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Note 16 - Restatement of Financial Statements
 9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Accounting Changes and Error Corrections [Text Block]
Note
16
– Restatement of Financial Statements
 
As of
January 3, 2020,
the Audit Committee of the Board approved the engagement of RBSM, LLP (“RBSM”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ended
December 31, 2019. 
This Form
10
-Q/A is being prepared with the benefit of auditor review and will constitute our amended filing.
 
This Form
10
-Q/A has also been updated to reflect disclosure of subsequent events that have occurred after the balance sheet date, but before the issuance of the associated financial statements.  The subsequent events include the Company’s decision to exit its underperforming international subsidiaries, exit a significant product line, change its capital structure and focus its efforts on its US-based foil balloon and related product offerings.  
 
The company had previously included a non-cash charge of
$3,000,000
during the
second
quarter of
2019
in anticipation of the divestiture or liquidation of European Sales entities and Clever Container.  This Form
10
-Q/A has had this reserve replaced by detailed calculations.  Based on this detailed calculation herein we believe the magnitude of the initial charge was appropriate.  
 
Yunhong CTI, LTD (f/k/a CTI Industries Corporation)
Condensed Consolidated Balance Sheets
 
   
September 30, 2019
  
   
As Previously Reported
    
Adjustments
    
As Restated
  
ASSETS                        
Current assets:
                        
Cash and cash equivalents
   $
126,647
     $
(67,442
 )   $
59,205
  
Accounts receivable
    
8,134,291
      
(1,219,707
 )    
6,914,584
  
Inventories, net
    
18,345,406
      
(2,058,954
 )    
16,286,452
  
Prepaid expenses
    
556,594
      
(104,469
 )    
452,125
  
Other current assets
    
1,293,899
      
(148,354
 )    
1,145,545
  
Receivable from related party
    
 
      
1,392,666
      
1,392,666
  
Current assets of discontinued operations
    
 
      
1,304,305
      
1,304,305
  
                         
Total current assets
    
28,456,837
      
(901,955
 )    
27,554,882
  
                         
Property, plant and equipment:
                        
Machinery and equipment
    
23,883,267
      
(135,425
 )    
23,747,842
  
Building
    
3,374,334
      
 
      
3,374,334
  
Office furniture and equipment
    
2,692,423
      
(407,078
 )    
2,285,345
  
Intellectual property
    
783,179
      
 
      
783,179
  
Land
    
250,000
      
 
      
250,000
  
Leasehold improvements
    
409,347
      
 
      
409,347
  
Fixtures and equipment at customer locations
    
518,450
      
 
      
518,450
  
Projects under construction
    
189,795
      
(93,099
 )    
96,696
  
     
32,100,795
      
(635,602
 )    
31,465,193
  
Less : accumulated depreciation and amortization
    
(28,865,571
 )    
265,336
      
(28,600,235
 )
                         
Total property, plant and equipment, net
    
3,235,224
      
(370,266)
      
2,864,958
  
                         
Other assets:
                        
Goodwill
    
1,473,176
      
(1,473,176
 )    
 
  
Net deferred income tax asset
    
1,051,128
      
(916,034
 )    
135,094
  
Operating lease right-of-use
    
1,711,812
      
(416,067
 )    
1,295,745
  
Other non-current assets
    
(3,000,000
 )    
3,000,000
      
 
  
Other assets
    
(31,086
 )    
154,246
      
123,160
  
                         
Total other assets
    
1,205,030
      
348,970
      
1,554,000
  
                         
Other non-current assets of discontinued operations
    
 
      
 
      
-
  
                         
TOTAL ASSETS
   $
32,897,091
     $
(923,251
 )    
31,973,840
  
                         
LIABILITIES AND EQUITY
                        
Current liabilities:
                        
Checks written in excess of bank balance
   $
244,829
     $
(628
 )   $
244,201
  
Trade payables
    
8,522,419
      
(489,806
 )    
8,032,613
  
Line of credit
    
12,774,347
      
(214,141
 )    
12,560,206
  
Notes payable - current portion
    
3,787,533
      
 
      
3,787,533
  
Notes payable affiliates - current portion
    
11,789
      
 
      
11,789
  
Operating Lease Liabilities
    
1,268,257
      
(428,421
 )    
839,836
  
Accrued liabilities
    
1,550,238
      
(487,637
 )    
1,062,601
  
Current liabilities of discontinued operations
    
 
      
