10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________

FORM 10-Q/A

AMENDMENT NO. 1 TO FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to_________

Commission File Number

000-23115

YUNHONG CTI LTD.

(Exact name of registrant as specified in its charter)

Illinois	36-2848943
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

22160 N. Pepper Road
Barrington, Illinois	60010
(Address of principal executive offices)	(Zip Code)

(847)382-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	CTIB	The Nasdaq Stock Market LLC  (The Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☑     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐     No ☑

The number of shares outstanding of the registrant’s common stock as of November 1, 2019 was 3,835,950 (excluding treasury shares).

QUARTERLY REPORT ON FORM 10-Q/A

For the quarterly period ended September 30, 2019

EXPLANATORY NOTE

Amendment No. 1 on Form 10-Q/A amends and restates certain items noted below in the Quarterly Report on Form 10-Q of Yunhong CTI Ltd. (formerly CTI Industries Corporation) (the “Company”) for the quarter ended September 30, 2019, as originally filed with the Securities and Exchange Commission on November 19, 2019  (the “Original Filing”).  This Form 10-Q/A amends the Original Filing to reflect the following changes.  First, the Original Filing was made without the benefit of auditor review, as noted in the filing, and this amendment reflects the inclusion of outside auditor participation.  Second, additional information of subsequent events is detailed in this amended filing. We determined that CTI Balloons (UK) and CTI Europe (Germany) were held for sale as of September 30, 2019.  Accordingly, the Company has reported the results of these operations as discontinued operations in the Consolidated Statements of Comprehensive Income and presented the related assets and liabilities as held-for-sale in the Consolidated Balance Sheets. These changes have been applied for all periods presented.  Associated with the determination that these entities were held for sale; impairments were recorded to appropriately value the entities.   Additionally, the impairment charges and deferred tax benefits previously reported were adjusted based on additional information.  Effective July 1, 2019, we determined that we are no longer the primary beneficiary of certain Variable Interest Entities.  Therefore, effective July 1, 2019, we deconsolidated these entities and their results are not included in our Consolidated Statements of Comprehensive Income subsequent to June 30, 2019.   

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 a significant product line and a change of capital structure.

For the convenience of the reader, this Form 10-Q/A amends and restates only the following financial statements and disclosures that were impacted from the changes:

● Item No. 1 – Financial Statements

● Item No. 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

● Item No. 4 – Controls and Procedures

● Item No. 6 – Exhibits

Except as described above, no other changes have been made to the Original Filing.

INDEX

Part I – Financial Information
Item No. 1.	Financial Statements
	Condensed Consolidated Balance Sheets at September 30, 2019 (unaudited) and December 31, 2018	1
	Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 30, 2019 and September 30, 2018	2
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2019 and September 30, 2018	3
	Condensed Consolidated Statements of Shareholders Equity (unaudited) for the nine months ended September 30, 2019	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item No. 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item No. 3	Quantitative and Qualitative Disclosures Regarding Market Risk	31
Item No. 4	Controls and Procedures	31
Part II – Other Information
Item No. 1	Legal Proceedings	32
Item No. 1A	Risk Factors	32
Item No. 2	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item No. 3	Defaults Upon Senior Securities	32
Item No. 4	Submission of Matters to a Vote of Security Holders	32
Item No. 5	Other Information	32
Item No. 6	Exhibits	33
	Signatures	34
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

Item 1.   Financial Statements

Yunhong CTI, LTD (f/k/a CTI Industries Corporation)

Condensed Consolidated Balance Sheets

	September 30, 2019			December 31, 2018
	Restated/Unaudited			Restated/Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	59,205		$	258,238
Accounts receivable, net		6,914,584			10,245,728
Inventories, net		16,286,452			17,388,634
Prepaid expenses		452,125			834,690
Other current assets		1,145,545			784,125
Receivable from related party		1,392,666
Current assets of discontinued operations		1,304,305			3,499,319
Total current assets		27,554,882			33,010,734
Property, plant and equipment:
Machinery and equipment		23,747,842			23,668,082
Building		3,374,334			3,367,082
Office furniture and equipment		2,285,345			2,573,095
Intellectual property		783,179			783,179
Land		250,000			250,000
Leasehold improvements		409,347			409,188
Fixtures and equipment at customer locations		518,450			518,450
Projects under construction		96,696			150,272
		31,465,193			31,719,348
Less : accumulated depreciation and amortization		(28,600,235	)		(27,998,437	)
Total property, plant and equipment, net		2,864,958			3,720,912
Other assets:
Goodwill					1,473,176
Net deferred income tax asset		135,094			135,094
Operating lease right-of-use		1,295,745
Other assets		123,160			248,120
Total other assets		1,554,000			1,856,390
Other non-current assets of discontinued operations		-			172,798
TOTAL ASSETS		31,973,840			38,760,834
LIABILITIES AND EQUITY
Current liabilities:
Checks written in excess of bank balance	$	244,201		$	636,142
Trade payables		8,032,613			5,951,929
Line of credit		12,560,206			16,582,963
Notes payable - current portion		3,787,533			4,432,320
Notes payable affiliates - current portion		11,789			10,821
Operating Lease Liabilities		839,836			0
Accrued liabilities		1,062,601			1,786,761
Current liabilities of discontinued operations		1,071,617			807,776
Total current liabilities		27,610,396			30,208,712
Long-term liabilities:
Notes payable - affiliates		19,347			167,248
Notes payable, net of current portion		839,207			399,912
Operating Lease Liabilities		455,909
Notes payable - officers, subordinated		1,042,766			1,597,019
Deferred gain (non-current)		214,074			100,340
Other long-term liabilities of discontinued operations		-			31,874
Total long-term liabilities		2,571,303			2,296,393
TOTAL LIABILITIES		30,181,699			32,505,105
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			2,506,437
Accumulated earnings		(8,545,637	)		(2,865,486	)
Accumulated other comprehensive loss		(6,034,745	)		(6,050,347	)
Less: Treasury stock, 43,658 shares		(160,784	)		(160,784	)
Total Yunhong CTI, LTD stockholders' equity		2,639,166			7,328,314
Noncontrolling interest		(847,025	)		(1,072,585	)
Total Equity		1,792,141			6,255,729
TOTAL LIABILITIES AND EQUITY	$	31,973,840		$	38,760,834

See accompanying notes to condensed consolidated unaudited financial statements

1

Yunhong CTI, LTD (f/k/a CTI Industries Corporation)

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
	Restated			Restated			Restated			Restated
Net Sales	$	8,329,043		$	10,128,436		$	30,297,835		$	36,508,220
		-			-						-
Cost of Sales		7,706,748			8,295,669			25,651,678			28,776,700
		-			-						-
Gross profit		622,295			1,832,767			4,646,157			7,731,520
		-			-						-
Operating expenses:		-			-						-
General and administrative		1,148,482			1,277,503			3,939,289			4,307,784
Selling		233,506			629,706			842,546			2,208,925
Advertising and marketing		134,040			302,985			485,096			931,475
Impairment on long-lived assets					-			1,472,382
Gain on loss of control of VIEs		(218,527	)		-			(218,527	)
Gain on sale of assets		(23,054	)		(24,061	)		(70,263	)		(71,474	)
Total operating expenses		1,274,447			2,186,133			6,450,524			7,376,710
		-			-						-
Loss from operations		(652,152	)		(353,366	)		(1,804,367	)		354,810
		-			-						-
Other (expense) income:		-			-						-
Interest expense		(464,546	)		(462,855	)		(1,493,264	)		(1,560,130	)
Interest income					(27	)					(356	)
Other Income/(expense)		(82,873)			(57	)		(485,742	)		1,601
Foreign currency loss		(25,747	)		24,584			(27,458	)		8,336
					-						-
Total other expense, net		(573,166	)		(438,355	)		(2,006,464	)		(1,550,549	)
		-			-						-
Loss from continuing operations before taxes		(1,225,318	)		(791,721	)		(3,810,831	)		(1,195,739	)
		-			-						-
Income tax benefit					(221,803	)		-			(347,318	)
					-						-
					-						-
Loss from continuing operations		(1,225,318	)		(569,918	)		(3,810,831	)		(848,422	)
Income (Loss) from discontinued operations (including loss on HFS of $0.6M), net of tax		(999,251	)		23,693			(2,730,796	)		37,354
					-
Net loss	$	(2,224,569	)	$	(546,225	)	$	(6,541,627	)	$	(811,068	)
Less: Net (loss) income attributable to noncontrolling interest		(282,985	)		13,072			(861,475	)		(38,968	)
Net loss attributable to Yunhong CTI, LTD	$	(1,941,584	)	$	(559,297	)	$	(5,680,152	)	$	(772,100	)
Other Comprehensive Income (Loss)
Foreign currency adjustment		(281,817	)		231,827			15,603			(110,605	)
Comprehensive loss	$	(2,223,401	)	$	(327,470	)	$	(5,664,549	)	$	(882,705	)
Basic loss per common share
Continuing operations		(0.25	)	$	(0.16	)		(0.77	)	$	(0.23	)
Discontinued operations		(0.26)			0.00			(0.71	)		0.01
Basic loss per common share	$	(0.51)		$	(0.16	)	$	(1.48	)	$	(0.22	)
Diluted loss per common share
Continuing operations	$	(0.25	)	$	(0.16	)	$	(0.77	)	$	(0.23	)
Discontinued operations		(0.26)			0.00			(0.71	)		(0.01	)
Diluted loss per common share	$	(0.51)		$	(0.16	)	$	(1.48	)	$	(0.22	)
Weighted average number of shares and equivalent shares of common stock outstanding:
Basic		3,835,950			3,530,227			3,835,950			3,530,227
Diluted		3,835,950			3,530,227			3,835,950			3,530,227

See accompanying notes to condensed consolidated unaudited financial statements

2

Yunhong CTI, LTD (f/k/a CTI Industries Corporation)

Condensed Consolidated Statements of Cash Flows (Unaudited)

