PART I – FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the nine months ended September 30, 2021, show a net income turnaround driven by asset sales, despite ongoing going concern doubts Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Total current assets | $19,766 | $19,151 | +$615 | | Total property, plant and equipment, net | $1,268 | $1,950 | -$682 | | Total Assets | $24,882 | $21,551 | +$3,331 | | **Liabilities & Equity** | | | | | Total current liabilities | $16,694 | $18,787 | -$2,093 | | Total Liabilities | $19,586 | $18,831 | +$755 | | Total Shareholders' Equity | $5,297 | $1,187 | +$4,110 | Performance Summary for the Three Months Ended September 30 | Metric | 2021 (in $) | 2020 (in $) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $6,234,231 | $5,980,766 | +4.2% | | Gross Profit | $574,831 | $260,942 | +120.3% | | Income (Loss) from Operations | ($590,824) | ($907,472) | +34.9% | | Net Income (Loss) | ($638,138) | ($1,028,632) | +38.0% | | Basic Loss Per Share | ($0.14) | ($0.21) | +33.3% | Performance Summary for the Nine Months Ended September 30 | Metric | 2021 (in $) | 2020 (in $) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $19,975,640 | $18,793,620 | +6.3% | | Gross Profit | $2,533,841 | $2,352,096 | +7.7% | | Income (Loss) from Operations | $2,100,819 | ($1,239,441) | N/A (Turned to profit) | | Net Income (Loss) | $1,465,091 | ($2,981,947) | N/A (Turned to profit) | | Basic Loss Per Share | ($0.20) | ($1.32) | +84.8% | - The significant improvement in income from operations for the nine-month period was primarily due to a **$3.36 million** gain on the sale of assets[9](index=9&type=chunk) Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($2,939) | $995 | | Net cash provided by (used in) investing activities | $3,401 | ($140) | | Net cash used in financing activities | ($650) | ($2,237) | - Cash from investing activities was positive in 2021 due to **$3.5 million** received from the sale of a building, which was a key source of liquidity[11](index=11&type=chunk) - Cash used in operating activities in 2021 was primarily driven by a gain on the sale of the building, an increase in inventories, and a decrease in trade payables, contrasting with cash provided by operations in 2020[11](index=11&type=chunk) Notes to Condensed Consolidated Financial Statements - The company has exited the business of its CTI Europe subsidiary, which was fully disposed of in Q2 2021 and is classified as a discontinued operation[18](index=18&type=chunk)[29](index=29&type=chunk) - Management has expressed substantial doubt about the company's ability to continue as a **going concern** due to a cumulative net loss of over **$13 million** and dependence on raising additional capital[35](index=35&type=chunk)[36](index=36&type=chunk) - On September 30, 2021, the company entered into a new senior secured financing agreement with Line Financial Corp., including a **$6 million** revolving credit facility and a **$731,250** term loan, to repay its previous debt with PNC Bank[46](index=46&type=chunk) - In April 2021, the company sold its Lake Barrington, Illinois facility for **$3.5 million** and entered into a ten-year leaseback agreement for the same property[39](index=39&type=chunk)[83](index=83&type=chunk) - Subsequent to the quarter end, on October 28, 2021, the company closed the transaction to redeem all of its equity interests in its Mexican subsidiary, Flexo Universal S. de R.L. de C.V., for a purchase price of **$500,000**[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales increased for Q3 and the nine-month period, driven by asset sales, with liquidity concerns addressed by new financing and divestitures Net Sales by Product Category (in thousands) | Product Category | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Foil Balloons | $4,295 | $4,515 | $13,900 | $12,380 | | Latex Balloons | $1,052 | $1,014 | $2,359 | $3,712 | | Film Products | $689 | $78 | $1,639 | $664 | | Other | $198 | $374 | $2,078 | $2,038 | | **Total** | **$6,234** | **$5,981** | **$19,975** | **$18,794** | - Latex balloon revenues were negatively impacted by COVID-19 