Business Context and Reporting Period
Company: Yunhong Green CTI Ltd. (Ticker: YHGJ)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: The Company designs, manufactures, and distributes novelty products (primarily foil and latex balloons) and flexible films for commercial packaging. Operations are based in Lake Barrington and Elgin, Illinois. The Company also maintains a wholly-owned subsidiary in Hubei, China, intended for international production, though commercial operations there have not commenced due to tariff and macroeconomic factors.
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Net Sales | $19,705,000 | $17,953,000 |
| Gross Profit | $3,590,000 | $3,601,000 |
| Gross Margin | 18.2% | 20.1% |
| Net Loss | $(2,530,000) | $(1,499,000) |
| Loss Per Share (Basic & Diluted) | $(1.01) | $(0.07) |
| Cash and Cash Equivalents (Year End) | $97,000 | $220,000 |
| Total Debt (Line of Credit + Term Loan) | $7,468,000 | $7,184,000 |
| Working Capital | $4,388,000 | $3,123,000 |
Note: Working Capital calculated as Total Current Assets ($15,073,000) minus Total Current Liabilities ($10,685,000) for 2025.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 10% to $19.7 million, driven by an 11% increase in foil balloon sales (due to new mass retailer assortments) and a 33% increase in film products.
- Operating Expenses: General and administrative expenses surged 45% to $4.9 million. This increase was primarily due to non-cash impairment charges totaling approximately $1.67 million related to the China subsidiary assets and a stock surrender agreement.
- Profitability: Despite revenue growth, the Net Loss widened significantly from $1.5 million to $2.5 million due to the aforementioned impairments and increased operating costs.
- Capital Structure: The Company executed a 1-for-10 reverse stock split in October 2025 to regain compliance with Nasdaq listing rules. The revolving credit facility limit was increased from $6.0 million to $7.0 million.
Guidance, Outlook, Risks, and Unusual Items
Going Concern Warning
The Company has reported a cumulative net loss of approximately $28.4 million since inception and held only $97,000 in cash as of December 31, 2025. Management has expressed substantial doubt about the Company's ability to continue as a going concern for one year from the issuance of the financial statements. Continued operations depend on raising additional capital and executing business plans.
Unusual Items
- China Subsidiary Impairment: Recorded a $351,000 impairment on machinery and equipment in Hubei, China, and a $1.318 million charge related to the cancellation of 175,000 shares in a settlement agreement regarding prepaid assets.
- Settlement Income: Recognized $315,000 in "Other Income" from a settlement with a former service provider.
Key Risks
- Customer Concentration: Two customers accounted for 81% of total revenues in 2025 (41% and 40%). The loss of either would have a material adverse effect.
- Helium Volatility: Fluctuations in helium price and availability directly impact the demand for the Company's primary product line (foil balloons).
- Internal Controls: Management identified material weaknesses in internal control over financial reporting, specifically regarding the application of new accounting standards and equity financing arrangements.
Investor Verification Checklist
- Liquidity Status: Verify the Company's ability to secure additional financing given the "substantial doubt" going concern warning and low cash balance ($97k).
- Customer Dependency: Assess the stability of the top two customers who represent 81% of revenue.
- China Asset Viability: Confirm the status of the Hubei subsidiary; operations are currently deferred, and significant impairment charges have already been taken.
- Debt Covenants: Review the terms of the $7.0 million credit facility (maturing April 2027) and ensure compliance with the minimum tangible net worth covenant ($4.0 million).
- Stock Split Impact: Note that all historical share data has been retroactively adjusted for the 1-for-10 reverse stock split executed in October 2025.