YUNHONG GREEN CTI LTD. Annual Report - How They Did This Year

Hey there! Thinking about YUNHONG GREEN CTI LTD.? Let's break down their past year so you can get a good feel for how they're doing and what it might mean for your investment.

1. What does this company do and how did they perform this year? YUNHONG GREEN CTI LTD. (NASDAQ: YHGJ) is based in Illinois. For over 40 years, they have developed flexible film products. They hold several patents for these products. They develop, produce, distribute, and sell consumer products. Their markets include the United States, Canada, Mexico, Europe, Latin America, and Australia.

   Their main business focuses on Foil Balloons, Film Products, and other related items. In 2025, sales came from:

   • Novelty Products (like foil and latex balloons, and related gift items): 65% of total sales
   • Balloon-inspired gifts and Other Products (like candy bouquets with small balloons): 29% of total sales
   • Flexible Film Products (for commercial and packaging uses): 6% of total sales

   Let's look closer at their products:

   • Foil Balloons: They have designed, produced, and sold foil balloons since 1979. This makes them one of the larger U.S. manufacturers. They offer hundreds of designs, shapes, and sizes. Many feature their own designs, but some use licensed characters. Consumer trends change fast. So, they constantly innovate with new designs and products. They also design most foil balloon shapes and graphics.
   • Latex Balloons: They once made latex balloons through a Mexican subsidiary, which they sold in October 2021. Now, they source latex products from a foreign supplier. They resell these to customers wanting both foil and latex options. These balloons are for novelty, decorative, floral, and party uses.
   • Packaging Films and Custom Film Products: They produce and sell flexible films. These films package many consumer and commercial products, including food and liquids. They offer services like laminating, extrusion coating, adhesive coating, and flexographic printing. They can create customized film products for specific packaging needs.
   • Other Products: This includes their "balloon-inspired gifts" line, started in 2014. These are usually candy presentations with a balloon in a decorative arrangement. They have added related items since then.

   In 2023, they expanded into compostable materials. These materials replace single-use plastics. This was a big change. Shareholders approved adding "Green" to the company name. They also adopted the new trading symbol "YHGJ" in August 2023. This shows a strategic shift to environmentally friendly products.

   They operate two leased facilities in Illinois:

   • Their main facility is 69,000 sq ft in Lake Barrington, northwest of Chicago. It serves as headquarters, production, and warehouse. They sold and leased back this facility in 2021, so they now rent it. The ten-year lease has annual rent increasing from $500,000 to $652,000.
   • They also lease a 69,000 sq ft facility in Elgin for warehouse and assembly. This sublease was extended in 2024. It now runs until December 31, 2028. The annual lease cost will rise to $510,000 in its final year. The company believes these facilities are well-maintained. They have enough capacity for current needs.

   As of December 31, 2025, the company had 52 full-time U.S. employees. This includes 12 in executive/supervisory roles, 2 in sales, 25 in manufacturing/warehouse, and 13 in clerical positions. They do not have a union. They believe employee relationships are good.

   They also have an international presence. They formed a wholly owned subsidiary, Yunhong Technology (Hubei) Co., Ltd., in Hubei Province, China. This supports their international production operations.

2. Financial performance - sales, profit, growth metrics In 2025, 65% of sales were from Novelty products, 29% from Balloon-inspired gifts, and 6% from Flexible Film. They also raised $2 million in 2024 by selling preferred stock.

   As of June 30, 2025, regular investors owned about $10 million worth of common stock. About 2.6 million shares were outstanding as of March 23, 2026. This gives you a sense of the company's size. They are a "Smaller Reporting Company" and "Non-accelerated filer." They track sales from key customers, "Customer One" and "Customer Two," for both 2024 and 2025. They also managed their common stock, preferred stock (Series E and F), additional paid-in capital, retained earnings (past profits kept in the business), and treasury stock from 2023 to 2025.

