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EXCHANGE COMMISSION**\n\n**WASHINGTON,\nD.C. 20549**\n\n \n\n \n\n \n\n**FORM\n10-Q**\n\n \n\n**(Mark\nOne)**\n\n \n\n☒\n**QUARTERLY\nREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**\n\n \n\n**For\nthe quarterly period ended March 31, 2026**\n\n \n\n**OR**\n\n \n\n☐\n**TRANSITION\nREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**\n\n \n\n**For\nthe transition period from __________to__________**\n\n \n\n**Commission\nFile Number**\n\n**000-23115**\n\n \n\n**YUNHONG\nGREEN CTI LTD.**\n\n(Exact\nname of registrant as specified in its charter)\n\n \n\nIllinois\n \n36-2848943\n\n(State\nor other jurisdiction of\n \n(I.R.S.\nEmployer\n\nincorporation\nor organization)\n \nIdentification\nNo.)\n\n \n\n22160\nN. Pepper Road\n \n \n\nBarrington,\nIllinois\n \n60010\n\n(Address\nof principal executive offices)\n \n(Zip\nCode)\n\n \n\n(847)382-1000\n\n(Registrant’s\ntelephone number, including area code)\n\n \n\nSecurities\nregistered pursuant to Section 12(b) of the Act:\n\n \n\n**Title\nof each class**\n \n**Trading\nSymbol(s)**\n \n**Name\nof each exchange on which registered**\n\nCommon\nStock, no par value per share\n \nYHGJ\n \nThe\nNasdaq Stock Market LLC\n\n \n \n \n \n(The\nNasdaq Capital Market)\n\n \n\nIndicate\nby check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange\nAct of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2)\nhas been subject to such filing requirements for the past 90 days. Yes ☒ No ☐\n\n \n\nIndicate\nby check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule\n405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant\nwas required to submit such files). Yes ☒ No ☐\n\n \n\nIndicate\nby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting\ncompany or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”\n“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.\n\n \n\nLarge\naccelerated filer\n☐\nAccelerated\nfiler\n☐\n\nNon-accelerated\nfiler\n☒\nSmaller\nreporting company\n☒\n\n \n \nEmerging\ngrowth company\n☐\n\n \n\nIf\nan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying\nwith any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐\n\n \n\nIndicate\nby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes\n☐ No ☒\n\n \n\nThe\nnumber of shares outstanding of the registrant’s common stock, no par value per share, as of May 13, 2026 was 2,609,244 (excluding\ntreasury shares).\n\n \n\n \n\n \n\n   \n\n \n\n \n\n**INDEX**\n\n \n\nPART\nI – FINANCIAL INFORMATION\n \n\n \n \n \n\nItem\nNo. 1.\nFinancial\nStatements\n \n\n \n[Unaudited\nCondensed Consolidated Balance Sheets at March 31, 2026 and December 31, 2025](#aq_001)\n1\n\n \n[Unaudited\nCondensed Consolidated Statements of Income (Loss) for the three months ended March 31, 2026 and 2025](#aq_002)\n2\n\n \n[Unaudited\nCondensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025](#aq_003)\n3\n\n \n[Unaudited\nCondensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2026 and 2025](#aq_004)\n4\n\n \n[Notes\nto Unaudited Condensed Consolidated Financial Statements](#aq_005)\n5\n\nItem\nNo. 2\n[Management’s\nDiscussion and Analysis of Financial Condition and Results of Operations](#aq_006)\n11\n\nItem\nNo. 3\n[Quantitative\nand Qualitative Disclosures Regarding Market Risk](#aq_007)\n14\n\nItem\nNo. 4\n[Controls\nand Procedures](#aq_008)\n14\n\n \n \n \n\n[PART\nII – OTHER INFORMATION](#aq_009)\n \n\n \n \n \n\nItem\nNo. 1\n[Legal\nProceedings](#aq_010)\n16\n\nItem\nNo. 1A\n[Risk\nFactors](#aq_011)\n16\n\nItem\nNo. 2\n[Unregistered\nSales of Equity Securities and Use of Proceeds](#aq_012)\n16\n\nItem\nNo. 3\n[Defaults\nUpon Senior Securities](#aq_013)\n16\n\nItem\nNo. 4\n[Mine\nSafety Disclosures](#aq_014)\n16\n\nItem\nNo. 5\n[Other\nInformation](#aq_015)\n16\n\nItem\nNo. 6\n[Exhibits](#aq_016)\n17\n\n \n[Signatures](#aq_017)\n18\n\n \n[Exhibit 31.1](ex31-1.htm)\n \n\n \n[Exhibit 31.2](ex31-2.htm)\n \n\n \n[Exhibit 32](ex32.htm)\n \n\n \n\n   \n\n[Table of Contents](#toc)\n\n \n\n**Yunhong\nGreen CTI, Ltd**\n\n**Unaudited\nCondensed Consolidated Balance Sheets**\n\n \n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nASSETS \n    \n   \n\nCurrent assets: \n    \n   \n\nCash and cash\nequivalents \n$178,000  \n$97,000 \n\nAccounts receivable, net \n 6,109,000  \n 5,955,000 \n\nInventories \n 8,006,000  \n 8,738,000 \n\nPrepaid\nexpenses \n 238,000  \n 283,000 \n\n  \n    \n   \n\nTotal current assets \n 14,531,000  \n 