	For the Nine Months Ended September 30,
	2019			2018
	Restated
Cash flows from operating activities:
Net loss	$	(6,541,627	)	$	(811,068	)
Depreciation and amortization		835,302			981,449
Amortization of deferred gain on sale/leaseback		(82,422)			(83,394	)
Other		248,974
Provision for losses on accounts receivable		399,463			(40,924	)
Provision for losses on inventories		1,249,519			14,250
Impairment of long-lived assets		1,252,283
Stock Based Compensation		72,401			139,450
Impairment of Prepaids, Current Assets, and Other Non-Current Assets		168,931
Gain on deconsolidation of Clever		(218,534	)
Impairment of assets held for sale		604,483
Deferred income taxes		-			(347,725	)
Loss on disposition of asset		17,480
Change in assets and liabilities:
Accounts receivable		2,776,396			1,717,018
Inventories		1,435,411			(819,293	)
Prepaid expenses and other assets		228,389			(776,294	)
Trade payables		1,892,671			385,715
Accrued liabilities		(166,823	)		(267,938	)
Net cash provided by operating activities		4,172,297			91,246
Cash flows from investing activities:
Purchases of property, plant and equipment		(144,222	)		(323,785	)
Net cash provided by (used in) investing activities		(144,222	)		(323,785	)
Cash flows from financing activities:
Change in checks written in excess of bank balance		(391,313	)		149,447
Net change in revolving line of credit		(3,808,012	)		821,390
Repayment of long-term debt		(913,855	)		(697,040	)
Cash paid for deferred financing fees		(82,763	)		(32,805	)
Proceeds from issuance of long-term debt		650,000
Net cash provided by (used in) financing activities		(4,545,943	)		240,992
Effect of exchange rate changes on cash		205,692			84,360
Net increase/(decrease) in cash and cash equivalents		(312,176	)		92,813
Cash and cash equivalents at beginning of period		428,150			181,026
Cash and cash equivalents at end of period	$	115,974		$	273,839
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		$	1,381,149
Common stock issued for accounts payable	$	303,000
Common stock issued for notes payable	$	600,000

See accompanying notes to condensed consolidated unaudited financial statements

3

Yunhong CTI, LTD (f/k/a CTI Industries Corporation)

Consolidated Statements of Stockholders' Equity (Restated)

	Yunhong CTI, LTD
										Accumulated
										Other			Less
	Common Stock				Paid-in		Accumulated			Comprehensive			Treasury Stock						Noncontrolling
	Shares		Amount		Capital		(Deficit) Earnings			Loss			Shares			Amount			Interest			TOTAL
Balance December 31, 2018		3,578,885	$	13,898,494	$	2,506,437	$	(2,865,486	)	$	(6,050,347	)		(43,658	)	$	(160,784	)	$	(1,072,585	)		6,255,729
																							-
Note conversion - Schwan		180,723				600,000																	600,000
Less deconsolidation of VIE																				1,087,035			1,087,035
Stock Issued		120,000				303,000																	303,000
Stock Option Expense						72,401																	72,401
Net Income								(5,680,152	)											(861,475	)		(6,541,627	)
Other comprehensive income, net of taxes											15,603												15,603
Foreign currency translation																							-
Balance September 30, 2019, restated		3,879,608	$	13,898,494	$	3,481,838	$	(8,545,638	)	$	(6,034,744	)		(43,658	)	$	(160,784	)	$	(847,025	)	$	1,792,141

See accompanying notes to consolidated financial statements

4

Yunhong CTI Ltd. (formerly CTI Industries Corporation) and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 - Basis of Presentation

The accompanying condensed (a) consolidated balance sheet as of December 31, 2018, which has been derived from audited consolidated financial statements, and (b) the unaudited interim condensed consolidated financial statements have been prepared and, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the consolidated financial position and the consolidated statements of comprehensive income and consolidated cash flows for the periods presented in conformity with generally accepted accounting principles for interim consolidated financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2018.

Principles of consolidation and nature of operations:

The condensed consolidated financial statements include the accounts of Yunhong CTI Ltd. (formerly CTI Industries Corporation) and its wholly-owned subsidiaries, CTI Balloons Limited (CTI Balloons) and CTI Supply, Inc., its majority-owned subsidiaries, Flexo Universal, S. de R.L. de C.V. (Flexo) and CTI Europe GmbH (CTI Europe), as well as the accounts of Venture Leasing S. A. de R. L. (VLM). As discussed in Note 2 Discontinued Operations, effective in the third quarter, the Company determined that it is exiting CTI Balloons and CTI Europe. Accordingly, the operations of these entities are classified as discontinued operations in these financial statements.

The Company (i) designs, manufactures and distributes balloon and related novelty (candy and party related) products, (ii) operates systems for the production, lamination, coating and printing of films used for food packaging and other commercial uses and for conversion of films to flexible packaging containers and other products, and (iii) distributes vacuum sealing products and home organization products in the United States.

Variable Interest Entities (“VIE’s”):

The determination of whether or not to consolidate a variable interest entity under U.S. GAAP requires a significant amount of judgment concerning the degree of control over an entity by its holders of variable interest. To make these judgments, management has conducted an analysis of the relationship of the holders of variable interest to each other, the design of the entity, the expected operations of the entity, which holder of variable interests is most “closely associated” to the entity and which holder of variable interests is the primary beneficiary required to consolidate the entity. Upon the occurrence of certain events, management reviews and reconsiders its previous conclusion regarding the status of an entity as a variable interest entity.

5

The Company has variable interests in Venture Leasing L.L.C (VL) and Clever Container Company, L.L.C. (Clever). Through June 30, 2019, the Company had determined that it was the primary beneficiary of these entities and included them in our consolidated results. In the third quarter, we determined that operationally material changes in our involvement with Clever and VL resulted in us having no power over the decisions which impact their financial performance. Therefore, we are no longer the primary beneficiary of these entities. Effective July 1, 2019, we deconsolidated these entities and their results are not included in our Consolidated Statements of Comprehensive Income subsequent to June 30, 2019. Upon deconsolidation of these entities, we recognized a gain of $219,000. In accordance with ASC 810-10 because the carrying value of the noncontrolling interest of Clever which was eliminated exceeded the net carrying value of the assets and liabilities of Clever. The Company determined that there was no fair value associated with its remaining noncontrolling interest in Clever based on an income approach.

Use of estimates:

In preparing condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of revenue and expenses during the reporting period in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates. The Company’s significant estimates include reserves for doubtful accounts, reserves for the lower of cost or market of inventory, reserves for deferred tax assets and recovery value of goodwill.

Earnings per share:

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during each period.

Diluted earnings per share is computed by dividing the net income by the weighted average number of shares of common stock and equivalents (stock options and warrants), unless anti-dilutive, during each period.

As of September 30, 2019, and 2018, shares to be issued upon the exercise of options and warrants aggregated 471,000 and 471,000, respectively. The number of shares included in the determination of earnings on a diluted basis for the three months ended September 30, 2019 and 2018 were 25,000 and 25,000, respectively. For the nine months ended September 30, 2019 and 2018, the same share disclosure was 25,000 and 25,000, respectively.

6

Significant Accounting Policies:

The Company’s significant accounting policies are summarized in Note 2 of the Company’s consolidated financial statements for the year ended December 31, 2018. There were no significant changes to these accounting policies during the three or nine months ended September 30, 2019, except for the adoption of Accounting Standards Codification (ASC) Topic 842, Leases.

On January 1, 2019, we adopted ASC Topic 842 (Leases). The adoption of this standard significantly increased our assets and liabilities and further discussed in Note 12. ASC 842 requires a lessee to recognize assets and liabilities related to leases with terms in excess of 12 months. Such assets are typically considered Right-Of-Use (“ROU”) assets. Prior information has not been restated and continues to be reported under the accounting standards in effect for those periods.

On January 1, 2018, we adopted ASC 606 (Revenue From Contracts With Customers) using the modified retrospective method. The adoption of ASC 606 did not have a material impact on our consolidated financial position or results of operations, as our revenue arrangements generally consist of a single performance obligation to transfer promised goods at a fixed price.

Net sales include revenues from sales of products and shipping and handling charges, net of estimates for product returns. Revenue is measured at the amount of consideration the Company expects to receive in exchange for the transferred products. Revenue is recognized at the point in time when we transfer the promised products to the customer and the customer obtains control over the products. The Company recognizes revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight are included in cost of sales, as we have elected the practical expedient included in ASC 606.

The Company provides for product returns based on historical return rates. While we incur costs for sales commissions to our sales employees and outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than one year and we have elected the practical expedient included in ASC 606. We do not incur incremental costs to obtain contracts with our customers. Our product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Therefore, the product warranties are not a separate performance obligation and are accounted for as described herein. Sales taxes assessed by governmental authorities are accounted for on a net basis and are excluded from net sales.

Auditor Replacement Process:

During April 2019, our independent registered accounting firm, Plante & Moran PLLC, declined to stand for reappointment as auditor.  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.   Previously, the quarterly report on Form 10-Q was prepared without the benefit of auditor review.  This Form 10-Q/A is filed with review from RBSM. 

Note 2 – Discontinued Operations

In July 2019 management and the Board engaged in a review of CTI Balloons and CTI Europe and determined that they are not accretive to the Company overall, add complexity to the Company’s structure and utilize resources. Therefore, as of July 19, 2019, the board authorized management to divest of CTI Balloons and CTI Europe. These actions are being taken to focus our resources and efforts on our core business activities, particularly foil balloons and ancillary products based in North America. The Company determined that these entities met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of these operations as discontinued operations in the Consolidated Statements of Comprehensive Income and presented the related assets and liabilities as held-for-sale in the Consolidated Balance Sheets. These changes have been applied for all periods presented. The Company divested its CTI Balloons (United Kingdom) subsidiary in the fourth quarter 2019 and expects to divest CTI Europe (Germany) in the first half of 2020.

7

In connection with management’s intentions to simplify these operations and organizational structure, we identified write-offs of $88,000 and $1.7 million for the three and nine months ended September 30, 2019, respectively, related to CTI Balloons and CTI Europe. The charges for the three months ended September 30, 2019 were comprised of the following: $78,000 inventory and other assets and $10,000 allowance for doubtful accounts. The charges for the nine months ended September 30, 2019 were comprised of the following: $1.3M inventory, $76,000 allowance for doubtful accounts; and $280,000 for other assets. Additionally, it recognized an impairment charge of $1.0 million, including $167,000 of previously unrecognized currency translation adjustment losses because the Company is completely exiting its operations in Germany and the UK once the divestitures occur.      