constraints, as production activities were severely limited by the Mexican government[98](index=98&type=chunk) - A gain of **$3,357,000** was recognized in Q2 2021 from the sale of the company's facility in Lake Barrington, Illinois[105](index=105&type=chunk) - The company has a high concentration of sales, with its top 3 customers accounting for **71%** of sales in the first nine months of 2021[103](index=103&type=chunk) - Management's plans to address **going concern** issues include raising additional capital, focusing on profitable elements, and exploring alternative funding. The company secured a new credit facility with Line Financial for up to **$6.7 million** and sold its Mexican subsidiary post-quarter end[90](index=90&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) [Quantitative and Qualitative Disclosures Regarding Market Risk](index=31&type=page&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20Regarding%20Market%20Risk) The company has indicated that this section is not applicable for this reporting period - No quantitative or qualitative disclosures regarding market risk were provided[120](index=120&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to material weaknesses, including insufficient accounting professionals and over-reliance on the CFO - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2021[122](index=122&type=chunk) - Management identified material weaknesses in internal control over financial reporting, leading to the conclusion that internal controls were not effective[127](index=127&type=chunk) - Specific material weaknesses include: a lack of sufficient accounting professionals with knowledge to account for significant, unusual transactions, and over-dependence on the CFO in a highly manual environment[135](index=135&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company settled several legal cases while a significant claim seeking over **$500,000** in damages remains pending with an uncertain outcome - Settled a case with Transportation Solutions Group LLC for **$65,000**, to be paid in installments[129](index=129&type=chunk) - Settled an arbitration with Jules and Associates, Inc. for **$90,000**, to be paid in installments[130](index=130&type=chunk) - Settled a claim with Airgas USA, LLC for **$125,000**, to be paid over 10 months[131](index=131&type=chunk) - A case filed by Benchmark Investments, Inc. seeking over **$500,000** in damages is still pending. The company has filed a counterclaim and cannot currently estimate potential loss[132](index=132&type=chunk) [Risk Factors](index=32&type=page&id=Item%201A.%20Risk%20Factors) The company has indicated that this section is not applicable for this reporting period - No risk factors were provided in this section[133](index=133&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=page&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has indicated that this section is not applicable for this reporting period - No information on unregistered sales of equity securities was provided[134](index=134&type=chunk) [Defaults Upon Senior Securities](index=33&type=page&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company has indicated that this section is not applicable for this reporting period - No defaults upon senior securities were reported[136](index=136&type=chunk) [Mine Safety Disclosures](index=34&type=page&id=Item%204.%20Mine%20Safety%20Disclosures) The company has indicated that this section is not applicable for this reporting period - No mine safety disclosures were provided[137](index=137&type=chunk) [Other Information](index=34&type=page&id=Item%205.%20Other%20Information) The company reported no other information for this period - No other information was disclosed[138](index=138&type=chunk) [Exhibits](index=35&type=page&id=Item%206.%20Exhibits) The report includes certifications from the Chief Executive Officer and Chief Financial Officer as required by the Securities Exchange Act and the Sarbanes-Oxley Act - Filed exhibits include CEO and CFO certifications pursuant to Rule 13a-14(a) and 18 U.S.C. 1350 (Sarbanes-Oxley Act)[139](index=139&type=chunk)