15,073,000 \n\n  \n    \n   \n\nProperty, plant and equipment: \n    \n   \n\nMachinery and equipment \n 21,993,000  \n 21,993,000 \n\nOffice furniture and equipment \n 2,122,000  \n 2,122,000 \n\nIntellectual property \n 783,000  \n 783,000 \n\nLeasehold improvements \n 39,000  \n 39,000 \n\nFixtures and equipment \n 518,000  \n 518,000 \n\nProjects\nunder construction \n 167,000  \n 140,000 \n\nProperty, plant and equipment gross  \n 25,622,000  \n 25,595,000 \n\nLess:\naccumulated depreciation and amortization \n (21,749,000) \n (21,599,000)\n\n  \n    \n   \n\nTotal property, plant\nand equipment, net \n 3,873,000  \n 3,996,000 \n\n  \n    \n   \n\nOther assets: \n    \n   \n\nOperating lease right-of-use \n 3,242,000  \n 3,393,000 \n\n  \n    \n   \n\nTotal other assets \n 3,242,000  \n 3,393,000 \n\n  \n    \n   \n\nTOTAL\nASSETS \n$21,646,000  \n$22,462,000 \n\n  \n    \n   \n\nLIABILITIES AND SHAREHOLDERS’\nEQUITY \n    \n   \n\nCurrent liabilities: \n    \n   \n\nTrade payables \n$1,782,000  \n$1,677,000 \n\nLine of credit \n 6,708,000  \n 6,822,000 \n\nNotes payable – current\nportion \n 149,000  \n 146,000 \n\nNotes payable related party \n 344,000  \n 344,000 \n\nNotes payable \n 344,000  \n 344,000 \n\nOperating lease liabilities\n– current portion \n 627,000  \n 596,000 \n\nAdvance investor deposit \n 150,000  \n 150,000 \n\nAccrued\nliabilities \n 592,000  \n 950,000 \n\n  \n    \n   \n\nTotal current liabilities \n 10,352,000  \n 10,685,000 \n\n  \n    \n   \n\nLong-term liabilities: \n    \n   \n\nOperating lease liabilities – noncurrent \n 2,704,000  \n 2,873,000 \n\nNotes payable – net of current portion \n 331,000  \n 348,000 \n\n  \n    \n   \n\nTotal\nlong-term liabilities \n 3,035,000  \n 3,221,000 \n\n  \n    \n   \n\nTOTAL\nLIABILITIES \n$13,387,000  \n$13,906,000 \n\n  \n    \n   \n\nSHAREHOLDERS’ EQUITY \n    \n   \n\nSeries E Preferred Stock — no par value,\n130,000 shares authorized, issued and outstanding at March 31, 2026 and December 31, 2025 (liquidation preference of $1,300,000) \n 1,004,000  \n 976,000 \n\nSeries F Preferred Stock — no par value,\n70,000 shares authorized, issued and outstanding at March 31, 2026 and December 31, 2025 (liquidation preference of $700,000) \n 540,000  \n 525,000 \n\nPreferred stock value \n 540,000  \n 525,000 \n\nCommon stock - no par value, 2,000,000,000\nshares authorized, 2,608,705 and 2,601,788 shares issued and 2,604,279 and 2,597,362 shares outstanding at March 31, 2026 and December\n31, 2025, respectively \n 27,891,000  \n 27,891,000 \n\nAdditional paid-in-capital \n 7,712,000  \n 7,711,000 \n\nAccumulated deficit \n (28,727,000) \n (28,386,000)\n\nLess: Treasury stock,\n4,426 shares, at cost \n (161,000) \n (161,000)\n\n  \n    \n   \n\nTOTAL\nSHAREHOLDERS’ EQUITY \n 8,259,000  \n 8,556,000 \n\n  \n    \n   \n\nTOTAL\nLIABILITIES AND SHAREHOLDERS’ EQUITY \n$21,646,000  \n$22,462,000 \n\n \n\nSee\naccompanying notes to condensed consolidated unaudited financial statements.\n\nReflects\na 1-for-10 reverse stock split of the Company’s common stock, effective October 1, 2025\n\n \n\n1 \n\n[Table of Contents](#toc)\n\n \n\n**Yunhong\nGreen CTI, LTD**\n\n**Unaudited\nCondensed Consolidated Statements of Income (Loss)**\n\n \n\n  \n2026  \n2025 \n\n  \n\n**For\nthe Three Months Ended**\n\n**March\n31,**\n \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nNet sales \n$6,154,000  \n$4,802,000 \n\n  \n    \n   \n\nCost of sales \n 5,138,000  \n 3,936,000 \n\n  \n    \n   \n\nGross profit \n 1,016,000  \n 866,000 \n\n  \n    \n   \n\nOperating expenses: \n    \n   \n\nGeneral and administrative \n 924,000  \n 839,000 \n\nSelling \n 37,000  \n 35,000 \n\nAdvertising\nand marketing \n 153,000  \n 170,000 \n\n  \n    \n   \n\nTotal\noperating expenses \n 1,114,000  \n 1,044,000 \n\n  \n    \n   \n\nLoss from operations \n (98,000) \n (178,000)\n\n  \n    \n   \n\nOther (expense) income: \n    \n   \n\nInterest expense \n (242,000) \n (237,000)\n\nOther (expense) / income \n (1,000) \n (1,000)\n\n  \n    \n   \n\nTotal\nother (expense) / income, net \n (243,000) \n (238,000)\n\n  \n    \n   \n\nNet loss \n$(341,000) \n$(416,000)\n\n  \n    \n   \n\nDeemed\ndividends on preferred stock \n$(43,000) \n$(43,000)\n\n  \n    \n   \n\nNet loss attributable to Yunhong Green CTI\nLtd common shareholders \n$(384,000) \n$(459,000)\n\n  \n    \n   \n\nBasic income (loss) per common share \n$(0.15) \n$(0.18)\n\n  \n    \n   \n\nDiluted income (loss) per common share \n$(0.15) \n$(0.18)\n\n  \n    \n   \n\nWeighted average number of shares and equivalent shares of common stock\noutstanding: \n    \n   \n\nBasic \n 2,600,501  \n 2,600,658 \n\n  \n    \n   \n\nDiluted \n 2,600,501  \n 2,600,658 \n\n \n\nSee\naccompanying notes to condensed consolidated unaudited financial statements.