   The company spent about $200,000 on research and development in both 2024 and 2025. This money develops new products, designs, components, and marketing ideas.

   In June 2024, they bought machinery and equipment for their China subsidiary. They issued 500,000 common shares for this purchase, valued at about $6.25 million then. In December 2025, they bought back and canceled 175,000 shares. This exchanged for giving up rights to about $2.1 million in prepaid assets. This shows they actively manage their stock and assets.

3. Major wins and challenges this year

   • Potential Wins:
     • In 2023, the company made a strategic move. They expanded into compostable materials and changed their name to reflect this "Green" focus. This could open new markets. It may also appeal to environmentally conscious consumers.
     • In March 2024, the company successfully sold Series E and F Preferred Stock. They raised $2 million from outside investors. This cash infusion can fund operations and growth.
     • They also signed an Asset Purchase Agreement in June 2024. This bought machinery and equipment for their China subsidiary. It means they are expanding international production.
     • Their credit facility (a bank loan) was extended again in September 2025. It now runs until April 30, 2027. This provides financial stability. It ensures access to working capital (money for day-to-day operations) for almost two more years. They have also followed its terms since 2021. This shows good financial management and a strong lender relationship.
     • The company also increased its revolving credit line from $6.0 million to $7.0 million. This gives them more borrowing flexibility if needed.
     • They have actively paid down their term loan. Its balance fell from about $0.6 million in late 2024 to $0.5 million in late 2025. This shows progress in reducing debt.
     • A Settlement Agreement in December 2025 involved common stock. This might have resolved a past issue from the China subsidiary asset purchase.
     • They are actively introducing automation in their production lines. This started in 2022 and continues. It helps manage rising labor costs and improves efficiency.
     • They believe they comply with OSHA (worker safety regulations) and environmental rules.
     • Strong Cybersecurity Management: The company has strong cybersecurity measures. These include regular employee training, encrypting critical information, and minimizing personal data collection. Senior leaders directly assess and manage these risks. The Board of Directors, especially the Audit Committee, provides oversight. So far, they have found no major cybersecurity threats or incidents. This shows their proactive approach.
   • Potential Challenges:
     • A big risk is customer concentration. They track sales from "Customer One" and "Customer Two" for 2024 and 2025. They also mention money owed from "Two Customers" at the end of 2025. If a few customers drive most sales, it's risky. If one customer leaves or faces financial trouble, sales could drop significantly.
     • The company operates in highly competitive markets. They must constantly innovate and manage costs to stay ahead.
     • Raw Material Costs: Key raw materials like petroleum/natural gas-based films, resins, printing inks, and bulk candy are a big part of product costs. These costs can fluctuate greatly. They lack long-term supply agreements. This could hurt their profit margins (how much profit they make on each sale).
     • Helium Supply: Helium is crucial for their foil balloons. Its price has fluctuated, and availability was limited at times (e.g., 2018-2019, 2022). Prices fell through 2025. However, future disruptions could hurt foil balloon sales by impacting customer demand.
     • Excess Inventory: Many products are custom-designed or tied to promotions. So, they sometimes have extra inventory. This often means selling it at a discount or disposing of it. This can negatively impact their profit margins.
     • Rising Labor Costs: The company expects rising labor costs in its local U.S. market (near Chicago). This could negatively impact future profits if not managed well. They are addressing this with automation.
     • High Interest Rates: Interest rates on their loans are quite high. Their revolving credit facility charges 14.57%. Their term loan charges 8.2% as of December 31, 2025. These high interest payments reduce profits and funds for investment or operations.
     • Limited Available Credit: They increased their revolving credit line. However, only $0.2 million remained available to borrow as of December 31, 2025. This means they use most of their available credit. It could limit financial flexibility for unexpected needs or growth.
     • Data Security: They have not had past data security issues. However, unauthorized data access could lead to costs, fines, and lost customer trust.
     • Supply Chain Disruptions, Inflation, and Trade Policy: Since 2021, they have faced material shortages, supply chain interruptions, and transport difficulties. This forced them to buy materials at higher prices. Trade policy changes (like tariffs) could also raise costs. They might not pass all increases to customers, hurting profit margins.
     • Public Health Crises: Events like the COVID-19 pandemic have disrupted operations, consumer spending, and supply chains. The pandemic also delayed strategic plans. For example, it delayed selling their Flexo Universal subsidiary (sold Oct 2021) and a planned relocation to Laredo, Texas (canceled). Such events can continue to impact their financial results.