CTI Balloons recorded losses from discontinued operations, net of taxes of ($433,000) and ($996,000) for the three and nine months ended September 30, 2019, respectively (including an estimated loss on sale of $321,000). The losses, net of tax were ($8,000) and ($59,000) for the three and nine months ended September 30, 2018, respectively.

CTI Europe recorded losses from discontinued operations, net of taxes of ($566,000) and ($1,735,000) for the three and nine months ended September 30, 2019, respectively (including an estimated loss on sale of $283,000). The income, net of taxes were $32,000 and $96,000 for the three and nine months ended September 30, 2018, respectively.

Summarized Discontinued Operations Financial Information

The following table summarizes the major line items for the International operations that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income for the three months ending

	09/30/19			09/30/18
Income Statement
Net Sales	$	1,177,953		$	1,397,033
Cost of Sales		1,163,985			1,041,266
Gross Margin		13,968			355,767
Impairment of Long-Lived Assets
SG&A		373,625			330,898
Operating Income		(359,657)			24,869
Other Expense (income)		35,111			(8,038	)
pretax loss from discontinued operations		(394,768	)		32,907
Loss from classification to held for sale		604,483			-
Income Tax Expense		-			9,214
(Loss)Income prior to non-controlling interest		(999,251	)		23,693
Non-controlling Interest share of profit/loss		(271,807	)		15,411
(Loss) Income attributable to CTI shareholders	$	(727,444	)	$	8,282

The following table summarizes the major line items for the International operations that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income for the nine months ending

		09/30/19			09/30/18
Income Statement
Net Sales	$	4,152,390		$	4,981,152
Cost of Sales		4,881,526			3,860,225
Gross Margin		(729,136	)		1,120,927
Impairment of Long-Lived Assets		(4,173	)
SG&A		1,342,360			1,103,266
Operating Income		(2,067,323	)		17,662
Other Expense (income)		58,990			(34,219	)
Pretax loss from discontinued operations		(2,126,313	)		51,880
Loss from classification to held for sale		604,483			-
Income Tax Expense		-			14,526
Income (loss) prior to non-controlling interest		(2,730,796	)		37,354
Non-controlling Interest share of (loss)/income		(837,136	)		46,067
Income (loss) attributable to CTI shareholders	$	(1,893,660	)	$	(8,713	)

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The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented:

	9/30/2019		12/31/2018
Balance Sheet
Assets
Current Assets
Cash on hand and Banks	$	56,769	$	169,912
Accounts Receivable		687,607		584,827
Inventory		453,395		2,618,854
Prepaid & Other		-		125,726
TOTAL Current Assets		1,197,771		3,499,319
NET Property, Plant, and Equipment		105,594		94,069
Other Assets
Operating lease right-of-use		561,120		-
Other		44,303		78,729
TOTAL Other Assets		605,423		78,729
TOTAL Non-Current Assets		711,017		172,798
Less Valuation Allowance on Held for Sale classification		(604,483)
TOTAL Assets	$	1,304,305	$	3,672,117
Liabilities
Current Liabilities
Trade Accounts Payable	$	435,785	$	727,741
Operating Lease Liabilities - Current		382,214		-
Other/Accrued Liabilities		43,425		80,035
TOTAL Current Liabilities		861,424		807,776
Non-Current Liabilities
Operating Lease Liabilities - Non Current		178,906		-
Other Non-Current		31,287		31,874
TOTAL Non-Current Liabilities		210,193		31,874
		-		-
TOTAL Liabilities	$	1,071,617	$	839,650

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The cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows. The following table summarizes depreciation from discontinued operations for each of the periods presented:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Depreciation		7,321		7,963		20,519		21,588

Note 3 – Liquidity and Going Concern

The Company’s primary sources of liquidity are cash and cash equivalents as well as availability under the Credit Agreement with PNC Bank, National Association (“PNC”) (see Note 4). As indicated in Note 4, twice during 2018 we violated covenants in our credit facility and as of March 2019 we entered into a forbearance agreement with PNC. Under the terms of this agreement, financial covenants as of March 31, 2019 were not considered and all previously identified compliance failures were waived, but we remain out of compliance with the terms of our credit facility, as amended, including the covenants as of June 30, 2019 calculated on or about July 31, 2019. On August 1, 2019, PNC issued a Default and Reservation of Rights letter to the Company, in which PNC advised that line of credit advances would continue to be available to the Company at PNC’s sole discretion, and subject to its terms and conditions. On October 18, 2019, we entered into a new forbearance agreement with PNC (“Amendment 4”). Identified events of default were waived until January 10, 2020 with respect to Yunhong CTI, LTD, but not its Mexican subsidiary (Flexo), subject to its terms and conditions. On January 13, 2020, we entered into a new forbearance agreement with PNC (“Amendment 5”). PNC agreed to (i) waive the Loan Agreement’s requirement that the Company apply the net proceeds of the Offering first to the Term Loans (as defined in the Loan Agreement), and agreed that the Company shall instead apply the net proceeds of the Offering to the Revolving Advances (as defined in the Loan Agreement) and in connection therewith the Revolving Commitment Amount (as defined in the Loan Agreement) shall be reduced on a dollar for dollar basis by the amount so applied to the Revolving Advances, and (ii) forebear from exercising the rights and remedies in respect of the Existing Defaults afforded to Lender under the Loan Agreement for a period ending no later than December 31, 2020.

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During 2019 we attempted to execute a major capital event with a partner that would infuse money, among other attributes. That effort was unsuccessful as envisioned. We are currently seeking to execute on one or more smaller transactions, as well as pursue other financing options. There is no assurance that any of these efforts will be successful.

In addition to the above, due to financial performance in 2016, 2017 and 2018, including net income/(losses) attributable to the Company of $0.7 million, ($1.6 million), and ($3.6 million), respectively, we believe that substantial doubt about our ability to continue as a going concern exists at September 30, 2019.

Additionally, we have experienced challenges in maintaining adequate seasonal working capital balances, made more challenging by increases in financing and labor costs, along with a supply disruption in the helium market. These changes in cash flows have created very significant strain within our operations and have therefore increased our attempts to obtain additional funding resources.

Finally, four claims have been filed in court by vendors, one current and three former, regarding claims of non-payment pursuant to contractual obligations. The sum of these claims is approximately $0.7 million. The cost of defense and potential ultimate resolution increases the strain on our financial resources.

Management’s plans include:

(1)     Pursuing a smaller strategically significant major capital event.

(2)     Working with our bank to resolve our compliance failure on a long-term basis.

(3)     Evaluating and potentially executing a transaction of our facility in Lake Barrington, IL.

(4)     Simplifying our group structure, and

(5)     Exploring alternative funding sources.

Management Assessment

Considering both quantitative and qualitative information, we believe that our plans to obtain additional financing may provide us with an ability to finance our operations through 2020 and, if successfully executed, may mitigate the substantial doubt about our ability to continue as a going concern.

Note 4 - Debt

During December 2017, we terminated a prior credit arrangement and entered in new financing agreements with PNC Bank, National Association (“PNC”). The “PNC Agreements” include a $6 million term loan and an $18 million revolving credit facility, with a termination date of December 2022.

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Available credit under the Revolving Credit facility is determined by eligible receivables and inventory at Yunhong CTI, LTD (U.S.) and Flexo Universal (Mexico). We notified PNC of our failure to meet two financial covenants as of March 31, 2018. On June 8, 2018, we entered into Waiver and Amendment No. 1 (the “Amendment 1”) to our PNC Agreements. The Amendment modified certain covenants, added others, waived our failure to comply as previously reported, and included an amendment fee and temporary increase in interest rate. During September 2018, we filed a preliminary prospectus on Form S-1 for a planned equity issuance. On October 8, 2018, we entered into Consent and Amendment No. 2 (the “Amendment 2”) to our PNC Agreements. Amendment 2 reduced the amount of new funding proceeds that must be used to repay the term loan from $5 million to $2 million and waived the calculation of financial ratios for the period ended September 30, 2018, in exchange for a new covenant committing to raise at least $7.5 million in gross proceeds from our equity issuance by November 15, 2018 and pay an amendment fee. Market conditions ultimately forced us to postpone the offering, and thus no proceeds were received by the November 15, 2018 requirement.

We engaged PNC to resolve this failure to meet our amended covenant, and as of March 2019 entered into a forbearance agreement. Under the terms of this agreement, previously identified compliance failures were waived and financial covenants as of March 31, 2019 were not considered, with the next calculation due July 31, 2019 for the period ended June 30, 2019. We received a temporary over-advance of $1.2 million, which declined to zero over a six-week period under the terms of this agreement and paid a fee of $250,000.

On August 1, 2019, PNC issued a Notice of Default and Reservation of Rights letter, indicating the end of the forbearance period and continued events of default with our credit agreement, as amended. We remain out of compliance with the terms of our facility and have thus reclassified long-term bank debt to current liabilities on our balance sheet.

Available credit under the Revolving Credit facility is determined by eligible receivables and inventory at Yunhong CTI, LTD (U.S.) and Flexo Universal (Mexico).

Certain terms of the PNC Agreements include:

● Restrictive Covenants: The Credit Agreement includes several restrictive covenants under which we are prohibited from, or restricted in our ability to:

o Borrow money;

o Pay dividends and make distributions;

o Make certain investments;

o Use assets as security in other transactions;

o Create liens;

o Enter into affiliate transactions;

o Merge or consolidate; or

o Transfer and sell assets.