\n\nReflects\na 1-for-10 reverse stock split of the Company’s common stock, effective October 1, 2025\n\n \n\n2 \n\n[Table of Contents](#toc)\n\n \n\n**Yunhong\nGreen CTI, Ltd**\n\n**Unaudited\nCondensed Consolidated Statements of Cash Flows**\n\n \n\n  \n2026  \n2025 \n\n  \nFor\nthe Three Months Ended March 31, \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nCash flows from operating activities: \n    \n   \n\nNet loss \n$(341,000) \n$(416,000)\n\nAdjustments to reconcile net loss to net cash\nprovided by operating activities: \n    \n   \n\nDepreciation and amortization \n 150,000  \n 163,000 \n\nEquity compensation charge \n 44,000  \n 9,000 \n\n  \n    \n   \n\nChange in assets and liabilities: \n    \n   \n\nAccounts receivable \n (154,000) \n 772,000 \n\nInventories \n 732,000  \n (175,000)\n\nPrepaid expenses and other\nassets \n 45,000  \n 63,000 \n\nTrade payables \n 105,000  \n 334,000 \n\nOperating leases \n 13,000  \n - \n\nAccrued\nliabilities \n (358,000) \n 220,000 \n\n  \n    \n   \n\nNet\ncash provided by operating activities \n 236,000  \n 970,000 \n\n  \n    \n   \n\nCash flows from investing activities: \n    \n   \n\nPurchases\nof property, plant and equipment \n (27,000) \n (20,000)\n\n  \n    \n   \n\nNet\ncash used in investing activities \n (27,000) \n (20,000)\n\n  \n    \n   \n\nCash flows from financing activities: \n    \n   \n\nRepayment of note payable \n (14,000) \n (21,000)\n\nNet\nadvances (repayments) on revolving line of credit \n (114,000) \n (977,000)\n\n  \n    \n   \n\nNet\ncash used in financing activities \n (128,000) \n (998,000)\n\n  \n    \n   \n\nNet increase (decrease) in cash and cash equivalents \n 81,000  \n (48,000)\n\n  \n    \n   \n\nCash and cash equivalents\nat beginning of period \n 97,000  \n 220,000 \n\n  \n    \n   \n\nCash and cash equivalents\nat end of period \n$178,000  \n$172,000 \n\n  \n    \n   \n\nSupplemental disclosure of cash flow information\nand noncash investing and financing activities: \n    \n   \n\nCash payments for interest \n$242,000  \n$237,000 \n\nAccretion of dividends\non preferred stock \n 43,000  \n 43,000 \n\nCommon stock issued in\nexchange for rent due to Icy Melon \n -  \n 182,000 \n\n \n\nSee\naccompanying notes to condensed consolidated unaudited financial statements.\n\nReflects\na 1-for-10 reverse stock split of the Company’s common stock, effective October 1, 2025\n\n \n\n3 \n\n[Table of Contents](#toc)\n\n \n\n**Yunhong\nGreen CTI, Ltd**\n\n**Unaudited\nCondensed Consolidated Statements of Shareholders’ Equity**\n\n** **\n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \n\nCapital\n  \nEarnings  \nShares  \nAmount  \nTOTAL \n\n  \n\nSeries\nE\n\nPreferred\nStock\n  \n\nSeries\nF\n\nPreferred\nStock\n  \nCommon\nStock  \n\nAdditional\n\nPaid-in\n\n  \n\nAccumulated\n\n(Deficit)\n  \nLess\n\nTreasury Stock  \n  \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \n\nCapital\n  \nEarnings  \nShares  \nAmount  \nTOTAL \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nBalance\nDecember 31, 2025 \n 130,000  \n$976,000  \n 70,000  \n$525,000  \n 2,601,788  \n$27,891,000  \n$7,711,000  \n$(28,386,000) \n (4,426) \n$(161,000) \n$8,556,000 \n\n  \n    \n    \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nSeries E Accrued Deemed Dividend \n -  \n 28,000  \n    \n -  \n -  \n -  \n (28,000) \n -  \n -  \n -  \n - \n\nSeries F Accrued Deemed Dividend \n -  \n -  \n -  \n 15,000  \n -  \n -  \n (15,000) \n -  \n -  \n -  \n - \n\nEquity Compensation Charge \n    \n -  \n -  \n -  \n    \n    \n 6,000  \n -  \n -  \n -  \n 6,000 \n\nStock Issuance - Vesting Milestone \n    \n    \n    \n    \n 6,917  \n    \n 38,000  \n    \n    \n    \n 38,000 \n\nNet Loss \n -  \n -  \n -  \n -  \n -  \n -  \n    \n (341,000) \n -  \n -  \n (341,000)\n\n  \n    \n    \n    \n    \n    \n    \n    \n    \n    \n    \n - \n\nBalance March 31, 2026 \n 130,000  \n$1,004,000  \n 70,000  \n$540,000  \n 2,608,705  \n$27,891,000  \n$7,712,000  \n$(28,727,000) \n (4,426) \n$(161,000) \n$8,259,000 \n\n \n\n**Yunhong\nGreen CTI, Ltd**\n\n**Unaudited\nCondensed Consolidated Statements of