Table of Contents 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, 2021 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 CTI LTD. (Exact name of registrant as specified in its charter) Illinois 36-2 ...

Table of Contents ☐ 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. 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 March 31, 2021 OR Barrington, Illinois 60010 (Address of principal execu ...

Table of Contents 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, 2020 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 CTI LTD. (Exact name of registrant as specified in its charter) incorporation or or ...

Table of Contents 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 September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Illinois 36-2848943 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 22160 N. Pepper Road Barrington, Illinois 600 ...

For the transition period from _________to_________ 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, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 000-23115 YUNHONG CTI LTD. (Exact name of registrant as specified in its charter) Illinois 36-2848943 (State or o ...

Table of Contents 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 March 31, 2020 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 CTI LTD. (Exact name of registrant as specified in its charter) ...

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) YUNHONG CTI LTD. manufactures and sells flexible film-based consumer products, strategically refocusing on its core U.S. foil balloon business by divesting international operations and discontinuing product lines 2019 Revenue Breakdown by Product Line | Product Line | Percentage of 2019 Revenues | | :--- | :--- | | Novelty Products | 61% | | Vacuum Sealing Containers and Devices | 20% | | Flexible Film Products | 5% | | Other Products | 14% | - The company is strategically focusing on its **core foil balloon products** in the U.S. market. This involves divesting or liquidating subsidiaries in the UK and Europe and attempting to sell its Mexican subsidiary[29](index=29&type=chunk) - The vacuum sealing container and device product line, which was marketed under the Ziploc® brand through a license that expired on December 31, 2019, was **discontinued** in the first quarter of 2020[16](index=16&type=chunk)[35](index=35&type=chunk) - The company faces **significant competition** from several established manufacturers in the balloon and novelty industry, including Anagram International and Pioneer Balloon Company[68](index=68&type=chunk)[73](index=73&type=chunk) - Fluctuations in the cost and availability of raw materials, such as petroleum-based films and helium, **materially affect profitability**. **Helium supply declined and costs increased** during 2018 and 2019, adversely affecting foil balloon sales[66](index=66&type=chunk)[67](index=67&type=chunk) [International Operations](index=17&type=section&id=Item%201.%20Business%20-%20International%20Operations) The company is significantly scaling back international operations, liquidating UK and German subsidiaries, and maintaining its Mexican subsidiary, to refocus on North American markets - The UK subsidiary, CTI Balloons, was **shut down and liquidated** in 2019 and is reported as a **discontinued operation**[84](index=84&type=chunk) - The German subsidiary, CTI Europe, is **planned for liquidation** in the first half of 2020 and is also reported as a **discontinued operation**[84](index=84&type=chunk) Net Sales and Total Assets by Geographic Area (Continuing Operations, in USD) | Geographic Area | Net Sales 2019 | Net Sales 2018 | Total Assets 2019 | Total Assets 2018 | | :--- | :--- | :--- | :--- | :--- | | United States | $32,019,000 | $40,553,000 | $19,668,000 | $25,613,000 | | Mexico | $8,518,000 | $8,868,000 | $10,897,000 | $9,476,000 | | **Total** | **$40,537,000** | **$49,421,000** | **$31,321,000** | **$38,761,000** | [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company identifies the COVID-19 pandemic as a significant risk, potentially disrupting operations, sales, and supply chains, with uncertain duration and severity - The spread of COVID-19 is identified as a **significant risk** that could **disrupt operations, negatively impact sales, and affect the supply chain** for products and raw materials[87](index=87&type=chunk) [Item 1B. Unresolved Staff Comments](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved comments from the Securities and Exchange Commission staff as of the Form 10-K filing date - The company had **no unresolved comments** from the SEC staff at the time of filing[88](index=88&type=chunk) [Item 2. Properties](index=18&type=section&id=Item%202.%20Properties) The company owns its principal plant in Illinois, leases a warehouse planned for relocation to Texas, and its Mexican subsidiary leases a facility in Guadalajara - Owns its principal **68,000 sq. ft. facility** in Lake Barrington, Illinois[89](index=89&type=chunk) - Leases a **118,000 sq. ft. facility** in Lake Zurich, IL, which is expected to be vacated and relocated to Laredo, TX during 2020[92](index=92&type=chunk) - The Mexican subsidiary, Flexo Universal, leases a **73,000 sq. ft. facility** in Guadalajara, Mexico[93](index=93&type=chunk) [Item 3. Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) Management believes ongoing legal proceedings arising from normal business operations will not materially adversely affect the company's financial condition or results - Management believes that ongoing legal proceedings arising from the normal course of business will not have a **material adverse effect** on the company's financial condition or results[96](index=96&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=21&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ, experiencing significant volatility, and the company has not paid or planned cash dividends due to loan restrictions Quarterly Stock Price (2019, in USD) | Quarter | High ($) | Low ($) | | :--- | :--- | :--- | | Q1 2019 | 3.69 | 2.78 | | Q2 2019 | 3.62 | 2.66 | | Q3 2019 | 3.32 | 1.75 | | Q4 2019 | 2.18 | 0.40 | - The company **did not pay cash dividends** in 2018 or 2019 and has **no plans to do so** in the foreseeable future. Loan agreements also **limit the ability to pay dividends**[100](index=100&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company experienced a significant financial decline in 2019, with an 18% decrease in net sales and a net loss, driven by strategic shifts, covenant non-compliance, and liquidity concerns addressed by new equity financing - The company is **exiting foreign operations** in the UK and Germany to focus on its domestic foil balloon business and is **relocating a warehouse** to Texas to improve its cost structure[106](index=106&type=chunk) - In January 2020, the company secured new equity financing of up to **$7 million** through the sale of Series A Convertible Preferred Stock, primarily to LF International Pte. Ltd., which may result in a change of control[107](index=107&type=chunk) - The company has **significant customer concentration**, with its top two customers, Wal-Mart and Dollar Tree Stores, accounting for **27% and 28% of net revenues** in 2019, respectively[114](index=114&type=chunk) - The company was **not in compliance** with its PNC credit facility covenants, resulting in **multiple forbearance agreements**. This condition is temporary, and failure to maintain compliance could **impact liquidity and the ability to continue as a going concern**[133](index=133&type=chunk)[142](index=142&type=chunk) [Year Ended December 31, 2019 Compared to Year Ended December 31, 2018](index=24&type=section&id=Item%207.%20MD%26A%20-%20Year%20Ended%20December%2031%2C%202019%20Compared%20to%20Year%20Ended%20December%2031%2C%202018) Consolidated net sales from continuing operations decreased by **18%** in 2019 to **$40.5 million**, primarily due to a **17%** drop in foil balloon sales, despite reduced operating expenses and a foreign currency gain Net Sales from Continuing Operations by Product (2019 vs 2018, in thousands USD) | Product Category | 2019 Sales (in thousands) | 2018 Sales (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Foil Balloons | $17,653 | $21,193 | -17% | | Latex Balloons | $7,409 | $7,862 | -6% | | Vacuum Sealing Products | $8,242 | $8,820 | -7% | | Film Products | $1,883 | $2,006 | -6% | | **Total Net Sales** | **$40,537** | **$49,421** | **-18%** | - General and administrative expenses decreased from **$6.1 million** in 2018 to **$5.4 million** in 2019, reflecting cost reductions in personnel and outside services[124](index=124&type=chunk) - Selling expenses saw a significant decrease from **$3.2 million** in 2018 to **$1.1 million** in 2019, primarily due to reduced consulting services and lower commission expenses[125](index=125&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=26&type=section&id=Item%207.%20MD%26A%20-%20Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) The company's liquidity was strained in 2019 due to covenant defaults and declining equity, despite improved operating cash flow, with new equity financing in 2020 expected to address working capital needs - Cash provided by operating activities was **$3,263,000** in 2019, compared to cash used of **$1,228,000** in 2018. This was primarily driven by a **$4.5 million decrease** in inventories[129](index=129&type=chunk)[132](index=132&type=chunk) - The company **failed to meet financial covenants** under its PNC Revolving Credit Facility, leading to a series of waivers and forbearance agreements. As forbearance is temporary, long-term bank debt was **reclassified to current liabilities**[133](index=133&type=chunk)[137](index=137&type=chunk) - Working capital (current assets minus current liabilities) decreased from **$2.8 million** at year-end 2018 to just **$100,000** at year-end 2019[142](index=142&type=chunk) - Stockholders' equity decreased from **$7,328,000** at the end of 2018 to **$1,983,000** at the end of 2019[144](index=144&type=chunk) [Critical Accounting Policies](index=29&type=section&id=Item%207.%20MD%26A%20-%20Critical%20Accounting%20Policies) Key accounting policies involve significant judgment, leading to goodwill impairment charges and a full valuation allowance against deferred tax assets in 2019, alongside the deconsolidation of certain Variable Interest Entities - The company fully impaired the goodwill related to its Clever and Flexo reporting units in the first quarter of 2019, recording impairment charges of **$220,000** and approximately **$1 million**, respectively[156](index=156&type=chunk) - Effective July 1, 2019, the company **deconsolidated** its Variable Interest Entities (Clever and VL) as it determined it was no longer the primary beneficiary, recognizing a **gain of $219,000** on the transaction[128](index=128&type=chunk)[167](index=167&type=chunk) - A **valuation allowance** was established for substantially all deferred tax assets due to non-compliance with credit facility terms and operating losses. The net deferred tax asset was **reduced from $135,000 in 2018 to $0** in 2019[163](index=163&type=chunk) [Item 9A. Controls and Procedures](index=33&type=section&id=Item%209A.