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● Financial Covenants: The Credit Agreement includes a series of financial covenants we are required to meet including:

o We are required to maintain a "Leverage Ratio", which is defined as the ratio of (a) Funded Debt (other than the Shareholder Subordinated Loan) as of such date of determination to (b) EBITDA (as defined in the PNC Agreements) for the applicable period then ended. The highest values for this ratio allowed by the PNC Agreements are:

Fiscal Quarter Ratio

December 31, 2017	4.75	to	1.00
June 30, 2018	4.50	to	1.00
June 30, 2018	4.25	to	1.00
September 30, 2018	not applicable
December 31, 2018	3.50	to	1.00
March 31, 2019	not applicable
June 30, 2019	3.00	to	1.00
September 30, 2019 and thereafter	2.75	to	1.00

o We are required to maintain a "Fixed Charge Coverage Ratio", which is defined as the ratio of (a) EBITDA for such fiscal period, minus Unfinanced Capital Expenditures made during such period, minus distributions (including tax distributions) and dividends made during such period, minus cash taxes paid during such period to (b) all Debt Payments made during such period. This ratio must not exceed 1.1 : 1.0 for any quarterly calculation.

The credit agreement provides for interest at varying rates in excess of the prime rate, depending on the level of senior debt to EBITDA over time. We also entered into a swap agreement with PNC Bank to fix the rate of interest for $3 million of the notes over 3 years at 2.25%. This contract was made at market value upon December 14, 2017 execution and accounted for as a hedge. This contract terminated during 2019 under the terms of the forbearance agreement.

Failure to comply with these covenants has caused us to pay a higher rate of interest (by 2% per the Agreements), and other potential penalties may impact the availability of the credit facility itself, and thus might negatively impact our ability to remain a going concern. As described above in this Note as well as in Note 2, we remain out of compliance with the terms of this facility.

As of December 2017, Mr. Schwan was owed a total of $1,099,000, with additional accrued interest of $400,000, by the Company. As part of the December 2017 financing with PNC, Mr. Schwan executed a subordination agreement related to these amounts due him, as evidenced by a related note representing the amount owed to Mr. Schwan. During January 2019, Mr. Schwan converted $600,000 of his balance into approximately 181,000 shares of our common stock at the then market rate. No payments were issued to Mr. Schwan during 2018 or the three or nine months ended September 30, 2019, with $15,000 and $45,000, respectively, of interest recorded as an expense.

Note 5 - Stock-Based Compensation; Changes in Equity

The Company has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated financial statements based on their grant-date fair values.

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The Company has applied the Black-Scholes model to value stock-based awards and issued warrants related to notes payable. 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 our common stock. The risk-free rate of interest is the related U.S. Treasury yield curve for periods within the expected term of the option at the time of grant. The dividend yield on our common stock is estimated to be 0%, as the Company did not issue dividends during 2019 and 2018. The expected volatility is based on historical volatility of the Company’s common stock.

The Company’s net loss for the three months ended September 30, 2019 and net loss for the three months ended September 30, 2018 includes approximately $20,000 and $34,000, respectively, of compensation costs related to share based payments. The Company’s net loss for the nine months ended September 30, 2019 and 2018 includes approximately $72,000 and $139,000 respectively, of compensation costs related to share based payments. As of September 30, 2019, there was $118,000 of unrecognized compensation expense related to non-vested stock option grants and stock grants. We expect approximately $18,000 of additional stock-based compensation expense to be recognized over the remainder of 2019, and $56,000 to be recognized during 2020.

On April 10, 2009, the Board of Directors approved for adoption, and on June 5, 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 approved the 2018 Stock Incentive Plan (“2018 Plan”). The 2018 Plan authorizes the issuance of up to 300,000 shares of our common stock in the form of equity-based awards. Because no registration on Form S-8 was filed for these additional shares within 12 months of approval by our shareholders, those additional shares are not available for issuance in the normal course. As of September 30, 2019, options for 471,144 shares remain outstanding.

A summary of the Company’s stock option activity, which includes grants of restricted stock, non-qualified stock options, incentive stock options, warrants and related information, is as follows:

	Shares under Option		Weighted Average Exercise Price
Balance at December 31, 2018		471,144	$	3.95
Granted		-		-
Cancelled/Expired		-		-
Exercised/Issued		-		-
Outstanding at September 30, 2019		471,144	$	3.95
Exercisable at September 30, 2019		165,264	$	4.05

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The instruments above have an aggregate intrinsic value of $83,000, which represents the total pre-tax intrinsic value (the difference between the closing price of the Company’s common stock on the last trading day of the quarter ended September 30, 2019 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all the holders exercised their options on September 30, 2019.

Note 6 - Legal Proceedings

The Company may be party to certain lawsuits or claims arising in the normal course of business. The ultimate outcome of these matters is unknown but, in the opinion of management, we do not believe any of these proceedings will have, individually or in the aggregate, a material adverse effect upon our financial condition, cash flows or future results of operation.

In July 2017, God’s Little Gift, Inc. (d\b\a) Helium and Balloons Across America and Gary Page (“Claimants”) filed an action against the Company based on disputed compensation amounts over several years. This action was resolved by mutual agreement between the parties during January 2019. Mr. Page received 20,000 shares of CTI common stock, $5,000 in cash, and a minimum payout in his monthly royalty calculation of $7,667 beginning March 1, 2019 and ending August 1, 2021. The Company accrued the $0.3 million in committed costs under this settlement in its December 31, 2018 financial statements.

During 2019, four claims have been filed against us claiming failure to pay contractually obligated amounts. Three of these claims have been filed by former vendors, and the fourth by a current vendor. The total of these four claims exceeds $0.7 million. All are being actively defended, and the claimed amount is recorded on our balance sheet as of September 30, 2019. Some of the largest with a combined claimed value of approximately $0.6M have subsequently been settled at approximately 50% of the amount claimed. Additional smaller amounts are pending some form of resolution.

Note 7 - Other Comprehensive Income

In the nine months ended September 30, 2019, the Company incurred other comprehensive gain of approximately $16,000, all from foreign currency translation adjustments.

The following table sets forth the accumulated balance of other comprehensive income and each component.

	Foreign Currency Items			Total Accumulated Other Comprehensive Income
Beginning balance as of January 1, 2019	$	(6,050,347	)	$	(6,050,347	)
Current period change, net of tax		15,603			15,603
Ending Balance as of September 30, 2019		(6,034,744	)		(6,034,744	)

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Note 8 - Geographic Segment Data

The Company has determined that it operates primarily in one business segment that designs, manufactures and distributes film and film related products for use in packaging, storage and novelty balloon products. The Company operates in foreign and domestic regions. Information about the Company's continuing operations by geographic area is as follows:

	Net Sales to Outside Customers				Net Sales to Outside Customers
	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	5,984,000	$	7,732,000	$	23,468,000	$	29,549,000
Mexico		2,345,000		2,396,000		6,830,000		6,959,000
	$	8,329,000	$	10,128,000	$	30,298,000	$	36,508,000

	Total Assets at
	September 30,		December 31,
	2019		2018
United States	$	19,409,000	$	25,613,000
Mexico		11,260,000		9,476,000
Assets Held for Sale International Subsidiaries		1,305,000		3,672,000
	$	31,974,000	$	38,761,000

Note 9 - Inventories, Net of Continuing Operations

	September 30, 2019			December 31, 2018
Raw materials	$	1,852,768		$	1,994,741
Work in process		3,124,781			3,052,224
Finished goods		11,454,025			12,300,010
In Transit		148,183			480,716
Allowance for excess quantities		(293,306	)		(439,057	)
Total inventories	$	16,286,452		$	17,388,634

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Note 10 - Concentration of Credit Risk

Concentration of credit risk with respect to trade accounts receivable is generally limited due to the large number of entities comprising the Company's customer base. The Company performs ongoing credit evaluations and provides an allowance for potential credit losses against the portion of accounts receivable which is estimated to be uncollectible. Such losses have historically been within management's expectations. During the three and nine months ended September 30, 2019 and 2018, there were two customers whose purchases represented more than 10% of the Company’s consolidated net sales, respectively. Sales to these customers for the three ended September 30, 2019 and 2018 are as follows:

	Three Months Ended				Three Months Ended
	September 30, 2019				September 30, 2018
Customer	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Customer A	$	1,799,000		22%	$	2,395,000		24%
Customer B	$	1,559,000		19%	$	2,686,000		27%

Sales to these customers for the nine months ended September 30, 2019 and 2018 are as follows:

	Nine Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2018
Customer	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Customer A	$	8,136,000		27%	$	9,738,000		27%
Customer B	$	8,424,000		28%	$	10,796,000		30%

As of September 30, 2019, the total amounts owed to the Company by these customers were approximately $1,777,000 or 26%, and $996,000 or 14%, of the Company’s consolidated net accounts receivable, respectively. The amounts owed at September 30, 2018 by these customers were approximately $2,241,000 or 22%, and $1,702,000 or 17% of the Company’s consolidated net accounts receivable, respectively.

Note 11 - Related Party Transactions

Stephen M. Merrick, Chief Executive Officer of the Company, is of counsel to the law firm of Vanasco Genelly and Miller PC which used to provide legal services to the Company. Legal fees paid by the Company to this firm for the three months ended September 30, 2019 and 2018, respectively, were none and none. Legal fees paid by the Company to this firm for the nine months ended September 30, 2019 and 2018, respectively, were none and $88,000.  On July 1, 2019, the Company deconsolidated Clever, and as result the Company has a note receivable of $1.3 million. One of owners of Clever is Mr. Schwan, the Company’s chairman.

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Note 12 - Derivative Instruments; Fair Value

The Company accounts for derivative instruments in accordance with U.S. GAAP, which requires that all derivative instruments be recognized on the balance sheet at fair value. We may enter into interest rate swaps to fix the interest rate on a portion of our variable interest rate debt to reduce the potential volatility in our interest expense that would otherwise result from changes in market interest rates. Our derivative instruments are recorded at fair value and are included in accrued liabilities of our consolidated balance sheet. Our accounting policies for these instruments are based on whether they meet our criteria for designation as hedging transactions, which include the instrument’s effectiveness, risk reduction and, in most cases, a one-to-one matching of the derivative instrument to our underlying transaction. As of September 30, 2019, we had no such instrument. The only derivative instrument, terminated during 2019, was accounted for as a hedge. Changes in fair value for the respective periods were recognized in the consolidated statement of operations.