Shareholders’ Equity**\n\n \n\n  \n\nSeries\nE\n\nPreferred\nStock\n  \n\nSeries\nF\n\nPreferred\nStock\n  \nCommon\nStock  \n\nAdditional \n\nPaid-in  \n\nAccumulated\n\n(Deficit)\n  \nLess\n\nTreasury Stock  \n  \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \n\nCapital\n  \nEarnings  \nShares  \nAmount  \nTOTAL \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nBalance\nDecember 31, 2024 \n 130,000  \n$864,000  \n 70,000  \n$465,000  \n 2,599,185  \n$27,533,000  \n$7,858,000  \n$(25,856,000) \n (4,426) \n$(161,000) \n$10,703,000 \n\n  \n    \n    \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nSeries E Accrued Deemed Dividend \n -  \n 28,000  \n    \n -  \n -  \n -  \n (28,000) \n -  \n -  \n -  \n - \n\nSeries F Accrued Deemed Dividend \n -  \n -  \n -  \n 15,000  \n -  \n -  \n (15,000) \n -  \n -  \n -  \n - \n\nCommon Stock Issuance for Rent \n    \n -  \n -  \n -  \n 27,604  \n 182,000  \n -  \n -  \n -  \n -  \n 182,000 \n\nEquity Compensation Charge \n -  \n -  \n -  \n -  \n -  \n -  \n 9,000  \n -  \n -  \n -  \n 9,000 \n\nNet Loss \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n (416,000) \n -  \n -  \n (416,000)\n\n  \n    \n    \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nBalance March 31, 2025 \n 130,000  \n$892,000  \n 70,000  \n$480,000  \n 2,626,789  \n$27,715,000  \n$7,824,000  \n$(26,272,000) \n (4,426) \n$(161,000) \n$10,478,000 \n\n \n\nSee\naccompanying notes to condensed consolidated unaudited financial statements.\n\nReflects\na 1-for-10 reverse stock split of the Company’s common stock, effective October 1, 2025\n\n \n\n4 \n\n[Table of Contents](#toc)\n\n \n\nYunhong\nGreen CTI Ltd.\n\nNotes\nto Unaudited Condensed Consolidated Financial Statements\n\n \n\n**Note\n1 - Basis of Presentation and Significant Accounting Policies**\n\n \n\nThe\naccompanying unaudited condensed consolidated interim financial statements have been prepared and, in the opinion of management, contain\nall material adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the consolidated financial\nposition and the consolidated statements of income (loss) and consolidated cash flows for the periods presented in conformity with generally\naccepted accounting principles for interim consolidated financial information and the instructions to Form 10-Q and Article 8 of Regulation\nS-X.\n\n \n\nAccordingly,\nthey do not include all the information and footnotes required by accounting principles generally accepted in the United States of America.\nOperating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the\nfiscal year ending December 31, 2026. It is suggested that these condensed consolidated financial statements be read in conjunction with\nthe consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year\nended December 31, 2025, filed on March 23, 2026, which can be found on the Company’s website (www.ctiindustries.com) or www.sec.gov.\n\n \n\nThe\nfinancial information presented in these financial statements has been rounded to the nearest thousand dollars ($000), which is\nin accordance with our policy to simplify the presentation. The financial information is not presented in thousand-dollar\nincrements.\n\n \n\nAll\nof the Company’s historical share and per share information related to issued and outstanding common stock, outstanding share based\nawards and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect\nthe 1-for-10 reverse stock split approved by the Company’s shareholders on August 22, 2025 and effective October 1, 2025.\n\n \n\n**Principles\nof consolidation and nature of operations:**\n\n \n\nYunhong\nGreen CTI Ltd., its wholly owned subsidiary Yunhong Technology Industry (Hubei) Co., Ltd., and its inactive subsidiary CTI Supply, Inc.\n(collectively, the “Company”) (i) design, manufacture and distribute metalized balloon products throughout the world, (ii)\ndistribute purchased latex balloons products, and (iii) operate systems for the production, lamination, coating and printing of films\nused for food packaging and other commercial uses and for conversion of films to flexible packaging containers and other products.\n\n \n\nThe\ncondensed consolidated financial statements include the accounts of Yunhong Green CTI Ltd., CTI Supply, Inc., and Yunhong Technology\nIndustry (Hubei) Co., Ltd. All intercompany accounts and transactions have been eliminated in consolidation. See Note 2 Form 10-K for\nthe fiscal year ended December 31, 2025.