4. Financial health - cash, debt, liquidity YUNHONG GREEN CTI LTD. uses Revolving Credit Facilities and Term Loans (bank loans) to fund operations. These loans use nearly all the company's assets as collateral. This means lenders have a strong claim on property if the company defaults. They have had these agreements since at least 2021. Importantly, they extended their credit facility in September 2025. It now runs until April 30, 2027. They have also followed its terms since it began. This shows responsible debt management.

   Here are some specifics on their loans:

   • Interest Rates: As of December 31, 2025, their Revolving Credit Facility had a high interest rate of 14.57% (prime rate + 7.82%). Their Term Loan Facility had a lower rate of 8.2% (prime rate + 1.45%). These high rates significantly impact their cost of capital (the cost of borrowing money).
   • Loan Balances:
     • Their Term Loan balance decreased from about $0.6 million in late 2024 to $0.5 million in late 2025. They pay this down in monthly $15,000 installments.
     • Their Revolving Credit balance increased from $6.6 million in late 2024 to $6.8 million in late 2025. This shows they used more of their credit line.
   • Available Credit: As of December 31, 2025, only $0.2 million remained available to borrow on their Revolving Credit Facility. This means they use most of their available credit. They have limited immediate liquidity (cash or assets easily turned into cash) from this source.
   • Revolving Commitment Increase: In September 2025, they increased their revolving credit line from $6.0 million to $7.0 million. This gives them more borrowing capacity.
   • Fees: They also pay 4.62% collateral monitoring fees on assets supporting these loans. They incurred a 0.75% renewal fee and a $12,500 commitment fee for the extension.
   • Renewal: The facility automatically renews yearly. This happens unless either party gives 90 days' notice. They can also prepay the Term Loan early.

   Beyond traditional loans and lease obligations, the company actively manages its equity. In March 2024, they sold two types of Preferred Stock, Series E and Series F, to raise cash.

   • Series E Preferred Stock: They raised $1.3 million from this offering. They also issued 36,140 "warrants" (options to buy common stock at a set price) with these shares. These can be used until March 2027. Series E Preferred Stock holders get a quarterly dividend at an 8.5% annual rate on their investment ($10 per share stated value). They also have a "liquidation preference" over common stock. This means if the company sells or goes out of business, these preferred stockholders get paid back first. This is a risk for common shareholders. As of December 31, 2025, $205,000 in accrued dividends (dividends earned but not yet paid) for Series E were owed. This is up from $93,000 in 2024.
   • Series F Preferred Stock: They raised another $0.7 million from an unrelated third party. This also included 19,460 warrants, usable until March 2027. Like Series E, Series F holders get an 8.5% annual quarterly dividend. They also have a liquidation preference over common stock. Accrued dividends for Series F were $110,000 as of December 31, 2025. This is up from $50,000 in 2024. In total, they issued 55,600 warrants (36,140 + 19,460) with these preferred stock offerings. Investors can use these warrants to buy shares at the lower of $15.2 per share or 90% of the average stock price over 10 days. The company uses a financial model (Black-Scholes) to estimate warrant value. They manage these credit lines, lease obligations, and preferred stock commitments well. This shows they actively finance their operations.