The interest rate swap we entered into December 14, 2017 had a three-year term (ending December 14, 2020) and a notional amount of $3 million. The Company purchased a 2.25% fixed rate in exchange for the variable rate on a portion of the notes payable under the PNC Agreements, which was 1.47% at time of execution. The swap was terminated during 2019 as a result of the first forbearance agreement with the bank.

Note 13 - Leases

We adopted ASC Topic 842 (Leases) on January 1, 2019. This standard requires us to record certain operating lease liabilities and corresponding right-of-use assets on our balance sheet. Results for periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840. We elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of whether contracts are (or contain) leases, as well as lease classification tests and treatment of initial direct costs. We also elected to not separate lease components from non-lease components for all fixed payments, and we exclude variable lease payments in the measurement of right-of-use assets and lease obligations.

Upon adoption of ASC 842 we recorded a $2.8 million increase in other assets, a $1.1 million increase in current liabilities, and a $1.7 million increase in non-current liabilities. We did not record any cumulative effect adjustments in opening retained earnings, and adoption of ASC 842 had no impact on cash flows from operating, investing, or financing activities.

We determine if an arrangement is a lease at inception. Most of our operating leases do not provide an implicit rate of interest so we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. We lease various assets in the course of ordinary business including warehouses and manufacturing facilities, as well as vehicles and equipment used in our operations. Leases with an initial term of 12 months or less are not recorded on the balance sheet as we recognize lease expense for these leases on a straight-line basis over the lease term. The depreciable life of assets and related improvements are limited by the expected lease term, unless there is a reasonably certain expected transfer or title or purchase option. Some lease agreements include renewal options at our sole discretion. Any guaranteed residual value is included in our lease liability.

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The table below describes our lease position as of September 30, 2019:

Assets	As of September 30, 2019
Operating lease right-of-use assets		2,234,000
Accumulated amortization		(938,000	)
Net lease assets		1,296,000
Liabilities
Current
Operating		840,000
Noncurrent
Operating		456,000
Total lease liabilities		1,296,000
Weighted average remaining term (years) – operating leases (in years)	2
Weighted average discount rate – operating leases		11.25	%

During the three months ended September 30, 2019, we recorded expenses related to

Operating right-of-use lease asset amortization	216,000
Total expense during three months ended September 30, 2019	216,000

During the nine months ended September 30, 2019, we recorded expenses related to

Operating right-of-use lease asset amortization	938,000
Total expense during nine months ended September 30, 2019	938,000

Operating lease expense were approximately $216,000 for the three months and $938,000 for the nine months ended September 30, 2019. Operating lease costs are included within selling, general and administrative expenses on the condensed consolidated statements of operations.  The Company does not have any finance leases.  Cash paid for amounts included in the measurement of operating lease liabilities were approximately $216,000 for the three months and $938,000 for the nine months ended September 30, 2019.

The following table summarizes the maturities of our lease liabilities for all operating leases as of September 30,2019
(in thousands)	09/30/2019
2019	192
2020	752
2021	425
2022 and thereafter	60
Total lease payments	1,429
less:  Imputed interest	(133)
Present value of lease liabilities	1,296

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Note 14 - Impairment

Upon closing of the first quarter of 2019, the Company identified an impairment indicator related to the goodwill associated with Clever Container.  As a result of an impairment test, the Company fully impaired the goodwill related to Clever Container in the first quarter and recorded an impairment charge of $220,000.  Upon closing of the first quarter of 2019, the Company identified an impairment indicator related to the goodwill associated with Flexo.  As a result of an impairment test, the Company fully impaired the goodwill related to Flexo in the first quarter of 2019 and recorded an impairment charge of $1,033,000.

Note 15 - Subsequent Events 

In October 2019, we determined that we would not renew our Trademark License Agreement with SC Johnson when it expired on December 31, 2019.   Under this Agreement, we were licensed to manufacture and sell a line of vacuum sealing machines and pouches under the Ziploc® Brand Vacuum Sealer System.   The terms of the Agreement included a run-off provision which allowed us to sell products under the Ziploc® trademark for 90 days after the end of the Agreement.   For the three and nine months ended September 30, 2019, we had revenue of $2.0 million and $6.3M, respectively, associated with products which utilized the Ziploc® trademark.   Our exit of the Ziploc® product line is considered a strategic shift and will have a major effect on our operations and financial results on a go forward basis.   However, as we continued to utilize the Ziploc® related assets in 2020, those assets will not be considered abandoned until they cease to be used at the end of the first quarter of 2020.   Therefore, our Ziploc® operations cannot be classified as discontinued operations in these financial statements but will be presented as discontinued operations when all of the applicable accounting criteria are met. We have also dramatically changed our capital structure.  On January 3, 2020 we entered into a securities purchase agreement, as amended on February 24, 2020 and April 13, 2020, (the “LF Purchase Agreement”) with LF International Pte., a Singapore private limited company (the “LF International”), which is controlled by Company director Mr. Yubao Li, pursuant to which the Company agreed to issue and sell, and LF International agreed to purchase, up to 500,000 shares of the Company’s newly created Series A Convertible Preferred Stock (“Series A Preferred”), with each share of Series A Preferred initially convertible into ten shares of the Company’s common stock, at a purchase price of $10.00 per share, for aggregate gross proceeds of $5,000,000 (the “LF International Offering”).  As a result of the LF International Offering, a change of control of the Company may occur. As permitted by the LF Purchase Agreement, the Company may, in its discretion issue up to an additional 200,000 shares of Series A Preferred for a purchase price of $10.00 per share to additional investors (the “Additional Shares Offering,” and collectively with the LF International Offering, the “Offering”). On January 13, 2020, the Company conducted its first closing of the LF International Offering, resulting in aggregate gross proceeds of $2,500,000. Pursuant to the LF Purchase Agreement, LF International received the right to nominate and elect one member to the Company’s board of directors (subject to certain adjustments), effective as of the first closing, as well as a second director by the earlier of (i) the Company’s upcoming 2020 annual meeting of shareholders and (ii) May 15, 2020 and a third director by the Company’s upcoming 2020 annual meeting of shareholders. Pursuant to LF International’s nomination, effective January 13, 2020, the Board appointed Mr. Yubao Li as a director of the Company. Additionally, pursuant to the LF Purchase Agreement, on March 12, 2020, the Company changed its name to Yunhong CTI Ltd. To date, the Company has sold 492,660 shares of Series A Preferred to LF International and other accredited investors for aggregate gross proceeds of $4,926,600. Additionally, on April 1, 2020, an investor converted an accounts receivable of $482,000 owed to the investor by the Company in exchange for 48,200 shares of Series A Preferred.  Our business and results of operations may be negatively impacted by the spread of COVID-19.  We sell our products throughout the United States and in many foreign countries and may be impacted by public health crises beyond our control. This could disrupt our operations and negatively impact sales of our products. Our customers, suppliers and distributors may experience similar disruption. 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.

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.  

20

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

21

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

22

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

23

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This quarterly report includes both historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future results. Words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or similar words are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this quarterly report on Form 10-Q. We disclaim any intent or obligation to update any forward-looking statements after the date of this quarterly report to conform such statements to actual results or to changes in our opinions or expectations.

Overview

We produce film products for novelty, packaging and container applications. These products include foil balloons, latex balloons and related products, films for packaging and custom product applications, and flexible containers for packaging and consumer storage applications. We produce all of our film products for packaging, container applications and most of our foil balloons at our plant in Lake Barrington, Illinois. We produce all of our latex balloons and latex products at our facility in Guadalajara, Mexico. Substantially all of our film products for packaging and custom product applications are sold to customers in the United States. We market and sell our novelty items and flexible containers for consumer use in the United States, Mexico, Latin America, and Europe. We also market and sell vacuum sealing machines, home organizing and container products, Candy Blossoms and party goods.

As of January 1, 2018, we adopted Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, using the modified retrospective method. The adoption of ASC 606 did not have a material impact on our consolidated financial position or results of operations, as our revenue arrangements generally consist of a single performance obligation to transfer promised goods at a fixed price.

Net sales include revenues from sales of products and shipping and handling charges, net of estimates for product returns. Revenue is measured at the amount of consideration we expect to receive in exchange for the transferred products. Revenue is recognized at the point in time when we transfer the promised products to the customer and the customer obtains control over the products. We recognize revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight are included in cost of sales, as we have elected the practical expedient included in ASC 606.

We provide for product returns based on historical return rates. While we incur costs for sales commissions to our sales employees and outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than one year and we have elected the practical expedient included in ASC 606. We do not incur incremental costs to obtain contracts with our customers. Our product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Therefore, the product warranties are not a separate performance obligation and are accounted for as described herein. Sales taxes assessed by governmental authorities are accounted for on a net basis and are excluded from net sales.

24

As of January 1, 2019, we adopted ASC Topic 842, Leases (“ASC Topic 842”). Refer to Note 12 for additional information. Our primary leases relate to the facilities we use in Lake Zurich, IL (USA), and Mexico. We also have ancillary leases for items ranging from forklifts to printers. The majority of our leases are classified as operating lease right-of-use (“ROU”) assets and related operating lease liabilities. Finance leases are included in property and equipment and related liabilities. ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at the commencement date for leases that exceed 12 months. The expected lease term includes options to renew when it is reasonably certain that we will exercise such option.

Operating lease expense is recognized on a straight-line basis over the lease term and is included in the cost of sales or sales, general and administrative expense areas. Finance leases are amortized on a straight-line basis and included in similar areas of expense classification. Variable lease payments, non-lease component payments, and short-term rentals (leases less than 12 months in duration) are expensed as incurred.

