease Liabilities - Current | | $ | 596,000 | | | $ | 480,000 | | | | Lease Liabilities Noncurrent | | $ | 2,873,000 | | | $ | 3,470,000 | | | During the years ended December 31, 2025 and 2024, we recorded operating lease expenses to general and administrative expense of $1,085,000 and $1,030,000, respectively. At December 31, 2025, maturities of operating lease liabilities are as follows: Schedule of Operating Lease Liabilities | | | | | | | | 2026 | | $ | 1,048,000 | | | | 2027 | | | 1,083,000 | | | | 2028 | | | 1,119,000 | | | | 2029 | | | 627,000 | | | | 2030 | | | 646,000 | | | | Thereafter | | | 217,000 | | | | Total Lease Payments | | | 4,740,000 | | | | Less: Imputed interest | | | (1,271,000 | ) | | | Total Lease Liabilities | | $ | 3,469,000 | | | As of December 31, 2025, the weighted average remaining lease term and weighted average discount rate for our operating leases are 4.5 years and 14.07%, respectively. We calculated the weighted-average discount rate using incremental borrowing rates, which equal the rates of interest that we would pay to borrow funds on a fully collateralized basis over a similar term. | F-15 | | | Table of Contents | | **12. Convertible Preferred Stock** **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. These Series E Convertible Preferred Stock can be converted to common stock based on meeting certain conditions set forth in the document at ten (10) shares of the companys common stock, no par value. In aggregate, between Series E Preferred and Series F Convertible Preferred Stock (Series F Preferred) financings, $1.5 million of the total Series E and F proceeds were received as an advance prior to December 31, 2023. These funds advanced were initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was reclassified as equity, similar to the prior Convertible Preferred issuances. The issuance of the Series E Preferred Stock resulted in an allocation of $0.8 million to the convertible preferred stock and $0.5 million to the warrants described below and classified as Additional Paid-In Capital. Holders of the Series E Preferred will be entitled to receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common stock. Such dividends may be paid in cash or otherwise based on the terms of the agreement. In addition, warrants to purchase 36,140 shares of the Companys common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $15.2 per share or 90% of the variable price based on the ten-day volume weighted average price (VWAP) of the Companys common stock prior to exercise. Accrued dividends of $205,000 and $93,000 were recorded as of December 31, 2025 and 2024, respectively. **Series F Convertible Preferred Stock** In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 70,000 shares of Series F Preferred resulting in gross proceeds of $0.7 million from an unrelated third party. As disclosed above certain of these proceeds were received as an advance prior to December 31, 2023. This investment was initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was classified as equity, similar to the prior Convertible Preferred issuances. These Series F Convertible Preferred Stock can be converted to common stock were issued with respect to this transaction. 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 Companys discretion, based on the terms of the agreement. In addition, warrants to purchase 19,460 shares of the Companys common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $15.2 per share or 90% of the variable price based on the ten-day volume weighted average price (VWAP) of the Companys common stock prior to exercise. Accrued dividends of $110,000 and $50,000 were recorded as of December 31, 2025 and 2024, respectively. | F-16 | | | Table of Contents | | **13. Other Shareholders Equity** **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, Yunhong Green CTI Ltd. agreed to issue 500,000 shares of the Companys common share at a fair value of $6.25 million as consideration. The Company assigned a fair value of $4.05 million to machinery and equipment and $2.2 million represented prepayment to the Selling Parties for the Companys anticipated operational expenses, which the Selling Parties will pay on the Companys behalf. 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. Although the subsidiary was established to expand our international manufacturing operations, commercial production has not commenced as of the date of this report due to tariff conditions and broader macroeconomic factors. The timing and extent of future operations will depend on market conditions and the Companys strategic evaluation of the subsidiarys viability. See Note 2 regarding Companys impairment assessment over the related machinery and equipment acquired from the Asset Purchase Agreement. On December 2, 2025, the Company entered into a Stock Surrender Agreement with the Selling Parties pursuant to which 175,000 shares of common stock were reacquired and immediately canceled. The fair value of the reacquired shares in the amount of $874,000 was recorded as a reduction to common stock and the Company recognized an impairment charge of $1,318,000 to remove the remaining prepaid asset balance. On October 1, 2025, the Company executed a reverse stock split of its shares of common stock at a ratio of 1-for-10. All of the Companys historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect this 1-for-10 reverse stock split**.