UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐	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 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
Barrington, Illinois		60010
(Address of principal executive offices)		(Zip Code)

(847)382-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value per share

CTIB

The Nasdaq Stock Market LLC

(The Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, no par value per share, as of August 1, 2023 was 20,096,755 (excluding treasury shares).

INDEX

PART I – FINANCIAL INFORMATION

Item No. 1.	Financial Statements
	Condensed Consolidated Balance Sheets at June 30, 2023 (unaudited) and December 31, 2022	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2023 and June 30, 2022	2
	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2023 and June 30, 2022	3
	Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the three and six months ended June 30, 2023 and June 30, 2022	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item No. 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item No. 3	Quantitative and Qualitative Disclosures Regarding Market Risk	17
Item No. 4	Controls and Procedures	17

PART II – OTHER INFORMATION

Item No. 1	Legal Proceedings	18
Item No. 1A	Risk Factors	18
Item No. 2	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item No. 3	Defaults Upon Senior Securities	19
Item No. 4	Mine Safety Disclosures	19
Item No. 5	Other Information	19
Item No. 6	Exhibits	19
	Signatures	20
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

Table of Contents

Yunhong CTI, LTD

Condensed Consolidated Balance Sheets

	June 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	100,000		$	146,000
Accounts receivable, net		2,959,000			1,618,000
Inventories, net		7,639,000			8,325,000
Prepaid expenses		436,000			389,000

Total current assets		11,134,000			10,478,000

Property, plant and equipment:
Machinery and equipment		17,723,000			17,723,000
Office furniture and equipment		2,084,000			2,084,000
Intellectual property		783,000			783,000
Leasehold improvements		39,000			39,000
Fixtures and equipment at customer locations		519,000			519,000
Projects under construction		202,000			108,000
Property, plant and equipment, gross		21,350,000			21,256,000
Less : accumulated depreciation and amortization		(20,485,000	)		(20,334,000	)

Total property, plant and equipment, net		865,000			922,000

Other assets:
Operating lease right-of-use		3,628,000			3,882,000

Total other assets		3,628,000			3,882,000

TOTAL ASSETS	$	15,627,000		$	15,282,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	982,000		$	1,313,000
Line of credit		4,288,000			2,878,000
Notes payable - current portion		521,000			289,000
Notes payable – related party, subordinated		1,305,000			-
Notes payable		1,305,000			-
Operating Lease Liabilities		519,000			518,000
Accrued liabilities		1,014,000			2,480,000

Total current liabilities		8,629,000			7,478,000
Long-term liabilities:
Notes payable - noncurrent		-			427,000
Notes payable – related party, subordinated		-			1,267,000
Notes payable		-			1,267,000
Operating Lease Liabilities – noncurrent		3,109,000			3,364,000
Total long-term liabilities		3,109,000			5,058,000

TOTAL LIABILITIES		11,738,000			12,536,000

Equity:
Yunhong CTI, Ltd stockholders’ equity:
Series B Preferred Stock — no par value, 170,000 shares authorized, none and 170,000 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		-			1,851,000
Common Stock – no par value, 50,000,000 shares authorized, 20,140,413 and 16,102,749 shares issued and 20,096,755 and 16,059,991 shares outstanding at June 30, 2023 and December 31, 2022, respectively		21,283,000			21,283,000
Paid-in-capital		6,642,000			3,895,000
Accumulated deficit		(23,875,000	)		(24,122,000	)
Less: Treasury stock, 43,658 shares		(161,000	)		(161,000	)

Total Yunhong CTI, Ltd Stockholders’ Equity		3,889,000			2,746,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	15,627,000		$	15,282,000

See accompanying notes to condensed consolidated unaudited financial statements

Table of Contents

Yunhong CTI, LTD

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

	2023			2022			2023			2022
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022

Net Sales	$	4,059,000		$	4,418,000		$	9,110,000		$	10,215,000

Cost of Sales		3,545,000			3,615,000			7,469,000			8,373,000

Gross profit		514,000			803,000			1,641,000			1,842,000

Operating expenses:
General and administrative		656,000			998,000			1,617,000			1,835,000
Selling		33,000			34,000			65,000			72,000
Advertising and marketing		115,000			77,000			237,000			260,000

Total operating (income) expenses		804,000			1,109,000			1,919,000			2,167,000

Loss from operations		(290,000	)		(306,000	)		(278,000	)		(325,000	)

Other (expense) income:
Interest expense		(155,000	)		(109,000	)		(297,000	)		(205,000	)
Other income/(expense)		296,000			16,000	)		822,000			110,000	)

Total other expense, net		141,000			(93,000	)		525,000			(95,000	)

(Loss) /income from continuing operations before taxes		(149,000	)		(399,000	)		247,000			(420,000	)

Income tax expense		-			-			-			-

Income (Loss) from continuing operations		(149,000	)		(399,000	)		247,000			(420,000	)

Less: Net income attributable to noncontrolling interest		-			-			-			-

Net (loss) / income attributable to Yunhong CTI, Ltd	$	(149,000	)	$	(399,000		$	247,000		$	(420,000

Other Comprehensive Income (Loss)
Foreign currency adjustment		-			-			-			-
Comprehensive (loss) / income	$	(149,000	)	$	(399,000		$	247,000		$	(420,000

Deemed Dividends on preferred stock and amortization of beneficial conversion feature	$	-		$	(202,000	)	$	(11,000	)	$	(404,000	)

Net (Loss) / income attributable to Yunhong CTI Ltd common Shareholders	$	(149,000	)	$	(601,000	)	$	236,000		$	(824,000	)

Basic (loss) / income per common share
Continuing operations	$	(0.01	)	$	(0.10	)	$	0.01		$	(0.14	)
Discontinued operations		-			-			-			-
Basic (loss) / income per common share	$	(0.01	)	$	(0.10	)	$	0.01		$	(0.14	)

Diluted (loss) / income per common share
Continuing operations	$	(0.01	)	$	(0.10	)	$	0.01		$	(0.14	)
Discontinued operations		-			-			-			-
Diluted (loss) / income per common share	$	(0.01	)	$	(0.10	)	$	0.01		$	(0.14	)

Weighted average number of shares and equivalent shares of common stock outstanding:

SEC Form 10-Q filed by Yunhong CTI Ltd.