Summary of Subsequent Events 

In October 2019, we determined that we would not renew our Trademark License Agreement with SC Johnson when it expired on December 31, 2019.   Under this Agreement, we were licensed to manufacture and sell a line of vacuum sealing machines and pouches under the Ziploc® Brand Vacuum Sealer System.   The terms of the Agreement included a run-off provision which allowed us to sell products under the Ziploc® trademark for 90 days after the end of the Agreement.   For the three and nine months ended September 30, 2019, we had revenue of $2.0 million and $6.3 million, respectively, associated with products which utilized the Ziploc® trademark.   Our exit of the Ziploc® product line is considered a strategic shift and will have a major effect on our operations and financial results on a go forward basis.   However, as we continued to utilize the Ziploc® related assets in 2020, those assets will not be considered abandoned until they cease to be used at the end of the first quarter of 2020.   Therefore, our Ziploc® operations cannot be classified as discontinued operations in these financial statements but will be presented as discontinued operations when all of the applicable accounting criteria are met. We have also dramatically changed our capital structure.  On January 3, 2020 we entered into a securities purchase agreement, as amended on February 24, 2020 and April 13, 2020, (the “LF Purchase Agreement”) with LF International Pte., a Singapore private limited company (the “LF International”), which is controlled by Company director Mr. Yubao Li, pursuant to which the Company agreed to issue and sell, and LF International agreed to purchase, up to 500,000 shares of the Company’s newly created Series A Convertible Preferred Stock (“Series A Preferred”), with each share of Series A Preferred initially convertible into ten shares of the Company’s common stock, at a purchase price of $10.00 per share, for aggregate gross proceeds of $5,000,000 (the “LF International Offering”).  As a result of the LF International Offering, a change of control of the Company may occur. As permitted by the LF Purchase Agreement, the Company may, in its discretion issue up to an additional 200,000 shares of Series A Preferred for a purchase price of $10.00 per share to additional investors (the “Additional Shares Offering,” and collectively with the LF International Offering, the “Offering”). On January 13, 2020, the Company conducted its first closing of the LF International Offering, resulting in aggregate gross proceeds of $2,500,000. Pursuant to the LF Purchase Agreement, LF International received the right to nominate and elect one member to the Company’s board of directors (subject to certain adjustments), effective as of the first closing, as well as a second director by the earlier of (i) the Company’s upcoming 2020 annual meeting of shareholders and (ii) May 15, 2020 and a third director by the Company’s upcoming 2020 annual meeting of shareholders. Pursuant to LF International’s nomination, effective January 13, 2020, the Board appointed Mr. Yubao Li as a director of the Company. Additionally, pursuant to the LF Purchase Agreement, on March 12, 2020, the Company changed its name to Yunhong CTI Ltd. To date, the Company has sold 492,660 shares of Series A Preferred to LF International and other accredited investors for aggregate gross proceeds of $4,926,600. Additionally, on April 1, 2020, an investor converted an accounts receivable of $482,000 owed to the investor by the Company in exchange for 48,200 shares of Series A Preferred.  Our business and results of operations may be negatively impacted by the spread of COVID-19.  We sell our products throughout the United States and in many foreign countries and may be impacted by public health crises beyond our control. This could disrupt our operations and negatively impact sales of our products. Our customers, suppliers and distributors may experience similar disruption. 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.

Comparability

In July 2019 management and the Board engaged in a review of CTI Balloons and CTI Europe and determined that they are not accretive to the Company overall, add complexity to the Company’s structure and utilize resources. Therefore, as of July 19, 2019, the board authorized management to divest these international subsidiaries. These actions are being taken to focus our resources and efforts on our core business activities, particularly foil balloons and ancillary products based in North America. The Company determined that these entities met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of these International operations as discontinued operations in the Consolidated Statements of Comprehensive Income and presented the related assets and liabilities as held-for-sale in the Consolidated Balance Sheets. These changes have been applied for all periods presented. The Company divested its CTI Balloons (United Kingdom) subsidiary in the fourth quarter 2019 and expects to divest its CTI Europe (Germany) subsidiary in the first half of 2020.

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The Company has variable interests in Venture Leasing L.L.C (VL) and Clever Container Company, L.L.C. (Clever). Through June 30, 2019, the Company had determined that it was the primary beneficiary of these entities and included them in our consolidated results. In the third quarter, we determined that operationally material changes in our involvement with Clever and VL resulted in us having no power over the decisions which impact their financial performance. Therefore, we are no longer the primary beneficiary of these entities. Effective July 1, 2019, we deconsolidated these entities and their results are not included in our Consolidated Statements of Comprehensive Income subsequent to June 30, 2019. Upon deconsolidation of these entities, we recognized a gain of $219,000.

Results of Operations

Net Sales. For the three and nine month periods ended September 30, 2019, net sales from continuing operations were $8,329,000 and $30,298,000, compared to net sales of $10,128,000 and $36,508,000 for the same periods of 2018. For the three month period ended September 30, 2019 and 2018, net sales from continuing operations by product category were as follows:

	Three Months Ended
	September 30, 2019					September 30, 2018
	$		% of			$		% of
Product Category	(000) Omitted		Net Sales			(000) Omitted		Net Sales
Foil Balloons		3,681		44	%		3,854		38	%
Latex Balloons		2,059		25	%		2,217		22	%
Vacuum Sealing Products		1,958		24	%		2,517		25	%
Film Products		237		3	%		320		3	%
Home Organization		0		0	%		900		9	%
Other		394		4	%		320		3	%
Total		8,329		100	%		10,128		100	%

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For the nine month period ended September 30, 2019 and 2018, net sales for continuing operations by product category were as follows:

	Nine Months Ended
	September 30, 2019					September 30, 2018
	$		% of			$		% of
Product Category	(000) Omitted		Net Sales			(000) Omitted		Net Sales
Foil Balloons		13,325		44	%		15,750		43	%
Latex Balloons		5,640		19	%		6,220		17	%
Vacuum Sealing Products		6,022		20	%		5,970		16	%
Film Products		1,476		5	%		1,367		4	%
Home Organization		263		0	%		3,080		9	%
Other		3,572		12	%		4,121		11	%
Total		30,298		100	%		36,508		100	%

Foil Balloons. During the three and nine months ended September 30, 2019, revenues from the sale from continuing operations of foil balloons decreased by 4% and 15%, respectively compared to the prior year period, from $3,854,000 and $15,750,000 during 2018, respectively, to $3,681,000 and $13,325,000 during 2019. Sales to our largest balloon customer decreased from $10,796,000 during the first nine months of 2018 to $8,424,000 during the first nine months of 2019. As we and others in the industry have reported, the commercial supply of helium has been limited and pricing has increased, while availability has been reduced. We expect the helium market to improve during the next few months, but it remains a negative factor in the sale of helium-based products such as many foil balloons.

Latex Balloons. During the three months ended September 30, 2019, revenues from the continuing operations sale of latex balloons decreased by 7% compared to the prior year from $2,217,000 during 2018 to $2,059,000 during 2019. During the nine months ended September 30, 2019, revenues from the sale of latex balloons decreased by 9% to the prior year period, from $6,220,000 during 2018 to $5,640,000 during 2019.

Vacuum Sealing Products. During the three months ended September 30, 2019, revenues from the continuing operations sale of vacuum sealing products decreased by 22% compared to the prior year period, from $2,517,000 during 2018 to $1,958,000 during 2019. During the nine months ended September 30, 2019, revenues from the sale of vacuum sealing products increased by 1% compared to the prior year period, from $5,970,000 during 2018 to $6,022,000 during 2019.

Films. During the three months ended September 30, 2019, revenues from the continuing operations sale of commercial films decreased by 26% compared to the prior year period, from $320,000 during 2018, respectively, to $237,000 during 2019. During the nine months ended September 30, 2019, revenues from the sale of commercial films increased by 8% compared to the prior year period, from $1,367,000 during 2018, respectively, to $1,476,000 during 2019.

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Other Revenues. During the three months ended September 30, 2019, revenues from continuing operations from the sale of other products increased by 23% respectively compared to the prior year period, from $320,000 during 2018 to $394,000 during 2019. During the nine months ended September 30, 2019, revenues from the sale of other products decreased by 13% respectively compared to the prior year period, from $4,121,000 during 2018 to $3,572,000 during 2019. The revenues from the sale of other products during the first nine months of 2019 include (i) sales of a line of “Candy Blossoms” and similar products consisting of candy and small inflated balloons sold in small containers in the amount of $2.3 million, (ii) the sale of accessories and supply items related to balloon products.

Sales to a limited number of customers continue to represent a large percentage of our net sales.

The table below illustrates the impact on sales from continuing operations of our top three and ten customers for the three and nine months ended September 30, 2019 and 2018.

	Three Months Ended September 30,				Nine Months Ended September 30,
	% of Sales				% of Sales
	2019		2018		2019		2018
Top 3 Customers		48%		57%		55%		61%
Top 10 Customers		65%		73%		70%		82%

During the three and nine months ended September 30, 2019, there were two customers whose purchases represented more than 10% of the Company’s consolidated net sales. Sales to these customers for the three months ended September 30, 2019 were $1,799,000 or 22%, and $1,559,000 or 19%, of consolidated net sales, respectively. Sales to these customers for the three months ended September 30, 2018 were $2,395,000 or 24%, and $2,686,000 or 27%, of consolidated net sales, respectively. The amounts owed at September 30, 2019 by these customers were $1,777,000 or 24%, and $996,000 or 14%, of the Company’s consolidated net accounts receivable, respectively. As of September 30, 2018, the total amounts owed to the Company by these customers were $2,241,000 or 30%, and $1,702,000 or 23% of the Company’s consolidated net accounts receivable, respectively.

Cost of Sales. During the three and nine months periods ended September 30, 2019, the cost of sales from continuing operations was $7,707,000 and $25,651,000, respectively, compared to $8,296,000 and $28,776,000 for the same periods ended September 30, 2018. The reduction in cost of sales was largely due to lower sales volume, net of related inefficiencies.

General and Administrative. During the three and nine months ended September 30, 2019, general and administrative expenses from continuing operations were $1,148,000 and $3,939,000, respectively, as compared to $1,278,000 and $4,308,000 for the same periods in 2018. A one-time fee associated with the forbearance agreement in the amount of $250,000 was included in the first three months of 2019 general and administrative expenses.

Selling, Advertising and Marketing. During the three and nine months ended September 30, 2019, selling, advertising and marketing expenses from continuing operations were $368,000 and $1,327,000, respectively, as compared to $933,000 and $3,140,000, respectively for the same periods in 2018. This reduction was primarily due to the full year benefit of cost reduction programs implemented during 2018.