5. Key risks that could hurt the stock price

   • Customer Dependence: As mentioned, relying heavily on a few customers is a big risk. If these customers face issues or reduce orders, it could significantly impact YHGJ's sales and profit.
   • Dilution from Preferred Stock and Warrants: The Series E and F Preferred Stock, sold in March 2024, can become common stock. They also issued 55,600 warrants (options to buy common stock at a set price) with these shares. These can be used until March 2027. If preferred shares convert or warrants are used, more common shares become available. This could dilute existing shares. This means your ownership percentage shrinks, and earnings per share (profit per share) might decrease. Also, Series E and F Preferred Stock holders have a "liquidation preference". This means they get paid back before common stockholders if the company sells or goes out of business. This is another risk for common shareholders.
   • High Interest Rates and Debt Costs: The company pays significant interest on its loans. The revolving credit facility charges 14.57%. The term loan charges 8.2% as of December 31, 2025. These high rates reduce profits and funds for investment or operations.
   • Debt Secured by Assets: Their loans use nearly all company assets as collateral. If the company faces severe financial trouble and defaults, lenders get priority claim on most property. This is a significant risk for common shareholders, as little might remain for them.
   • Credit Facility Refinancing: The CEO's restricted stock fully vests if the company "refinances its credit facility." The current facility expires in April 2027. Successfully refinancing this debt is a key financial goal. Failure could create financial instability. This might limit working capital (money for day-to-day operations) and growth.
   • Highly Competitive Markets: The company operates in competitive industries like balloons, novelty, and films. This pressures pricing and market share. Many competitors, such as Anagram International and Pioneer Balloon Company, have greater financial, marketing, and technical resources. They also have broader distribution. This lets them respond faster to changes or invest more than YHGJ.
   • Raw Material Issues: Changes in raw material costs or availability could disrupt production. This includes petroleum/natural gas-based films, resins, printing inks, and bulk candy. Dependence on limited suppliers also poses a risk. These issues could increase costs, hurting profitability (the ability to make a profit). They lack long-term supply agreements. This makes them vulnerable to price swings.
   • Helium Supply and Cost: Helium supply and cost is a specific risk for their foil balloon business. Past issues with limited availability and price spikes could recur. This directly impacts customer buying and sales of their key product line.
   • Excess Inventory: Custom designs and promotional schedules mean they sometimes have extra products. They must sell these at a discount or dispose of them. This can reduce profit margins and lead to inventory write-downs (reducing the value of unsold goods).
   • Changing Consumer Demands/Technology: Consumer tastes change quickly. New technologies could make current products less appealing. This requires constant investment in R&D and product innovation.
   • International Operations/Political Risks: Operating internationally exposes them to risks. These include currency fluctuations, trade policies, and political instability. These can impact supply chain, costs, and sales.
   • Regulatory Compliance: Failure to comply with regulations could lead to fines or disruptions. They believe they comply with OSHA and environmental rules. However, new regulations could emerge, increasing compliance costs.
   • Litigation: Legal disputes could be costly. They might distract management. This impacts financial performance and reputation.
   • Operational Disruptions: Damage to their main plants could halt production. This includes natural disasters or equipment failure. This would lead to lost sales and higher costs.
   • Ability to Service Debt/Invest: Struggling to pay debts or invest in plants/equipment could hinder growth. It could also hurt long-term competitiveness.
   • Supply Chain Disruptions, Inflation, and Trade Policy: Since 2021, ongoing issues like material shortages, transportation, and rising costs (due to inflation or tariffs) could negatively impact sales. This also affects profit margins and overall business performance.
   • Public Health Crises: Future pandemics could again disrupt operations. This includes supply chains and consumer demand. COVID-19 impacted them this way, delaying strategic plans.
   • Rising Labor Costs: Rising wages in their U.S. labor market could squeeze profits. This could happen if not offset by automation or other efficiencies.
   • Data Security Breaches: The company has strong data security measures. These include employee training, encryption, and oversight from leaders and the Board. They have found no major incidents so far. However, unauthorized data access is always a risk. This could lead to financial penalties, legal costs, and reputational damage. Their systems, or partners' systems, could also prove inadequate. This might lead to disruptions or compromised information.