\n\n \n\n**Use\nof estimates:**\n\n \n\nIn\npreparing financial statements in conformity with accounting principles generally accepted in the United States of America, management\nmakes estimates and assumptions that affect the amounts reported of assets and liabilities, disclosure of contingent assets and liabilities\nat the date of the financial statements and the reported amount of revenues and expenses during the reporting period in the financial\nstatements and accompanying notes. Actual results may differ from those estimates. The Company’s significant estimates include\nrecoverability and impairment of long-lived assets, valuation allowances for doubtful accounts, inventory valuation, and valuation of\ndeferred tax assets.\n\n \n\n**Segments:**\n\n \n\nThe\nCompany views its operations and manages its business as one segment, both in terms of geography and operations. All manufacturing\noccurs in the United States. Due to the single reportable segment, this financial information is presented on the Consolidated\nStatements of Income (Loss). There are no significant segment expenses reported to the chief operating decision maker (CODM),\nwhich is the Chief Executive Officer. The Company’s CODM regularly reviews financial information presented and does not\nevaluate the Company’s operating segment using asset or liability information. Instead, the CODM uses revenue, gross margin,\nand net income or loss to allocate operating and capital resources and assess performance by comparing actual results to historical\nresults and previously forecasted financial information.\n\n \n\n5 \n\n[Table of Contents](#toc)\n\n** **\n\n**Earnings\nper share:**\n\n \n\nBasic\n(loss) per share is computed by dividing net loss attributable to common shareholders by the weighted average number of shares of common\nstock outstanding during each period.\n\n \n\nDiluted\n(loss) per share is computed by dividing the net loss attributable to common shareholders by the weighted average number of shares of\ncommon stock and equivalents (stock options and warrants), unless anti-dilutive, during each period. In periods for which there is a\nnet loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents\nwould be antidilutive.\n\n \n\nFor\nboth March 31, 2026 and 2025, shares to be issued upon the exercise of warrants aggregated 55,600. No options were outstanding for the\nthree months ended March 31, 2026 and 2025. The number of shares included in the determination of earnings on a diluted basis for the\nthree months ended March 31, 2026 and 2025 were none, as doing so would have been anti-dilutive.\n\n \n\n**Revenue\nrecognition:**\n\n \n\nNet\nsales include revenues from sales of products and shipping and handling charges, net of estimates for product returns. Revenue is measured\nat the amount of consideration the Company expects to receive in exchange for the transferred products. Revenue is recognized at the\npoint in time when we transfer the promised products to the customer and the customer obtains control over the products. The Company\nrecognizes revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight\nare included in cost of sales, as we have elected the practical expedient included in ASC 606.\n\n \n\nThe\nCompany provides for product returns based on historical return rates. While we incur costs for sales commissions to our sales employees\nand outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than one year\nand we have elected the practical expedient included in ASC 606. We do not incur incremental costs to obtain contracts with our customers.\nOur product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract.\nTherefore, the product warranties are not a separate performance obligation and are accounted for as described herein. Sales taxes assessed\nby governmental authorities are accounted for on a net basis and are excluded from net sales.\n\n \n\n**Note\n2**– **Liquidity and Going Concern**\n\n \n\nThe\nCompany’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”)\napplicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.\nThe Company has a cumulative net loss from inception to March 31, 2026 of approximately $29 million. The accompanying financial statements\nfor the three months ended March 31, 2026 have been prepared assuming the Company will continue as a going concern. The Company’s\ncash resources from operations may be insufficient to meet its anticipated needs during the next twelve months. If the Company does not\nexecute its plan, it may require additional financing to fund its future planned operations.