Other Shareholders’ Equity

12 Months Ended

Dec. 31, 2025

13. Other Shareholders’ Equity

Common Stock

As of June 30, 2024, our wholly owned subsidiary, Yunhong Technology Industry (Hubei) Co,. Ltd., acquired certain assets of Yunhong Environmental Protection Technology Co., Ltd. and Yunhong China Group (together the “Selling Parties”) pursuant to an Asset Purchase Agreement. The Selling Parties are affiliated entities of certain stockholders of the Company. In accordance with the terms and conditions of the Asset Purchase Agreement, Yunhong Green CTI Ltd. agreed to issue 500,000 shares of the Company’s common share at a fair value of $6.25 million as consideration. The Company assigned a fair value of $4.05 million to machinery and equipment and $2.2 million represented prepayment to the Selling Parties for the Company’s anticipated operational expenses, which the Selling Parties will pay on the Company’s behalf. No other assets or liabilities were transferred as part of this transaction. The Asset Purchase Agreement was evaluated under the guidance in ASC 805, Business Combinations and management determined this does not constitute the acquisition of a business. As a result, this transaction was treated as an asset purchase.

Although the subsidiary was established to expand our international manufacturing operations, commercial production has not commenced as of the date of this report due to tariff conditions and broader macroeconomic factors. The timing and extent of future operations will depend on market conditions and the Company’s strategic evaluation of the subsidiary’s viability. See Note 2 regarding Company’s impairment assessment over the related machinery and equipment acquired from the Asset Purchase Agreement.

On December 2, 2025, the Company entered into a Stock Surrender Agreement with the Selling Parties pursuant to which 175,000 shares of common stock were reacquired and immediately canceled. The fair value of the reacquired shares in the amount of $874,000 was recorded as a reduction to common stock and the Company recognized an impairment charge of $1,318,000 to remove the remaining prepaid asset balance.

On October 1, 2025, the Company executed a reverse stock split of its shares of common stock at a ratio of 1-for-10. All of the Company’s historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect this 1-for-10 reverse stock split.

Warrants

As described above, in connection with the Series E and F convertible preferred equity issuances, a total of 55,600 warrants were issued, exercisable for the Company’s common stock at the lower of $15.2 per share or 90% of the 10 day VWAP.

The Company has applied the Black-Scholes model to value stock-based awards. That model incorporates various assumptions in the valuation of stock-based awards relating to the risk-free rate of interest to be applied, the estimated dividend yield and expected volatility of the Company’s Common Stock. The risk-free rate of interest is the U.S. Treasury yield curve for periods within the expected term of the option at the time of grant. The expected volatility is based on historical volatility of the Company’s Common Stock.

The valuation assumptions we have applied to determine the fair value of warrants issued in 2024 were as follows:

-	Historical stock price volatility: The Company used the weekly closing price to calculate historical annual volatility which was a range from 240% - 243%.

-	Risk-free interest rate: The Company bases the risk-free interest rate on the rate payable on US treasury securities with a similar maturity in effect at the time of the grant, which was 15.16%.

-	Expected life: The expected life of the warrants represents the period of time warrants were expected to be outstanding. The Company used an expected life of 3 years which is consistent with the contractual term.

-	Dividend yield: The estimate for dividend yield is 0%, as the Company did not issue dividends during 2020 through 2024 and does not expect to do so in the foreseeable future.

-	Estimated forfeitures: When estimating forfeitures, the Company considers historical terminations as well as anticipated retirements.

A summary of the Company’s common stock warrant activity is as follows:

	Shares under Option (warrant)		Weighted Average Exercise Price
Balance at December 31, 2024		55,600	$	15.2
Granted		-		-
Cancelled/Expired		-		-
Exercised/Issued		-		-
Outstanding at December 31, 2025		55,600		15.2

Exercisable at December 31, 2025		55,600	$	15.2

As of December 31, 2025, the Company reserved the following shares of its common stock for the exercise of warrants:

2025 Common Stock Warrants			55,600
Shares reserved as of December 31, 2025			55,600

Restricted Stock

Effective January 2022, pursuant to the Employment Agreement of former Chief Executive Officer Frank Cesario, the Company granted 25,000 shares of restricted common stock. Of these shares, 2,500 vested immediately, and the remaining 22,500 shares were subject to performance-based vesting conditions and continued employment. During Mr. Cesario’s employment, certain performance conditions were achieved, resulting in the vesting of 16,875 additional shares. Accordingly, 19,375 shares in total vested under the award. Mr. Cesario departed the Company in 2024, and the remaining 5,625 unvested shares were forfeited in accordance with the terms of the award agreement.