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were ineffective as of December 31, 2019, due to material weaknesses in accounting expertise and over-reliance on key personnel, leading to restated interim financial statements - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2019[173](index=173&type=chunk) - Two **material weaknesses** were identified: a lack of sufficient accounting professionals with appropriate knowledge for unusual transactions, and over-dependence on the CFO and Controller in a highly manual system[177](index=177&type=chunk)[179](index=179&type=chunk) - The material weaknesses resulted in the **restatement** of the quarterly consolidated financial statements for the interim periods of 2019[171](index=171&type=chunk)[179](index=179&type=chunk) Part III [Items 10-14. Directors, Executive Officers, Compensation, Security Ownership, and Related Transactions](index=35&type=section&id=Items%2010-14) Information for Items 10 through 14, covering directors, executive compensation, security ownership, and related transactions, is incorporated by reference from the company's separately filed 2020 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the company's 2020 Proxy Statement[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=35&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules filed with the Form 10-K, including consolidated financial statements, notes, and key agreements like credit and forbearance arrangements - This item lists the **consolidated financial statements**, **financial statement schedules**, and **all exhibits** filed with the annual report[188](index=188&type=chunk)[189](index=189&type=chunk) - Key exhibits include the **Revolving Credit, Term Loan, and Security Agreement** with PNC Bank and its subsequent **amendments and forbearance agreements**, detailing the company's critical financing arrangements[192](index=192&type=chunk)[193](index=193&type=chunk)[196](index=196&type=chunk) Financial Statements and Notes [Report of Independent Registered Public Accounting Firm](index=41&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor's report expresses a fair presentation opinion but highlights substantial doubt about the company's going concern ability due to net losses and liquidity issues, also noting a change in lease accounting - The auditor's report includes a **'going concern' paragraph**, indicating **substantial doubt** about the company's ability to continue due to net losses and liquidity limitations[205](index=205&type=chunk)[213](index=213&type=chunk) - The company changed its method of accounting for leases in 2019 with the adoption of **ASU No. 2016-02 (Topic 842)**[206](index=206&type=chunk) [Consolidated Financial Statements](index=43&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for 2019 reveal significant financial deterioration, with an **18% decrease in net sales**, an **$8.1 million net loss**, and substantial declines in total assets and equity Consolidated Statement of Comprehensive Income Highlights (in USD) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Sales | $40,537,030 | $49,421,411 | | Gross Profit | $6,321,144 | $10,040,006 | | Loss from Operations | ($2,005,876) | ($642,521) | | Net Loss | ($8,074,448) | ($3,738,724) | | Basic & Diluted Loss Per Share | ($2.10) | ($1.00) | Consolidated Balance Sheet Highlights (in USD) | Metric | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $27,624,716 | $33,010,734 | | Total Assets | $31,321,086 | $38,760,834 | | Total Current Liabilities | $27,524,405 | $30,208,712 | | Total Liabilities | $30,194,576 | $32,505,105 | | Total Stockholders' Equity | $1,126,507 | $6,255,729 | [Note 3 – Liquidity and Going Concern](index=55&type=section&id=Note%203%20%E2%80%93%20Liquidity%20and%20Going%20Concern) This note details substantial doubt about the company's going concern ability due to recurring net losses, credit covenant violations, and liquidity challenges, with mitigation plans centered on new equity financing and strategic focus - The company's history of net losses, including **$3.6 million** in 2018 and **$6.7 million** in 2019, contributes to the **substantial doubt** about its ability to continue as a going concern[261](index=261&type=chunk) - The company was in **violation of its credit agreement** with PNC Bank and operated under forbearance agreements. Because the solution is temporary, the company remains out of compliance[258](index=258&type=chunk)[259](index=259&type=chunk) - Management's mitigation plan relies on a new equity financing arrangement from January 2020, where LF International Pte. purchased **$5 million** of convertible preferred stock, providing crucial liquidity[260](index=260&type=chunk) [Note 22. Discontinued Operations](index=74&type=section&id=Note%2022.%20Discontinued%20Operations) The company classified its UK and German subsidiaries as discontinued operations in July 2019 to refocus on North America, resulting in a **$3.2 million net loss** from these operations in 2019 - The company has classified its UK (CTI Balloons) and German (CTI Europe) subsidiaries as **discontinued operations** as of July 2019 to focus on its core North American business[347](index=347&type=chunk) Summarized Financials for Discontinued Operations (2019, in USD) | Metric | 2019 | | :--- | :--- | | Net Sales | $4,952,896 | | Gross Margin | ($926,403) | | Total pretax loss | ($2,609,053) | | Loss from classification to held for sale | ($604,483) | | Net loss from discontinued operations | ($3,213,536) | [Note 24. Subsequent Events](index=77&type=section&id=Note%2024.%20Subsequent%20Events) Subsequent to year-end, the company secured critical equity financing of up to **$5 million** through the sale of Series A Convertible Preferred Stock to LF International Pte. Ltd., providing significant capital infusion - On January 3, 2020, the company entered into a stock purchase agreement with LF International Pte. Ltd. for the sale of up to **$5 million** in Series A Convertible Preferred Stock[355](index=355&type=chunk) - The financing closed in multiple tranches between January and April 2020, providing aggregate gross proceeds of over **$4.5 million** from the primary investor, plus additional amounts from other investors[355](index=355&type=chunk)[356](index=356&type=chunk)[358](index=358&type=chunk) - As an inducement for accelerated funding, the company issued a total of **400,000 shares** of common stock to the investor in February and April 2020[356](index=356&type=chunk)[358](index=358&type=chunk)

Table of Contents 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 September 30, 2019 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 CTI INDUSTRIES CORPORATION (Exact name of Registrant as specified in its charter ...

Table of Contents 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, 2019 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 CTI INDUSTRIES CORPORATION (Exact name of Registrant as specified in its charter) inc ...