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Note 15 - Restatement of Financial Statements
 3 Months Ended
Mar. 31, 2019
Notes to Financial Statements  
Accounting Changes and Error Corrections [Text Block]
Note
15
– 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 determined that the deferred tax asset at
March 31, 2019
should have been
$135,094
and, therefore, the Company should have recorded a valuation allowance on the income tax benefit of
$360,492
generated during the quarter. 
 
Finally, the Company determined that  the goodwill associated with Clever Container and Flexo should be impaired and recorded an impairment charge of
$1.2M.
 
 
The change in the statement in equity was related to the increase in net loss of
$1.6
million and the corresponding decrease in stockholders’ equity and period end.
 
Yunhong CTI, LTD (f/k/a CTI Industries Corporation)
Condensed Consolidated Balance Sheets
 
   
March 31, 2019
  
   
As Previously Reported
    
Adjustments
    
As Restated
  
ASSETS                        
Current assets:
                        
Cash and cash equivalents (VIE $3,000 and $57,000, respectively)
   $
175,442
     $
-
     $
175,442
  
Accounts receivable, (less allowance for doubtful accounts of $524,000 and $85,000, respectively)
    
10,602,710
      
(432,454
 )    
10,170,256
  
Inventories, net (VIE $315,000 and $340,000, respectively)
    
20,837,907
      
 
      
20,837,907
  
Prepaid expenses (VIE $106,000 and $127,000, respectively)
    
646,164
      
12,000
      
658,164
  
Other current assets
    
1,419,371
      
(12,000)
      
1,407,371
  
                         
Total current assets
    
33,681,594
      
(432,454
 )    
33,249,140
  
                         
Property, plant and equipment:
                        
Machinery and equipment
    
23,842,559
      
 
      
23,842,559
  
Building
    
3,374,334
      
 
      
3,374,334
  
Office furniture and equipment (VIE $303,000 and $303,000, respectively)
    
2,656,519
      
 
      
2,656,519
  
Intellectual property
    
783,179
      
 
      
783,179
  
Land
    
250,000
      
 
      
250,000
  
Leasehold improvements
    
411,426
      
 
      
411,426
  
Fixtures and equipment at customer locations
    
518,450
      
 
      
518,450
  
Projects under construction
    
188,181
      
 
      
188,181
  
     
32,024,648
      
 
      
32,024,648
  
Less : accumulated depreciation and amortization (VIE $106,000 and $104,000, respectively)
    
(28,427,729
 )    
 
      
(28,427,729
 )
              -          
Total property, plant and equipment, net
    
3,596,919
      
 
      
3,596,919
  
                         
Other assets:
                        
Goodwill (VIE $0 and $440,000, respectively)
    
1,473,176
      
(1,473,176
 )    
0
  
Net deferred income tax asset
    
495,586
      
(360,492
 )    
135,094
  
Operating lease right-of-use
    
2,110,723
      
367,094
      
2,477,817
  
Other assets
    
26,088
      
220,000
      
246,088
  
              -          
Total other assets
    
4,105,573
      
(1,246,574
 )    
2,858,999
  
              -          
TOTAL ASSETS
   $
41,384,086
     $
(1,679,028
 )   $
39,705,058
  
                         
LIABILITIES AND EQUITY
                        
Current liabilities:
                        
Checks written in excess of bank balance (VIE $4,000 and $7,000, respectively)
   $
654,646
      
 
     $
654,646
  
Trade payables (VIE $142,000 and $62,000, respectively)
    
8,680,004
      
 
      
8,680,004
  
Line of credit (VIE $249,000 and $267,000, respectively)
    
15,351,709
      
 
      
15,351,709
  
Notes payable - current portion
    
4,414,581
      
 
      
4,414,581
  
Notes payable affiliates - current portion
    
11,271
      
 
      
