YUNHONG GREEN CTI LTD. Revenue Disclosure

Revenue Recognition

We recognize revenue in accordance with ASC 606 “Revenue from Contracts with Customers (“ASC 606”).” The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to recognize revenue and requires judgment and estimates within the revenue recognition process, including identifying contracts with customers, identifying performance obligations in the contract, determining and estimating the amount of any variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation and recognizing revenue when the entity satisfies each performance obligation.

Net sales consist primarily of revenues from the sale of products, including shipping and handling charges billed to customers, net of estimates for product returns. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to customers. Revenue is recognized at a point in time when control of the product transfers to the customer, which generally occurs upon shipment. The Company has elected the practical expedient under ASC 606-10-25-18B to account for shipping and handling activities that occur after the customer obtains control of the product as fulfillment activities rather than as a separate performance obligation. Accordingly, shipping and handling charges billed to customers are included in net sales, and the related outbound freight costs are included in cost of sales. In most cases, the Company’s contracts with customers contain a single performance obligation related to the sale and delivery of its products. Accrued product returns are estimated based on historical experience and current information. The Company provides for product returns based on historical return rates. While the Company incurs costs for sales commissions paid to its sales employees and outside agents, these commission costs are recognized concurrent with the related revenue, as the amortization period is less than one year. The Company has elected the practical expedient under ASC 606-10-25-4 to expense incremental costs of obtaining a contract when the amortization period would have been one year or less. The Company does not incur any other incremental costs to obtain contracts with its customers. The Company’s product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Accordingly, these warranties are not accounted for as a separate performance obligation. Sales taxes assessed by governmental authorities are accounted for on a net basis and excluded from net sales. A disaggregation of product net sales is presented in Note 14.