** **Warrants** As described above, in connection with the Series E and F convertible preferred equity issuances, a total of 55,600 warrants were issued, exercisable for the Companys common stock at the lower of $15.2 per share or 90% of the 10 day VWAP. The Company has applied the Black-Scholes model to value stock-based awards. That model incorporates various assumptions in the valuation of stock-based awards relating to the risk-free rate of interest to be applied, the estimated dividend yield and expected volatility of the Companys Common Stock. The risk-free rate of interest is the U.S. Treasury yield curve for periods within the expected term of the option at the time of grant. The expected volatility is based on historical volatility of the Companys 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 240% - 243%. | | | | | | | - | 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 15.16%. | | | | | | | - | 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 3 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. | | | F-17 | | | Table of Contents | | A summary of the Companys common stock warrant activity is as follows: Schedule of Companys Stock Warrant Activity | | | Shares under Option (warrant) | | | Weighted Average Exercise Price | | | | Balance at December 31, 2024 | | | 55,600 | | | $ | 15.2 | | | | Granted | | | - | | | | - | | | | Cancelled/Expired | | | - | | | | - | | | | Exercised/Issued | | | - | | | | - | | | | Outstanding at December 31, 2025 | | | 55,600 | | | | 15.2 | | | | | | | | | | | | | | | Exercisable at December 31, 2025 | | | 55,600 | | | $ | 15.2 | | | As of December 31, 2025, the Company reserved the following shares of its common stock for the exercise of warrants: Schedule of Reserved Shares of Exercise Warrants | 2025 Common Stock Warrants | | | 55,600 | | | | Shares reserved as of December 31, 2025 | | | 55,600 | | | **Restricted Stock** Effective January 2022, pursuant to the Employment Agreement of former Chief Executive Officer Frank Cesario, the Company granted 25,000 shares of restricted common stock. Of these shares, 2,500 vested immediately, and the remaining 22,500 shares were subject to performance-based vesting conditions and continued employment. During Mr. Cesarios employment, certain performance conditions were achieved, resulting in the vesting of 16,875 additional shares. Accordingly, 19,375 shares in total vested under the award. Mr. Cesario departed the Company in 2024, and the remaining 5,625 unvested shares were forfeited in accordance with the terms of the award agreement. During 2022, the Compensation Committee awarded the Companys then Chief Operating Officer (and current Chief Executive Officer) a grant of 10,000 shares of restricted common stock. Of these shares, 2,000 shares vested during the initial twelve-month period, while the remaining 8,000 shares were subject to performance-based vesting conditions. Based on the achievement of specified performance conditions, 2,000 additional shares vested in 2023 and 4,000 shares vested in 2024, and the remaining 2,000 shares did not vest and were forfeited in 2024. | F-18 | | | Table of Contents | | Upon taking the role of Chief Executive Officer during November 2024, Ms. Schwan was granted restricted stock in the amount of 25,000 shares. 2,500 shares vested immediately, while the remaining 22,500 are subject to performance conditions as further detailed in the share grant. Specifically, the restrictions on the remaining 22,500 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 5,625 shares of the award will lapse and the award will vest when the Companys trailing-twelve-month EBITDA equals or exceeds $0.7 million at any time on or after January 1, 2026. The restrictions on 5,625 shares of the award will lapse and the award will vest in the event the Companys common shares trade at or above $30/share for ten or more consecutive trading days. The restrictions on 5,625 shares of the award will lapse and the award will vest if Ms. Schwan remains an employee of the Company as of January 1, 2027. The restrictions on 5,625 shares of restricted stock lapse upon the Companys successful refinancing of its credit facility. The refinancing was completed on September 30, 2025, at which time the award vested however, the shares have not yet been issued. 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. The Company recognized share-based compensation expense relating to vesting of restricted stock of approximately $25,000 and $160,000 in 2025 and 2024, respectively. As of December 31, 2025 and 2024, respectively, there was $133,000 and $155,000 unrecognized compensation expense related to unvested restricted shares. There were approximately 19,800 performance-based grants for which the underlying performance threshold had not been met as of December 31, 2025. 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 | | | Unvested RSUs, PSUs & RSAs | | | Weighted Average Grant-Date Fair Value | | | | Outstanding at December 31, 2023 | | | 19,750 | | | $ | 21.37 | | | | Granted | | | 25,000 | | | | 6.70 | | | | Vested | | | (14,850 | ) | | | 13.30 | | | | Forfeited | | | (5,625 | ) | | | 12.80 | | | | Outstanding at December 31, 2024 | | | 24,275 | | | $ | 6.40 | | | | Granted | | | - | | | | - | | | | Vested | | | (4,117 | ) | | | 7.90 | | | | Forfeited | | | - | | | | - | | | | Outstanding at December 31, 2025 | | | 20,158 | | | $ | 3.63 | | | **Stock Options** The Compensation Committee (Committee) administers the Companys stock-based plans. The exercise price of the stock options shall be fixed by the Committee at whatever price the Committee may determine in good faith. Unless the Committee determines otherwise, options generally had a 4-year term with a 3-year vesting schedule. Unless