11,271
  
Operating Lease Liabilities
    
1,016,687
      
284,140
      
1,300,827
  
Accrued liabilities (VIE $47,000 and $89,000, respectively)
    
2,082,161
      
(432,454
 )    
1,649,707
  
              -          
Total current liabilities
    
32,211,059
      
(148,314
 )    
32,062,745
  
              -          
Long-term liabilities:
    
 
      
-
      
 
  
Notes payable - affiliates
    
175,512
      
 
      
175,512
  
Notes payable, net of current portion (VIE $30,000 and $27,000, respectively)
    
639,327
      
 
      
639,327
  
Operating Lease Liabilities
    
1,094,036
      
82,954
      
1,176,990
  
Notes payable - officers, subordinated
    
1,012,024
      
-
      
1,012,024
  
Deferred gain (non current)
    
74,364
      
-
      
74,364
  
Total long-term debt, net of current portion
    
2,995,263
      
82,954
      
3,078,217
  
              -          
Total liabilities
    
35,206,322
      
(65,360)
      
35,140,962
  
              -          
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, 3,779,608 shares issued and 3,730,950 shares outstanding
    
13,898,494
      
 
      
13,898,494
  
Paid-in-capital
    
3,135,404
      
 
      
3,135,404
  
Accumulated earnings
    
(3,745,907
 )    
(1,613,668
 )    
(5,359,575
 )
Accumulated other comprehensive loss
    
(5,814,471
 )    
 
      
(5,814,471
 )
Less: Treasury stock, 43,658 shares
    
(160,784
 )    
 
      
(160,784
 )
Total Yunhong CTI, LTD stockholders' equity
    
7,312,736
      
(1,613,668
 )    
5,699,068
  
Noncontrolling interest
    
(1,134,972
 )    
 
      
(1,134,972
 )
Total Equity
    
6,177,764
      
(1,613,668
 )    
4,564,096
  
TOTAL LIABILITIES AND EQUITY
   $
41,384,086
     $
(1,679,028
 )   $
39,705,058
  
 
Yunhong CTI, LTD (f/k/a CTI Industries Corporation)
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
   
For the Three Months Ended March 31,
  
   
2019
            
2019
  
   
As Previously Reported
    
Adjustments
    
As Restated
  
Net Sales
   $
12,536,389
     $
-
     $
12,536,389
  
              -          
Cost of Sales
    
10,540,218
      
-
      
10,540,218
  
              -          
Gross profit
    
1,996,171
      
-
      
1,996,171
  
              -          
Operating expenses:
    
 
      
-
      
 
  
General and administrative
    
2,056,073
      
(214,175)
      
1,841,898
  
Selling
    
437,565
      
-
      
437,565
  
Advertising and marketing
    
273,880
      
(101,303)
      
172,577
  
Impairment on long-lived assets
    
 
      
1,253,176
      
1,253,176
  
Gain on sale of assets
    
(23,547
 )    
-
      
(23,547
 )
Total operating expenses
    
2,743,971
      
937,698
      
3,681,669
  
              -          
Loss from operations
    
(747,800
 )    
(937,698
 )    
(1,685,498
 )
                         
Other (expense) income:
                        
Interest expense
    
(546,906
 )    
-
      
(546,906
 )
Other income (expense)    
 
      
(315,478)
      
(315,478)
  
Foreign currency loss
    
(8,594
 )    
-
      
(8,594
 )
                         
Total other expense, net
    
(555,500
 )    
(315,478)
      
(870,978
 )
                         
Net loss before taxes
    
(1,303,300
 )    
(1,253,176
 )    
(2,556,476
 )
                         
Income tax (benefit) expense
    
(360,491
 )    
360,491
      
 
  
                         
Net loss
    
(942,809
 )    
(1,613,667
 )    
(2,556,476
 )
                         
Less: loss  attributable to noncontrolling interest
    
(62,388
 )    
-
      
(62,388
 )
                         