\n\n \n\nThe\nability of the Company to continue as a going concern is dependent on the Company having adequate capital to fund its operating plan\nand performance. Management’s plans to continue as a going concern may include raising additional capital through sales of equity\nsecurities and borrowing, continuing to focus our Company attaining profitable operations, and exploring alternative funding sources\non an as needed basis. However, management cannot provide any assurances that the Company will be successful in accomplishing any of\nits plans. The supply chain challenges, inflationary pressures and tariffs have impacted on the Company’s business operations to\nsome extent and is expected to continue to do so and these impacts may include reduced access to capital. The ability of the Company\nto continue as a going concern may be dependent upon its ability to successfully secure other sources of financing and attain profitable\noperations. There is substantial doubt about the ability of the Company to continue as a going concern for one year from the issuance\nof the accompanying consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments\nthat might be necessary if the Company is unable to continue as a going concern.\n\n \n\nThe\nCompany’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under\na Credit Agreement. The Credit Agreement with Line Financial, as most recently amended in September 2025, includes a revolving credit\nfacility 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\nduring September 2025, to mature April 30, 2027, under substantially similar terms.\n\n \n\n6 \n\n[Table of Contents](#toc)\n\n \n\n**Note\n3 – Debt**\n\n** **\n\n**Senior\nFacilities**\n\n** **\n\nOn\nSeptember 30, 2021 (the “Closing Date”), the Company entered into a loan and security agreement (the “Agreement”)\nwith Line Financial (the “Lender”), which provides for a senior secured financing consisting of a revolving credit facility\n(the “Revolving Credit Facility) in an aggregate principal amount of up to $7 million, as amended (the “Maximum Revolver\nAmount”), subject to borrowing base provisions, and term loan facility (the “Term Loan Facility”) in an aggregate principal\namount of $731,250 (“Term Loan Amount” and, together with the Revolving Credit Facility, the “Senior Facilities”).\nThe Senior Facilities are secured by substantially all assets of the Company. The Company has remained in compliance with all material\ncovenants since inception.\n\n \n\nBorrowings\nunder the Revolving Credit Facility bear interest at the prime rate + 7.82% (14.57% as of March 31, 2026), payable monthly in arrears.\nThe Term Loan Facility bears interest at the prime rate + 1.45% (8.2% as of March 31, 2026) and is repaid in 48 monthly installments\nof approximately $15,000, beginning November 1, 2021. The Company also pays collateral monitoring fees of 4.62% of the eligible accounts\nreceivable, inventory, and equipment supporting both facilities.\n\n \n\nOriginally\nmaturing September 30, 2023, the Senior Facilities were extended to April 30, 2027 pursuant to a Fifth Amendment executed on September\n30, 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\nequal installments in October 2025 and September 2026. A $12,500 commitment fee was also incurred. All other material terms, including\nborrowing base, collateral, and covenants, remained unchanged.\n\n \n\nThe\nfacility automatically renews for successive one-year periods unless either party provides written notice of termination not less than\n90 days prior to the end of the then-current term. The Company may prepay the Term Loan Facility (together with accrued interest and\nany applicable prepayment fee) in whole, but not in part, upon at least 60 days’ prior written notice.\n\n \n\nThe\nAgreement requires the Company to maintain minimum tangible net worth of $4.0 million, subject to adjustment by the Lender. The Company\nwas in compliance with this covenant as of March 31, 2026 and 2025. The Agreement also limits additional indebtedness, liens, dividends,\nmergers, and annual capital expenditures exceeding $1.0 million.\n\nAs\nof March 31, 2026 and December 31, 2025, the term loan balance was approximately $0.5 and $0.5 million, respectively, and the revolving\nbalance was $6.7 million and $6.8 million, respectively. There was $0.3 million remaining available for borrowing under the Revolving\nCredit Facility as of March 31, 2026.