1,071,617
      
1,071,617
  
                         
Total current liabilities
    
28,159,412
      
(549,016
 )    
27,610,396
  
                         
Long-term liabilities:
                        
Notes payable - affiliates
    
221,362
      
(202,015
 )    
19,347
  
Notes payable, net of current portion
    
 
      
839,207
      
839,207
  
Operating Lease Liabilities
    
868,707
      
(412,798
 )    
455,909
  
Notes payable - officers, subordinated
    
443,555
      
599,211
      
1,042,766
  
Other long-term liabilities
    
1,042,766
      
(828,692
 )    
214,074
  
Deferred income tax liability
    
214,074
      
(214,074
 )    
-
  
Other long-term liabilities of discontinued operations
    
-
      
 
      
-
  
Total long-term debt, net of current portion
    
2,790,464
      
(219,161
 )    
2,571,303
  
                         
Total long-term liabilities
    
2,790,464
      
(219,161
 )    
2,571,303
  
                         
                         
TOTAL LIABILITIES
    
30,949,876
      
(768,177
 )    
30,181,699
  
                         
Equity:
                        
Yunhong CTI, LTD stockholders' equity:
                        
Preferred Stock -- no par value, 3,000,000 shares authorized, 0 shares issued and outstanding
    
-
      
 
      
 
  
Common stock - no par value, 15,000,000 shares authorized, 3,879,608 shares issued and 3,835,950 shares outstanding
    
13,898,494
      
 
      
13,898,494
  
Paid-in-capital
    
3,481,838
      
 
      
3,481,838
  
Accumulated earnings
    
(8,007,958
 )    
(537,679
 )    
(8,545,637
 )
Accumulated other comprehensive loss
    
(6,034,745
 )    
 
      
(6,034,745
 )
Less: Treasury stock, 43,658 shares
    
(160,784
 )    
 
      
(160,784
 )
Total Yunhong CTI, LTD stockholders' equity
    
3,176,845
      
(537,679)
      
2,639,166
  
Noncontrolling interest
    
(1,229,630
 )    
382,605
      
(847,025
 )
Total Equity
    
1,947,215
      
(155,074
 )    
1,792,141
  
TOTAL LIABILITIES AND EQUITY
   $
32,897,091
     $
(923,251
 )   $
31,973,840
  
 
 
 
Yunhong CTI, LTD (f/k/a CTI Industries Corporation)
Condensed Consolidated Statements of Comprehensive Income 
 
   
For the Three Months Ended September 30,
  
   
2019
            
2019
  
   
As Previously Reported
    
Adjustments
    
As Restated
  
Net Sales
   $
8,537,475
     $
(208,432
 )   $
8,329,043
  
              -       -  
Cost of Sales
    
7,729,851
      
(23,103
 )    
7,706,748
  
              -       -  
Gross profit
    
807,624
      
(185,329
 )    
622,295
  
              -       -  
Operating expenses:
    
 
      
-
      
-
  
General and administrative
    
1,466,830
      
(318,348
 )    
1,148,482
  
Selling
    
377,577
      
(144,071
 )    
233,506
  
Advertising and marketing
    
222,061
      
(88,021)
      
134,040
  
Impairment on long-lived assets
    
 
      
-
      
 
  
Gain on loss of control of VIEs
    
 
      
(218,527
 )    
(218,527
 )
Gain on sale of assets
    
(23,054
 )    
-
      
(23,054
 )
Total operating expenses
    
2,043,414
      
(768,967
 )    
1,274,447
  
              -       -  
Income/(Loss) from operations
    
(1,235,790
 )    
583,638
      
(652,152
 )
                         
Other (expense) income:
                        
Interest expense
    
(486,636
 )    
22,090
      
(464,546
 )
Interest income
    
99
      
(99)
      
 
  
Other Expense
    
-
      
(82,873)
      
(82,873)
  
Foreign currency loss
    
(28,420
 )    
2,673
      
(25,747
 )
                         
Total other expense, net
    
(514,957
 )    
(58,209)
      
(573,166
 )
                      -  
Income from continuing operations before taxes
    
(1,750,747
 )    
525,429
      
(1,225,318
 )
                      -  
Income tax expense
    
(511,823
 )    
511,823
      
 
  
                         
                         
Income from continuing operations
    
(1,238,924)
      
13,606
      
(1,225,318
 )
                         
                         
Income (Loss) from discontinued operations (including loss on HFS of $0.6M), net of tax
    
 
      
(999,251
 )    
(999,251
 )
                         