6. Competitive positioning YUNHONG GREEN CTI LTD. believes it is one of the larger U.S. foil balloon manufacturers. They have been in this business since 1979. Their 40+ years of experience in flexible film products gives them an advantage. They own several patents (for films, zipper closures, valves) and nine registered U.S. trademarks (some foreign). They also have proprietary designs for their foil balloons. They leverage advancements in compostable materials from "Yunhong Companies" (controlled by their Chairman, Mr. Yubao Li). This helps them stay competitive and align with sustainable product trends. They focus on their core expertise: film novelty products, specialty films, laminated films, and printed films.

   They sell balloon products through their own sales staff and customer service. They also use distributors, wholesalers, and independent sales representatives. They sell directly to large retail chains like grocery, general merchandise, drug, card/gift, party goods stores, and florists. They promote using catalogs, flyers, and websites. For printed and specialty films, they sell directly and through independent sales reps. They focus on customers needing added value through technology or systems.

   However, their markets are highly competitive. For foil balloons, they face major players like Anagram International and Pioneer Balloon Company. Other manufacturers exist in Europe and China. The global latex balloon market is also very competitive. The film and packaging market is fragmented. This leads to intense quality and price competition. Many competitors have significantly more financial, marketing, and technical resources. They also have broader distribution. This means they can react faster and invest more than YHGJ. To counter rising labor costs and stay competitive, the company has introduced automation in its production lines since 2022.

7. Leadership or strategy changes Leadership has changed. Ms. Jana Schwan became CEO in 2024, after serving as COO since 2020. Mr. Yubao Li has been Chairman of the Board since 2020.

   The company's strategy has several parts:

   1. Focus on growth and profit in core U.S. product lines. This includes foil balloons and related items.
   2. Use advancements in compostable materials from China's "Yunhong Companies." Their Chairman controls these companies. This blends traditional strengths with innovative, green technologies.
   3. Continuously engage in research, design, and innovation. They spend about $200,000 annually on R&D. This develops new products, improves existing ones, and creates new technologies. This is especially true for foil balloons, where consumer trends change fast.
   4. Actively develop new distribution channels and sales relationships. This applies to existing and new products in various countries. They also use resources from the Yunhong China Group for sales and sourcing. This includes forming a China subsidiary to support international production.
   5. Plan to pursue new product lines and extensions through internal development.
   6. Implement automation in production. This manages rising labor costs and improves efficiency.

8. Future outlook The company's future outlook has a dual strategy. They optimize existing core products. They also invest in new, sustainable materials. Their credit facility extension until April 30, 2027, provides financial stability for these plans. They plan Performance Shares and Restricted Stock Units for 2025. These are equity incentives. They align management and employee interests with creating shareholder value (increasing the value of your investment). For example, the CEO's restricted stock vests based on specific targets. These include the company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization, a key measure of operating profit) hitting a target. The stock price must also stay above $3 for a period. Finally, they must successfully refinance their credit facility. These conditions show what management aims to achieve soon. This includes continued innovation in foil balloon designs. It also includes expanding product lines and distribution (via their China subsidiary). They will also continue to implement automation to manage costs.

9. Market trends or regulatory changes affecting them In 2023, the company made a significant move. They incorporated compostable materials and changed their name to "Green." This directly addresses growing market demand for sustainable and environmentally friendly products. These products especially replace single-use plastics. This positions them to capitalize on this important shift. They also note that complying with federal, state, or local regulations is a risk. Regulatory changes could impact operations. This might increase costs or require product/process changes. Fluctuating costs and raw material availability are also significant market trends. This includes petroleum-based products and helium. These directly impact operations and profitability. Since 2021, broader market trends have also impacted them. These include supply chain disruptions, inflationary pressures, and trade policy changes. These have increased costs and created operational challenges. The company also faces increasing regulations. These relate to the integrity and security of personal data. This requires ongoing investment in cybersecurity measures.