\n\n**Notes\npayable, Related Party**\n\n \n\nThe\nCompany 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\nas of December 31, 2023 and an interest rate of 6%. The Company repaid $1 million to Mr. Schwan during January 2024. The parties agreed\nto the payment of the remaining $0.3 million at a future date to be determined. This related party note payable is subordinate to the\nSenior Facilities.\n\n \n\n7 \n\n[Table of Contents](#toc)\n\n** **\n\n**Note\n4 - Shareholders’ Equity**\n\n \n\n**Series\nE Convertible Preferred Stock**\n\n \n\nThe\nCompany’s Articles of Incorporation, as amended, authorized the issuance of 130,000 shares of Series E Convertible Preferred Stock\n(“Series E Preferred”). The Series E Preferred can be converted to common stock based on meeting certain conditions set forth\nin the document at ten (10) shares of the company’s common stock, no par value. Holders of the Series E Preferred will be entitled\nto receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over\ncommon stock. Such dividends may be paid in cash or otherwise based on the terms of the agreement. Accrued dividends of $233,000 and\n$205,000 were recorded as of March 31, 2026 and December 31, 2025, respectively. In addition, warrants to purchase 36,140 shares of the\nCompany’s common stock were issued with respect to this transaction and are equity classified instruments. These warrants are exercisable\nuntil March 2027.\n\n \n\n**Series\nF Convertible Preferred Stock**\n\n \n\nThe\nCompany’s Articles of Incorporation, as amended, authorized the issuance of 70,000 shares of Series F Preferred. The Series F Preferred\ncan be converted to common stock were issued with respect to this transaction. Holders of the Series F Preferred will be entitled to\nreceive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common\nstock. Such dividends may be paid in cash or stock, at the Company’s discretion, based on the terms of the agreement. Accrued dividends\nof $125,000   and $110,000 were recorded as of March 31, 2026 and December 31, 2025, respectively. In addition, warrants to\npurchase 19,460 shares of the Company’s common stock were issued with respect to this transaction and are equity classified instruments.\nThese warrants are exercisable until March 2027.\n\n \n\n**Warrants**\n\n \n\nAs\ndescribed above, in connection with the Series E and F convertible preferred equity issuances, a total of 55,600 warrants were issued,\nexercisable for the Company’s common stock at the lower of $15.2 per share or 90% of the 10 day VWAP.\n\n \n\n8 \n\n[Table of Contents](#toc)\n\n \n\nA\nsummary of the Company’s stock warrant activity is as follows:\n\n Schedule of Company’s Stock Warrant Activity\n\n  \nShares\nunder\nOption (warrant)  \nWeighted\nAverage\nExercise Price \n\nBalance at December 31, 2025 \n 55,600  \n$15.2 \n\nGranted \n -  \n - \n\nCancelled/Expired \n -  \n - \n\nExercised/Issued \n -  \n - \n\nOutstanding at March 31, 2026 \n 55,600  \n 15.2 \n\n  \n    \n   \n\nExercisable at March 31, 2026 \n 55,600  \n$15.2 \n\n \n\nAs\nof March 31, 2026, the Company reserved the following shares of its common stock for the exercise of warrants, and preferred stock:\n\n \n\n Schedule of Reserved Shares For Exercise of Warrants and Preferred Stock\n\n2025 Common\nStock Warrants \n 55,600 \n\nShares reserved as of March 31, 2026 \n 55,600 \n\n \n\nSecurity \n\nPreferred\nShares\n\nAuthorized/\n\nOutstanding\n  \nConversion\nRatio  \n\nCommon\nShares\n\nReserved\n \n\nSeries E Preferred Stock \n 130,000  \n 10:01  \n 1,300,000 \n\nSeries F Preferred\nStock \n 70,000  \n 10:01  \n 700,000 \n\nShares reserved for Preferred Stock as of\nMarch 31, 2026 \n    \n    \n 2,000,000 \n\n** **\n\n**Restricted\nStock Awards**\n\n** **\n\nRestricted\nStock Units, Performance-Based Restricted Stock Units and Restricted Stock Awards:\n\nAggregated\ninformation regarding RSUs, PSUs and RSAs granted under the Plan is summarized below:\n\n Summary of Aggregated Information Regarding RSUs, PSUs and RSAs granted\n\n  \nRSUs,\nPSUs & RSAs  \n\nWeighted\n\nAverage\nGrant-\n\nDate\nFair Value\n \n\nOutstanding, unvested at December\n31, 2025 \n 20,158  \n 3.63 \n\nGranted \n -  \n -  \n\nVested \n (6,804) \n 6.47 \n\nForfeited \n -  \n -  \n\nOutstanding, unvested at March 31, 2026 \n 13,354  \n 2.78 \n\n \n\nDifferences\nbetween amount of vested awards and shares of common stock issued are attributable to timing differences.