Net income (loss)
   $
(1,238,924
 )   $
(985,645
 )   $
(2,224,569
 )
                         
Less: Net (loss) income attributable to noncontrolling interest
    
(71,559
 )    
(211,426
 )    
(282,985)
  
                         
Net income attributable to Yunhong CTI, LTD
   $
(1,167,365
 )   $
(774,219
 )   $
(1,941,584
 )
                         
Other Comprehensive Income (Loss)
                        
Foreign currency adjustment
    
(281,817
 )    
 
      
(281,817
 )
Comprehensive Income (Loss)
   $
(1,449,182
 )   $
(774,219
 )   $
(2,223,401
 )
                         
Basic income per common share
                        
Continuing operations
   $
(0.30
 )   $
0.05
      
(0.25
 )
Discontinued operations
    
 
      
(0.26)
      
(0.26)
  
Basic income per common share
   $
(0.30
 )   $
(0.21)
     $
(0.51)
  
                         
Diluted income per common share
                        
Continuing operations
   $
(0.30
 )   $
0.5
     $
(0.25
 )
Discontinued operations
    
 
      
(0.26)
      
(0.26)
  
Diluted income per common share
   $
(0.30
 )   $
(0.21)
     $
(0.51)
  
                         
Weighted average number of shares and equivalent shares of common stock outstanding:
                        
Basic
    
3,835,950
      
 
      
3,835,950
  
                         
Diluted
    
3,835,950
      
 
      
3,835,950
  
 
   
For the Nine Months Ended September 30,
  
   
2019
            
2019
  
   
As Previously Reported
    
Adjustments
    
As Restated
  
Net Sales
   $
33,480,704
     $
(3,182,869
 )   $
30,297,835
  
                         
Cost of Sales
    
28,139,175
      
(2,487,497
 )    
25,651,678
  
                         
Gross profit
    
5,341,529
      
(695,372
 )    
4,646,157
  
                         
Operating expenses:
                        
General and administrative
    
5,054,028
      
(1,114,739
 )    
3,939,289
  
Selling
    
1,230,181
      
(387,635
 )    
842,546
  
Advertising and marketing
    
766,297
      
(281,201
 )    
485,096
  
Impairment on long-lived assets
    
 
      
1,472,382
      
1,472,382
  
Gain on loss of control of VIEs
    
 
      
(218,527
 )    
(218,527
 )
Gain on sale of assets
    
(70,263
 )    
 
      
(70,263
 )
Total operating expenses
    
6,980,243
      
(529,719
 )    
6,450,524
  
                         
Income/(Loss) from operations
    
(1,638,714
 )    
(165,653
 )    
(1,804,367
 )
                         
Other (expense) income:
                        
Interest expense
    
(1,549,703
 )    
56,439
      
(1,493,264
 )
Interest income
    
435
      
(435
 )    
 
  
Other Expense
    
(3,000,000
 )    
2,514,258
      
(485,742
 )
Foreign currency loss
    
(27,568
 )    
110
      
(27,458
 )
                         
Total other expense, net
    
(4,576,836
 )    
2,570,372
      
(2,006,464
 )
                         
Income from continuing operations before taxes
    
(6,215,550
 )    
2,404,719
      
(3,810,831
 )
                         
Income tax expense
    
(916,033
 )    
916,033
      
-
  
                         
                         
Income from continuing operations
    
(5,299,517)
      
1,488,686
      
(3,810,831
 )
                         
                         
Income (Loss) from discontinued operations (including loss on HFS of $0.6M), net of tax
    
 
      
(2,730,796
 )    
(2,730,796
 )
                         
Net income (loss)
   $
(5,299,517
 )   $
(1,242,110
 )   $
(6,541,627
 )
                         
Less: Net (loss) income attributable to noncontrolling interest
    
(157,045
 )    
(704,430
 )    
(861,475
 )
                         
Net income attributable to Yunhong CTI, LTD
   $
(5,142,472
 )   $
(537,680
 )   $
(5,680,152
 )
                         
Other Comprehensive Income (Loss)
                        
Foreign currency adjustment
    
15,603
      
 
      
15,603
  
Comprehensive Income (Loss)
   $
(5,126,869
 )   $
(537,680
 )   $
(5,664,549
 )
                         
Basic income per common share
                        
Continuing operations
   $
(1.34
 )   $
0.57
      
(0.77
 )
Discontinued operations
    
 
      
(0.71
 )    
(0.71
 )
Basic income per common share
   $
(1.34
 )   $
(0.14
 )   $
(1.48
 )
                         