the Committee provides otherwise, options terminate upon the termination of a participants employment, except that the participant may exercise an option to the extent it was exercisable on the date of termination and for a period of time after termination. In 2009, the shareholders of the Corporation approved, a 2009 Stock Incentive Plan (2009 Plan). The 2009 Plan and subsequent awards categorized as inducement of employment authorized the issuance of up to 510,000 shares of stock or options to purchase stock of the Company (including cancelled shares reissued under the plan.). On June 8, 2018, our shareholders authorized the issuance of up to 300,000 shares of our common stock in the form of equity-based awards. On June 17, 2022, our shareholders approved of the issuance of 500,000 additional shares to this plan. No registration on Form S-8 was filed for the aforementioned shares, therefore they are not available for issuance in the normal course.. The Company, at the discretion of the board, may issue options in excess of the total available, if options related to that stock plan are cancelled. In some cases, not all shares that are available to a stock plan are issued, as the Company is unable to issue options to a previous plan when a new plan is in place. | F-19 | | | Table of Contents | | **14. Product, Geographic and Segment Information** We manage our business activities as a single segment as our business contains similar products and services managed by the Company, and are economically similar, and share similar types of customers, production and distribution. The company designs, manufactures and distributes ballon products throughout the world. The company also laminates, coats, prints and converts films used for food packaging and other commercial uses and for the conversion of films into flexible packaging containers and other products including balloon-inspired gift products. The customers represent a single market or segment with similar stringent and well-defined requirements. The company makes operating decisions and assesses financial performance only for the Company as a whole and does not make operating decisions or assess financial performance by the end markets which ultimately use the products. Our chief operating decision maker (CODM) is Jana Schwan, CEO. The Companys CODM regularly reviews financial information presented and does not evaluate the Companys operating segment using asset or liability information. Instead, the CODM uses revenue, gross margin, and net income or loss to allocate operating and capital resources and assess performance by comparing actual results to historical results and previously forecasted financial information. There are no significant segment expenses reported to the CODM. Due to the single reportable segment, this financial information is presented on the Statements of Operations and Comprehensive Loss. The following table provides a breakdown of product net sales in each of the years indicated (in thousands): Schedule of Breakdown of Product Net Sales | | | Years Ended | | | | | | December 31, 2025 | | | December 31, 2024 | | | | | | $ | | | % of | | | $ | | | % of | | | | Product Category | | (000) Omitted | | | Net Sales | | | (000) Omitted | | | Net Sales | | | | | | | | | | | | | | | | | | | Foil Balloons | | | 12,764 | | | | 65 | % | | | 11,510 | | | | 64 | % | | | | | | | | | | | | | | | | | | | | | | Film Products | | | 1,129 | | | | 6 | % | | | 847 | | | | 5 | % | | | | | | | | | | | | | | | | | | | | | | Other | | | 5,812 | | | | 29 | % | | | 5,596 | | | | 31 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 19,705 | | | | 100 | % | | | 17,953 | | | | 100 | % | | **15. Contingencies** In the ordinary conduct of our business, we are from time to time subject to lawsuits, investigations and claims, including environmental claims and employee-related matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, including civil penalties or other enforcement actions, we do not believe that any currently pending legal proceeding or proceedings to which we are a party will have a material adverse effect on our business, financial condition or results of operations. **16. 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. **17. Retirement Benefits** The Company maintains a 401(k) employee savings plan in which all salaried employees are eligible to participate. The plan is a tax qualified retirement plan. Under the 401(k) Plan, employees may contribute up to 15% of their eligible compensation to the Plan. Participating employees may direct the investment of individual and company contributions into one or more of the investment options offered by the Plan. The Company has the ability to make matching contributions under the Plan, but none were made during 2025 or 2024. **18. Subsequent Events** On January 19, 2026, the Board of Directors accepted the resignation of Director Philip Wong. Mr. Wong was the Chair of the Audit Committee, was a member of the Compensation Committee and the Nominating and Governance Committee. On January 22, 2026, the Board of Directors elected Iris Chan as an Independent Director and Audit Committee Chair for the vacant term to conclude upon the election of directors during the 2026 Annual Meeting of Shareholders. On February 17, 2026, the Board of Directors accepted the resignation of Mr. Yubao Li as Chairman of the Board of Directors of the Company, effective immediately. The Board has elected Gerald D. Roberts Jr. as Interim Chairman. Mr. Roberts has agreed to serve until a permanent Chairman is selected. | F-20 | |