\n\n \n\n**Note\n5 - Legal Proceedings**\n\n \n\nThe\nCompany may be party to certain lawsuits or claims arising in the normal course of business. The ultimate outcome of these matters is\nunknown but, in the opinion of management, we do not believe any of these proceedings will have, individually or in the aggregate, a\nmaterial adverse effect upon our financial condition, cash flows or future results of operation.\n\n \n\n9 \n\n[Table of Contents](#toc)\n\n \n\n**Note\n6**- **Inventories**\n\n Schedule of Inventories\n\n  \nMarch\n31, 2026  \nDecember 31, 2025 \n\nRaw materials \n$974,000  \n$749,000 \n\nWork in process \n 2,534,000  \n 2,569,000 \n\nFinished goods \n 4,498,000  \n 5,420,000 \n\nTotal inventories \n$8,006,000  \n$8,738,000 \n\n \n\n**Note\n7 - Concentration of Credit Risk**\n\n \n\nConcentration\nof credit risk with respect to trade accounts receivable is generally limited due to the large number of entities comprising the Company’s\ncustomer base. The Company performs ongoing credit evaluations and provides an allowance for potential credit losses against the portion\nof accounts receivable which is estimated to be uncollectible. Such losses have historically been within management’s expectations.\n\n \n\nDuring\nthe three months ended March 31, 2026 and 2025, there were two customers whose purchases represented more than 10% of the Company’s\nconsolidated net sales. Sales to these customers for the three months ended March 31, 2026 and 2025 are as follows:\n\n Schedule of Concentration Risk\n\n  \nThree Months\nEnded  \nThree Months\nEnded \n\n  \nMarch\n31, 2026  \nMarch\n31, 2025 \n\nCustomer \nNet\nSales  \n\n**%\nof Net**\n\n**Sales**\n  \nNet\nSales  \n\n**%\nof Net**\n\n**Sales**\n \n\nCustomer A \n$2,378,000  \n 39% \n$3,091,000  \n 64%\n\nCustomer B \n$2,969,000  \n 48% \n$523,000  \n 11%\n\n \n\nAs\nof March 31, 2026, the outstanding accounts receivable balance from these customers was $6 million.\n\n \n\n**Note\n8 - Related Party Transactions**\n\n \n\nMs.\nJana M. Schwan is the Company’s Chief Executive Officer. Her father, John H. Schwan, held several positions with the Company over\nmany years, most recently as Chairman of the Board until June 2020 as discussed in Note 3, Mr. John H. Schwan was owed approximately\n$0.3 million as of both March 31, 2026 and December 31, 2025, in a note from the Company.\n\n \n\nIcy\nMellon LLC, the landlord of the Company’s Barrington Facility, is a shareholder of the Company. On January 13, 2025, the Company\nissued 27,604 shares of common stock   with an aggregate fair value of approximately $182,000 to settle rent payable that had\nbeen included in accrued expenses as of December 31, 2024. Barrington rent expense totaled approximately $141,000 and $137,000   for\nthe three months ended March 31, 2026, and 2025, respectively. As of March 31, 2026 and December 31, 2025, amounts due to Icy Mellon\nLLC totaled approximately $234,000 and $234,000  . The Company’s Vice President – Strategy and Business Development\nalso serves as a Manager of Icy Mellon LLC.\n\n \n\n**Note\n9 - Leases**\n\n \n\nWe\nentered into lease contracts for certain of our facilities at two locations. Our leases have remaining lease terms of 2 two and five\nyears.\n\n \n\nThe\nweighted average discount rate for our operating leases is 14.05%. We calculated the weighted-average discount rate using incremental\nborrowing rates, which equal the rates of interest that we would pay to borrow funds on a fully collateralized basis over a similar term.\n\n \n\nAt\nMarch 31, 2026, maturities of operating lease liabilities are as follows:\n\n Schedule of Operating Lease Liabilities\n\n  \n   \n\n2026 \n$789,000 \n\n2027 \n 1,083,000 \n\n2028 \n 1,119,000 \n\n2029 \n 627,000 \n\n2030 \n 646,000 \n\nThereafter \n 217,000 \n\nTotal Lease Payments \n 4,481,000 \n\nLess: Imputed interest \n (1,150,000)\n\nTotal Lease Liabilities \n$3,331,000 \n\n \n\n**Note\n10 – Subsequent Events**\n\n \n\nOn\nApril 22, 2026, the Board of Directors of Yunhong Green CTI Ltd. Appointed Fred H. F. Chak, an existing member of the Board, to serve\nas the Chairman of the Board, effective April 27, 2026. Mr. Chak succeeds Gerald D. Roberts Jr., who has served as interim Chairman of\nthe Board since February 17, 2026. Mr. Roberts will continue to serve as a director of the company.\n\n \n\n10 \n\n[Table of Contents](#toc)"}