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Other Operating Expense. During the nine months ended September 30, 2019, we recognized a $1,472,000 impairment charge on our other long term assets during 2019 due to changes in the overall business environment - $220,000 goodwill impairment related to Clever Container, a $1,032,000 goodwill impairment related to Flexo, and an additional $219,000 impairment on long lived assets.

Other Income (Expense). During the three and nine months ended September 30, 2019, the Company incurred interest expense from continuing operations of $465,000 and $1,493,000, respectively, as compared to interest expense during the same periods of 2018 of $463,000 and $1,560,000.

For the three months ended September 30, 2019, the Company had a foreign currency transaction loss from continuing operations of $26,000 during 2019 and $25,000 gain during same period of 2018. For the nine months ended September 30, 2019, the Company had a foreign currency transaction loss of $27,000 during 2019 and $8,000 gain during same period of 2018.

Discontinued Operations

In connection with management’s intentions to simplify these operations and organizational structure, we identified write-offs of $88,000 and $4.6 million for the three and nine months ended September 30, 2019, respectively, related to CTI Balloons and CTI Europe. The charges for the three months ended September 30, 2019 were comprised of the following: $78,000 inventory and other assets and $10,000 allowance for doubtful accounts. The charges for the nine months ended September 30, 2019 were comprised of the following: $1.3M inventory, $76,000 allowance for doubtful accounts; and $280,000 for other assets. Additionally, when the Company determined that these subsidiaries were held for sale, it recognized an impairment charge of $0.6 million, including $167,000 of previously unrecognized currency translation adjustment losses because the Company is completely exiting its operations in Germany and the UK once the divestitures occur.

Financial Condition, Liquidity and Capital Resources

Cash Flow Items.

Operating Activities. During the nine months ended September 30, 2019, net cash provided by operations was $4,172,000, compared to net cash used by operations during the nine months ended September 30, 2018 of $91,000.

Significant changes in working capital items during the nine months ended September 30, 2019 included:

● A decrease in accounts receivable of $2,776,000 compared to a decrease in accounts receivable of $1,717,000 in the same period of 2018.

● An decrease in inventory of $1,435,000 compared to an increase in inventory of $819,000 in 2018.

● An increase in trade payables of $1,893,000 compared to an increase in trade payables of $386,000 in 2018.

● A decrease in accrued liabilities of $167,000 compared to a decrease in accrued liabilities of $268,000 in 2018.

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Investing Activity. During the nine months ended September 30, 2019, cash used in investing activity was $144,000, compared to cash used in investing activity for the same period of 2018 in the amount of $324,000.

Financing Activities. During the nine months ended September 30, 2019, cash used in financing activities was $4,546,000 compared to cash provided by financing activities for the same period of 2018 in the amount of $241,000. Financing activity consisted principally of changes in the balances of revolving and long-term debt.

Liquidity and Capital Resources.

At September 30, 2019, the Company had cash balances of $116,000 compared to cash balances of $274,000 for the same period of 2018.

As of September 30, 2019, the Company was not in compliance with its credit facility, operating under a forbearance agreement. For this reason, $2.6 million of long-term debt was reclassified as current debt as of September 30, 2019. Failure to ultimately regain compliance with the terms of our credit agreement, or enter into a suitable replacement financing vehicle, could negatively impact our ability to carry on our business up to and including our ability to continue as a going concern. Additionally, we have encountered difficulties with seasonal cash flow needs, including increased costs associated with recruiting and retaining workers in the Chicago area. The failure to either regain compliance with the terms of our credit facility or properly manage seasonal cash needs could put a strain on the Company, up to and including our ability to continue as a going concern. See Note 2 for additional discussion.

Seasonality

In the foil balloon product line, sales have historically been seasonal with approximately 40% occurring in the period from December through March of the succeeding year and 24% being generated in the period July through October in recent years. Vacuum sealing product sales are also seasonal; approximately 60% of sales in this product line occur in the period from July through December.

Critical Accounting Policies

Please see pages 24-27 of our Annual Report on Form 10-K for the year ended December 31, 2018 for a description of policies that are critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results. Except for the adoption of ASC Topic 842 (Leases) as described herein, no material changes to such information have occurred during the three months ended September 30, 2019.

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Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk

Not applicable.

Item 4. Controls and Procedures

(a)   Restatement

        On May 8, 2020, the Audit Committee of the Board of Directors concluded, based on the recommendation of management, that we would amend and restate our quarterly consolidated financial statements for this interim period ended September 30, 2019, within this Form 10Q/A to correct the following errors:

• Previously, the Company had no external auditor engaged. As noted in the original filing, these filing are being amended now that the Company has hired RBSM as external independent auditors, with the benefit of auditor review, and

• To correct the timing of recognition of certain noncash charges with respect to the anticipated liquidation of subsidiaries and resulting classifications as they impact goodwill, deferred tax assets and related tax provisions, and reporting discontinued operations.

The following additional adjustments were also included in this restatement:

• To reclassify certain accrued expenses between liabilities and contra assets, particularly with respect to accruals for uncollectible accounts receivable, and

• Other miscellaneous adjustments, none of which were material either individually or in the aggregate.

(b)   Disclosure Controls and Procedures

        We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are properly recorded, processed, summarized and reported within the time periods required by the Commission's rules and forms.

        We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of these disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of September 30, 2019. Based on this evaluation, the Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) concluded that our disclosure controls and procedures were not effective as of September 30, 2019, the end of the period covered by this Quarterly Report on Form 10-Q/A due to the material weaknesses described below.

(c)   Management's Report on Internal Control over Financial Reporting

        Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

        Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management has assessed the effectiveness of our internal control over financial reporting as of September 30, 2019. In making our assessment of the effectiveness of internal control over financial reporting, management used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

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        A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant's annual or interim financial statements will not be prevented or detected on a timely basis. As a result of our evaluation of our internal control over financial reporting, management identified the following material weaknesses in our internal control over financial reporting:

• We lacked a sufficient number of accounting professionals with the necessary knowledge, experience and training to adequately account for significant, unusual transactions that resulted in misapplications of GAAP, particularly with regard to the timing of recognition of certain non-cash charges, and

• We are overly dependent upon our Chief Financial Officer and Controller within an environment that is highly manual in nature.

        These material weaknesses resulted in the restatement of the financial statements described in Item 4(a) and material post-closing adjustments which have been reflected in the financial statements for the interim periods for the year ended September 30, 2019. Additionally, as a result of the material weaknesses, we have concluded that we did not maintain effective internal control over financial reporting as of September 30, 2019.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company may be party to certain lawsuits or claims arising in the normal course of business. The ultimate outcome of these matters is unknown but, in the opinion of management, we do not believe any of these proceedings will have, individually or in the aggregate, a material adverse effect upon our financial condition, cash flows or future results of operation.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5.      Other Information

The Certifications of the Chief Executive Officer and the Chief Financial Officer of the Company Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached as Exhibits to this Report on Form 10-Q.

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Item 6. Exhibits

The following are being filed as exhibits to this report:

Exhibit Number	Description
3.1	Restated Articles of Incorporation (Incorporated by reference to Exhibit A to Registrant’s Schedule 14A Definitive Proxy Statement filed April 29, 2015).
3.2	Amended and Restated By-Laws of Yunhong CTI, LTD (formerly CTI Industries Corporation) (Incorporated by reference to Exhibit 3.2, contained in Registrant’s Form 8-K filed on March 17, 2017).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended (filed herewith).
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101	Interactive Data Files, including the following materials from the Company’s Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2019, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to Consolidated Financial Statements.

33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: 05/29/20   Yunhong CTI Ltd. (formerly CTI Industries Corporation)

By: /s/ Frank J. Cesario

Frank J. Cesario

President and Chief Executive Officer

Chief Financial Officer

34

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Frank J. Cesario, certify that:

1.     I have reviewed this quarterly report on Form 10-Q/A of Yunhong CTI Ltd. (formerly CTI Industries Corporation) (the “Company”).

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the condensed consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: 05/29/20

/s/ Frank J. Cesario

Frank J. Cesario

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Frank J. Cesario, certify that:

1.     I have reviewed this quarterly report on Form 10-Q/A of Yunhong CTI Ltd. (formerly CTI Industries Corporation) (the “Company”).

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the condensed consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: 05/29/20

By: /s/ Frank J. Cesario

Frank J. Cesario

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q/A of Yunhong CTI Ltd. (formerly CTI Industries Corporation) (the “Company”) for the quarterly period ended September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Frank J. Cesario, as Chief Executive Officer and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Frank J. Cesario                            

Frank J. Cesario

President and Chief Executive Officer

Chief Financial Officer

Date: 05/29/20

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and is not being “filed” as part of the Form 10-Q/A or as a separate disclosure document for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent that this Exhibit 32 is expressly and specifically incorporated by reference in any such filing.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Note 13 - Leases (Details Textual) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Assets, Noncurrent, Excluding Property, Plant, and Equipment	$ 1,554,000	$ 1,554,000		$ 1,856,390
Liabilities, Current, Total	27,610,396	27,610,396		30,208,712
Liabilities, Noncurrent, Total	2,571,303	2,571,303		$ 2,296,393
Operating Lease, Expense	216,000	938,000
Operating Lease, Payments	$ 216,000	$ 938,000
Accounting Standards Update 2016-02 [Member]
Assets, Noncurrent, Excluding Property, Plant, and Equipment			$ 2,800,000
Liabilities, Current, Total			1,100,000
Liabilities, Noncurrent, Total			$ 1,700,000

XML

Note 14 - Impairment (Details Textual) - USD ($)	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019
Goodwill, Impairment Loss	$ 3,000,000
Clever Container [Member]
Goodwill, Impairment Loss		$ 220,000
Flexo Universal [Member]
Goodwill, Impairment Loss		$ 1,033,000

XML

Note 3 - Liquidity and Going Concern (Details Textual) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net Income (Loss) Attributable to Parent, Total	$ (1,941,584)	$ (559,297)	$ (5,680,152)	$ (772,100)	$ (3,600,000)	$ (1,600,000)	$ 700,000
Failure to Pay Contractually Obligations [Member]
Loss Contingency, Damages Sought, Value			$ 700,000

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Note 16 - Restatement of Financial Statements (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Error Corrections and Prior Period Adjustments [Table Text Block]

	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

	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

	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

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Note 2 - Discontinued Operations

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note

2

–

Discontinued Operations

In

July 2019

management and the Board engaged in a review of CTI Balloons and CTI Europe and determined that they are

not

accretive to the Company overall, add complexity to the Company’s structure and utilize resources. Therefore, as of

July 19, 2019,

the board authorized management to divest of CTI Balloons and CTI Europe. These actions are being taken to focus our resources and efforts on our core business activities, particularly foil balloons and ancillary products based in North America. The Company determined that these entities met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of these operations as discontinued operations in the Consolidated Statements of Comprehensive Income and presented the related assets and liabilities as held-for-sale in the Consolidated Balance Sheets. These changes have been applied for all periods presented. The Company divested its CTI Balloons (United Kingdom) subsidiary in the

fourth

quarter

2019

and expects to divest CTI Europe (Germany) in the

first

half of

2020.