Net loss attributable to Yunhong CTI, LTD
   $
(880,421
 )   $
(1,613,667
 )   $
(2,494,088
 )
                         
Other Comprehensive Income (Loss)
                        
Foreign currency adjustment
    
235,876
      
-
      
235,876
  
Comprehensive loss
   $
(644,545
 )   $
(1,613,667
 )   $
(2,258,212
 )
                         
Basic loss per common share
   $
(0.24
 )   $
(0.43
 )   $
(0.67
 )
                         
Diluted loss per common share
   $
(0.24
 )   $
(0.43
 )   $
(0.67
 )
                         
Weighted average number of shares and equivalent shares of common stock outstanding:
                        
Basic
    
3,735,950
      
 
      
3,735,950
  
                         
Diluted
    
3,735,950
      
 
      
3,735,950
  
 
Yunhong CTI, LTD (f/k/a CTI Industries Corporation)
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
   
For the Three Months Ended March 31,
  
   
2019
            
2019
  
   
As Previously Reported
    
Adjustments
    
As Restated
  
Cash flows from operating activities:
                        
Net loss
   $
(942,809
 )   $
(1,613,667
 )   $
(2,556,476
 )
Depreciation and amortization
    
308,084
      
-
      
308,084
  
    Operating cash flows from operating leases    
248,757
      
(248,757)
      
 
  
Amortization of deferred gain on sale/leaseback
    
(27,474)
      
 
      
(27,474
 )
Provision for losses on accounts receivable
    
6,085
      
 
      
6,085
  
Provision for losses on inventories
    
(10,656)
      
 
      
(10,656
 )
Impairment of long-lived assets
    
 
      
1,253,176
      
1,253,176
  
Deferred income taxes
    
(360,491
 )    
360,491
      
 
  
   Stock based compensation    
 
      
28,967
      
28,967
  
Change in assets and liabilities:
    
 
      
-
      
 
  
Accounts receivable
    
249,950
      
410,349
      
660,299
  
Inventories
    
(827,084
 )    
-
      
(827,084
 )
Prepaid expenses and other assets
    
(235,701
 )    
215,468
      
(20,233
 )
Trade payables
    
1,971,593
      
28,741
      
2,000,334
  
Accrued liabilities
    
(149,957
 )    
 
      
(149,957
 )
                         
Net cash provided by  operating activities
    
230,297
      
434,768
      
665,065
  
                         
                         
Cash flows from investing activities:
                        
Purchases of property, plant and equipment
    
(52,243
 )    
 
      
(52,243
 )
                         
Net cash (used in) investing activities
    
(52,243
 )    
 
      
(52,243
 )
                         
Cash flows from financing activities:
                        
Change in checks written in excess of bank balance
    
18,504
      
 
      
18,504
  
Net change in revolving line of credit
    
(1,235,126
 )    
 
      
(1,235,126
 )
Repayment of long-term debt
    
771,113
      
(984,634)
      
(213,521)
  
Proceeds from issuance of stock
    
28,967
      
(28,967)
      
-
  
Cash paid for deferred financing fees
    
3,800
      
(31,385)
      
(27,585)
  
    Proceeds from issuance of long-term note payable    
 
      
650,000
      
650,000
  
                         
Net cash (used in) financing activities
    
(412,742
 )    
(394,986)
      
(807,728
 )
                         
Effect of exchange rate changes on cash
    
(18,020)
      
(39,782)
      
(57,802)
  
                         
Net increase/(decrease) in cash and cash equivalents
    
(252,708
 )    
 
      
(252,708
 )
                         
Cash and cash equivalents at beginning of period
    
428,150
      
 
      
428,150
  
                         
Cash and cash equivalents at end of period
   $
175,442
     $
 
     $
175,442
  
                         
                         
Supplemental disclosure of cash flow information:
                        
Cash payments for interest
   $
366,688
      
 
     $
366,688
  
       Common stock issued for notes payable    
 
      
 
     $
600,000