Diluted income per common share
                        
Continuing operations
   $
(1.34
 )   $
0.57
     $
(0.77
 )
Discontinued operations
    
 
      
(0.71
 )    
(0.71
 )
Diluted income per common share
   $
(1.34
 )   $
(0.14
 )   $
(1.48
 )
                         
Weighted average number of shares and equivalent shares of common stock outstanding:
                        
Basic
    
3,835,950
      
 
      
3,835,950
  
                         
Diluted
    
3,835,950
      
 
      
3,835,950
  
 
Yunhong CTI, LTD (f/k/a CTI Industries Corporation)
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
   
For the Nine Months Ended September 30,
  
   
2019
            
2019
  
   
As Previously Reported
    
Adjustments
    
As Restated
  
Cash flows from operating activities:
                        
Net income
    
(5,299,517
 )    
(1,242,110
 )    
(6,541,627)
  
Depreciation and amortization
    
835,302
      
 
      
835,302
  
    Operating Cash Flows from Operating Leases    
606,356
      
(606,356)
      
 
  
Amortization of deferred gain on sale/leaseback
    
116,277
      
(198,699)
      
(82,422)
  
    Other    
 
      
248,974
      
248,974
  
Provision for losses on accounts receivable
    
27,362
      
372,101
      
399,463
  
Provision for losses on inventories
    
(157,243
 )    
1,406,762
      
1,249,519
  
   Stock based compensation    
 
      
72,401
      
72,401
  
Impairment of long-lived assets
    
 
      
1,252,283
      
1,252,283
  
Impairment of Prepaids, Current Assets, and Other Non-Current Assets
    
 
      
168,931
      
168,931
  
Gain on deconsolidation of Clever
    
 
      
(218,534
 )    
(218,534
 )
Impairment of assets held for sale
    
3,000,000
      
(2,395,517
 )    
604,483
  
Deferred income taxes
    
(916,033
 )    
916,033
      
-
  
Loss on disposition of asset
    
17,480
      
 
      
17,480
  
Change in assets and liabilities:
                        
Accounts receivable
    
2,626,396
      
150,000
      
2,776,396
  
Inventories
    
1,685,411
      
(250,000)
      
1,435,411
  
Prepaid expenses and other assets
    
228,389
      
 
      
228,389
  
Trade payables
    
1,846,575
      
46,096
      
1,892,671
  
Accrued liabilities
    
(23,878
 )    
(142,945
 )    
(166,823
 )
                         
Net cash provided by (used in) operating activities
    
4,592,877 
      
(421,580)
      
4,172,297
  
                         
Cash flows from investing activities:
                        
Purchases of property, plant and equipment
    
(144,222
 )    
 
      
(144,222
 )
                         
Net cash  (used in) investing activities
    
(144,222
 )    
 
      
(144,222
 )
                         
Cash flows from financing activities:
                        
Change in checks written in excess of bank balance
    
(391,313
 )    
 
      
(391,313
 )
Net change in revolving line of credit
    
(3,808,012
 )    
 
      
(3,808,012
 )
Repayment of long-term debt
    
(913,855
 )    
 
      
(913,855
 )
Proceeds from issuance of stock
    
975,401
      
(975,401))
      
0
  
Cash paid for deferred financing fees
    
(82,763
 )    
 
      
(82,763
 )
Proceeds from issuance of long-term debt
    
125,000
      
525,000
      
650,000
  
                         
Net cash  (used in) financing activities
    
(4,095,542
 )    
(450,401)
      
(4,545,943)
  
                         
Effect of exchange rate changes on cash
    
(654,616
 )    
861,308
      
205,692
  
                         
Net increase/(decrease) in cash and cash equivalents
    
(301,503
 )    
(10,673
 )    
(312,176
 )
                         
Cash and cash equivalents at beginning of period
    
428,150
      
 
      
428,150
  
                         
Cash and cash equivalents at end of period
    
126,647
      
(10,673
 )    
115,974
  
                         
The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows. The cash and equivalents amounts presented above differ from cash and equivalents in the Consolidated Balance Sheets due to cash included in “Current assets of discontinued operations in amount of $57,000.”
                        
Supplemental disclosure of cash flow information:
                        
Cash payments for interest
    
1,558,817
      
 
     $
1,558,817
  
Common stock issued for accounts payable
    
 
      
 
     $
303,000
  
Common stock issued for notes payable
    
 
      
 
     $
600,000