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Note 3 - Liquidity and Going Concern | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Liquidity and Going Concern [Text Block] | Note 3 – Liquidity and Going Concern The Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under the Credit Agreement with PNC (see Note 9 ). As noted in Note 9, we initiated an equity issuance process and entered into an amendment with PNC that would have allowed us more flexibility in the use of any proceeds, but also committed us to raise at least $7.5 million by November 15, 2018. That offering was ultimately terminated due to changes in market conditions. As that condition was not met, we were in violation of our Agreement, as amended. As of March 2019 and October 2019, we entered into forbearance agreements with PNC. Subsequent to the period, during January 2020, we entered into Amendment 5 and forbearance wherein all previously identified compliance failures will be waived until December 31, 2020. Because this solution is temporary, we remain out of compliance with the terms of our credit facility, as amended. During January 2020, we entered into an equity financing arrangement. The primary investor, LF International Pte, purchased $5 million of convertible preferred stock (convertible to common stock at $1 per share). The first $2.5 million vested during January 2020 with the transaction, resolving a bank overadvance. $0.7 million of the remainder vested during February 2020 pursuant to an agreement between the parties wherein the Company issued 140,000 shares of common stock as inducement for accelerating this portion of the transaction. During April 2020, an additional $1.3 million of the remaining funds vested pursuant to a second agreement between the parties, wherein the Company issued 260,000 shares of common stock as inducement for accelerating that portion of the transaction. The remaining $0.5 million is in escrow, scheduled to be released after the Company’s name change to Yunhong CTI Ltd. Is completed and 2019 SEC filings are issued and/or amended and issued. The entire transaction also allowed for up to $2 million of similar shares to be issued to other investors. As of the date of this filing approximately $1 million of those shares have been sold. In addition to the above, due to financial performance in 2017, 2018 and 2019, including net losses attributable to the Company of $1.6 million, $3.6 million, and $6.7 million, respectively, we believe that substantial doubt about our ability to continue as a going concern exists at December 31, 2019. Additionally, we have experienced challenges in maintaining adequate seasonal working capital balances, made more challenging by increases in financing and labor costs. These changes in cash flows have created strain within our operations, and have therefore increased our desire to incorporate additional funding resources. In December 2019, COVID- 19 was reported in Wuhan, China. The World Health Organization has since declared the outbreak to constitute a pandemic. The extent of the impact of COVID- 19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, the impact on our customers and employees, all of which are uncertain and cannot be predicted. The preventative and protective actions that governments have taken to counter the effects of COVID- 19 have resulted in a period of business disruption, including delays in shipments of products and raw materials. To the extent the impact of COVID- 19 continues or worsens, the demand for our products may be negatively impacted, and we may have difficulty obtaining the materials necessary for the production of our products. In addition, the production facilities of our suppliers may be closed for sustained periods of time and industry-wide shipment of products may be negatively impacted, the severity of which may exceed the $1 million in Payroll Protection Program funds received by the Company from the US Federal Government. COVID- 19 has also delayed certain strategic transactions the Company intended to close on in the near future and the Company does not know if and when such transactions will be completed. Management’s plans include:
| ( 1 ) | Completing the equity financing transaction as described herein.
| ( 2 ) | Continuing to focus our Company on the most profitable elements.
| ( 3 ) | Exploring alternative funding sources on an as needed basis.
Management Assessment Considering both quantitative and qualitative information, we continue to believe that our plans to obtain additional financing will provide us with an ability to finance our operations through 2020 and, if adequately executed, will mitigate the substantial doubt about our ability to continue as a going concern.

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