During 2022, the Compensation Committee awarded the Company’s then Chief Operating Officer (and current Chief Executive Officer) a grant of 10,000 shares of restricted common stock. Of these shares, 2,000 shares vested during the initial twelve-month period, while the remaining 8,000 shares were subject to performance-based vesting conditions. Based on the achievement of specified performance conditions, 2,000 additional shares vested in 2023 and 4,000 shares vested in 2024, and the remaining 2,000 shares did not vest and were forfeited in 2024.

Upon taking the role of Chief Executive Officer during November 2024, Ms. Schwan was granted restricted stock in the amount of 25,000 shares. 2,500 shares vested immediately, while the remaining 22,500 are subject to performance conditions as further detailed in the share grant. Specifically, the restrictions on the remaining 22,500 shares will lapse based on satisfaction of the following performance goals and objectives and continued employment through the date of meeting such targets:

● The restrictions on 5,625 shares of the award will lapse and the award will vest when the Company’s trailing-twelve-month EBITDA equals or exceeds $0.7 million at any time on or after January 1, 2026.

● The restrictions on 5,625 shares of the award will lapse and the award will vest in the event the Company’s common shares trade at or above $30/share for ten or more consecutive trading days.

● The restrictions on 5,625 shares of the award will lapse and the award will vest if Ms. Schwan remains an employee of the Company as of January 1, 2027.

● The restrictions on 5,625 shares of restricted stock lapse upon the Company’s successful refinancing of its credit facility. The refinancing was completed on September 30, 2025, at which time the award vested however, the shares have not yet been issued.

The Compensation Committee (as defined in the Plan) shall be responsible for determining when the conditions above have been satisfied. The Company records compensation expense with each vesting and records a likelihood of vesting weighted analysis to the extent it has visibility to do so with a related grant date market value when such visibility is present. Without such visibility, it considers such probability as de minimis until additional information is available.

The Company recognized share-based compensation expense relating to vesting of restricted stock of approximately $25,000 and $160,000 in 2025 and 2024, respectively. As of December 31, 2025 and 2024, respectively, there was $133,000 and $155,000 unrecognized compensation expense related to unvested restricted shares. There were approximately 19,800 performance-based grants for which the underlying performance threshold had not been met as of December 31, 2025.

Restricted Stock Units, Performance-Based Restricted Stock Units and Restricted Stock Awards:

Aggregated information regarding RSUs, PSUs and RSAs granted under the Plan is summarized below:

	Unvested RSUs, PSUs & RSAs			Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2023		19,750		$	21.37
Granted		25,000			6.70
Vested		(14,850	)		13.30
Forfeited		(5,625	)		12.80
Outstanding at December 31, 2024		24,275		$	6.40
Granted		-			-
Vested		(4,117	)		7.90
Forfeited		-			-
Outstanding at December 31, 2025		20,158		$	3.63

Stock Options

The Compensation Committee (“Committee”) administers the Company’s stock-based plans. The exercise price of the stock options shall be fixed by the Committee at whatever price the Committee may determine in good faith. Unless the Committee determines otherwise, options generally had a 4-year term with a 3-year vesting schedule. Unless the Committee provides otherwise, options terminate upon the termination of a participant’s employment, except that the participant may exercise an option to the extent it was exercisable on the date of termination and for a period of time after termination.

In 2009, the shareholders of the Corporation approved, a 2009 Stock Incentive Plan (“2009 Plan”). The 2009 Plan and subsequent awards categorized as inducement of employment authorized the issuance of up to 510,000 shares of stock or options to purchase stock of the Company (including cancelled shares reissued under the plan.).

On June 8, 2018, our shareholders authorized the issuance of up to 300,000 shares of our common stock in the form of equity-based awards. On June 17, 2022, our shareholders approved of the issuance of 500,000 additional shares to this plan. No registration on Form S-8 was filed for the aforementioned shares, therefore they are not available for issuance in the normal course..

The Company, at the discretion of the board, may issue options in excess of the total available, if options related to that stock plan are cancelled. In some cases, not all shares that are available to a stock plan are issued, as the Company is unable to issue options to a previous plan when a new plan is in place.

- Definition

The entire disclosure for equity.

+ References

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+ Details

YUNHONG GREEN CTI LTD. 10-K