In connection with management’s intentions to simplify these operations and organizational structure, we identified write-offs of

$88,000

and

$1.7

million for the

three

and

nine

months ended

September 30, 2019,

respectively, related to CTI Balloons and CTI Europe. The charges for the

three

months ended

September 30, 2019

were comprised of the following:

$78,000

inventory and other assets and

$10,000

allowance for doubtful accounts. The charges for the

nine

months ended

September 30, 2019

were comprised of the following:

$1.3M

inventory,

$76,000

allowance for doubtful accounts; and

$280,000

for other assets. Additionally, it recognized an impairment charge of

$1.0

million, including

$167,000

of previously unrecognized currency translation adjustment losses because the Company is completely exiting its operations in Germany and the UK once the divestitures occur.      

CTI Balloons recorded losses from discontinued operations, net of taxes of (

$433,000

) and (

$996,000

) for the

three

and

nine

months ended

September 30, 2019,

respectively (including an estimated loss on sale of

$321,000

). The losses, net of tax were (

$8,000

) and (

$59,000

) for the

three

and

nine

months ended

September 30, 2018,

respectively.

CTI Europe recorded losses from discontinued operations, net of taxes of (

$566,000

) and (

$1,735,000

) for the

three

and

nine

months ended

September 30, 2019,

respectively (including an estimated loss on sale of

$283,000

). The income, net of taxes were

$32,000

and

$96,000

for the

three

and

nine

months ended

September 30, 2018,

respectively.

Summarized Discontinued Operations Financial Information

The following table summarizes the major line items for the International operations that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income for the

three

months ending

	09/30/19			09/30/18
Income Statement
Net Sales	$	1,177,953		$	1,397,033
Cost of Sales		1,163,985			1,041,266
Gross Margin		13,968			355,767
Impairment of Long-Lived Assets
SG&A		373,625			330,898
Operating Income		(359,657)			24,869
Other Expense (income)		35,111			(8,038	)
pretax loss from discontinued operations		(394,768	)		32,907
Loss from classification to held for sale		604,483			-
Income Tax Expense		-			9,214
(Loss)Income prior to non-controlling interest		(999,251	)		23,693
Non-controlling Interest share of profit/loss		(271,807	)		15,411
(Loss) Income attributable to CTI shareholders	$	(727,444	)	$	8,282

The following table summarizes the major line items for the International operations that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income for the

nine

months ending

		09/30/19			09/30/18
Income Statement
Net Sales	$	4,152,390		$	4,981,152
Cost of Sales		4,881,526			3,860,225
Gross Margin		(729,136	)		1,120,927
Impairment of Long-Lived Assets		(4,173	)
SG&A		1,342,360			1,103,266
Operating Income		(2,067,323	)		17,662
Other Expense (income)		58,990			(34,219	)
Pretax loss from discontinued operations		(2,126,313	)		51,880
Loss from classification to held for sale		604,483			-
Income Tax Expense		-			14,526
Income (loss) prior to non-controlling interest		(2,730,796	)		37,354
Non-controlling Interest share of (loss)/income		(837,136	)		46,067
Income (loss) attributable to CTI shareholders	$	(1,893,660	)	$	(8,713	)

The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented:

	9/30/2019		12/31/2018
Balance Sheet
Assets
Current Assets
Cash on hand and Banks	$	56,769	$	169,912
Accounts Receivable		687,607		584,827
Inventory		453,395		2,618,854
Prepaid & Other		-		125,726
TOTAL Current Assets		1,197,771		3,499,319
NET Property, Plant, and Equipment		105,594		94,069
Other Assets
Operating lease right-of-use		561,120		-
Other		44,303		78,729
TOTAL Other Assets		605,423		78,729
TOTAL Non-Current Assets		711,017		172,798
Less Valuation Allowance on Held for Sale classification		(604,483)
TOTAL Assets	$	1,304,305	$	3,672,117
Liabilities
Current Liabilities
Trade Accounts Payable	$	435,785	$	727,741
Operating Lease Liabilities - Current		382,214		-
Other/Accrued Liabilities		43,425		80,035
TOTAL Current Liabilities		861,424		807,776
Non-Current Liabilities
Operating Lease Liabilities - Non Current		178,906		-
Other Non-Current		31,287		31,874
TOTAL Non-Current Liabilities		210,193		31,874
		-		-
TOTAL Liabilities	$	1,071,617	$	839,650

The cash flows related to discontinued operations have

not

been segregated and are included in the Consolidated Statements of Cash Flows. The following table summarizes depreciation from discontinued operations for each of the periods presented:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Depreciation		7,321		7,963		20,519		21,588

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Note 11 - Related Party Transactions

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

11

-

Related Party Transactions

Stephen M. Merrick, Chief Executive Officer of the Company, is of counsel to the law firm of Vanasco Genelly and Miller PC which used to provide legal services to the Company. Legal fees paid by the Company to this firm for the

three

months ended

September 30, 2019

and

2018,

respectively, were

none

and

none.

Legal fees paid by the Company to this firm for the

nine

months ended

September 30, 2019

and

2018,

respectively, were

none

and

$88,000.

  On

July 1, 2019,

the Company deconsolidated Clever, and as result the Company has a note receivable of

$1.3

million. One of owners of Clever is Mr. Schwan, the Company’s chairman.

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)		9 Months Ended
		Sep. 30, 2019		Sep. 30, 2018
Cash flows from operating activities:
Net loss		$ (6,541,627)		$ (811,068)
Depreciation and amortization		835,302		981,449
Amortization of deferred gain on sale/leaseback		(82,422)		(83,394)
Other		248,974
Provision for losses on accounts receivable		399,463		(40,924)
Provision for losses on inventories		1,249,519		14,250
Impairment of long-lived assets		1,252,283
Stock Based Compensation		72,401		139,450
Impairment of Prepaids, Current Assets, and Other Non-Current Assets		168,931
Gain on deconsolidation of Clever		(218,534)
Impairment of assets held for sale		604,483
Deferred income taxes				(347,725)
Loss on disposition of asset		17,480
Change in assets and liabilities:
Accounts receivable		2,776,396		1,717,018
Inventories		1,435,411		(819,293)
Prepaid expenses and other assets		228,389		(776,294)
Trade payables		1,892,671		385,715
Accrued liabilities		(166,823)		(267,938)
Net cash provided by operating activities		4,172,297		91,246
Cash flows from investing activities:
Purchases of property, plant and equipment		(144,222)		(323,785)
Net cash provided by (used in) investing activities		(144,222)		(323,785)
Cash flows from financing activities:
Change in checks written in excess of bank balance		(391,313)		149,447
Net change in revolving line of credit		(3,808,012)		821,390
Repayment of long-term debt		(913,855)		(697,040)
Cash paid for deferred financing fees		(82,763)		(32,805)
Proceeds from issuance of long-term debt		650,000
Net cash provided by (used in) financing activities		(4,545,943)		240,992
Effect of exchange rate changes on cash		205,692		84,360
Net increase/(decrease) in cash and cash equivalents		(312,176)		92,813
Cash and cash equivalents at beginning of period		428,150		181,026
Cash and cash equivalents at end of period	[1]	115,974	[2]	273,839
Supplemental disclosure of cash flow information:
Cash payments for interest		1,558,817		1,381,149
Conversion from Accounts Payable To Common Stock [Member]
Supplemental disclosure of cash flow information:
Common stock issued		303,000
Conversion from Notes Payable To Common Stock [Member]
Supplemental disclosure of cash flow information:
Common stock issued		$ 600,000

[1] 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."

[2] 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."

XML

Note 3 - Liquidity and Going Concern

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Liquidity and Going Concern [Text Block]

Note

3

– Liquidity and Going Concern

The Company’s primary sources of liquidity are cash and cash equivalents as well as availability under the Credit Agreement with PNC Bank, National Association (“PNC”) (see Note

4

). As indicated in Note

4,

twice during

2018

we violated covenants in our credit facility and as of

March 2019

we entered into a forbearance agreement with PNC. Under the terms of this agreement, financial covenants as of

March 31, 2019

were

not

considered and all previously identified compliance failures were waived, but we remain out of compliance with the terms of our credit facility, as amended, including the covenants as of

June 30, 2019

calculated on or about

July 31, 2019.

On

August 1, 2019,

PNC issued a Default and Reservation of Rights letter to the Company, in which PNC advised that line of credit advances would continue to be available to the Company at PNC’s sole discretion, and subject to its terms and conditions. On

October 18, 2019,

we entered into a new forbearance agreement with PNC (“Amendment

4”

). Identified events of default were waived until

January 10, 2020

with respect to Yunhong CTI, LTD, but

not

its Mexican subsidiary (Flexo), subject to its terms and conditions. On

January 13, 2020,

we entered into a new forbearance agreement with PNC (“Amendment

5”

). PNC agreed to (i) waive the Loan Agreement’s requirement that the Company apply the net proceeds of the Offering

first

to the Term Loans (as defined in the Loan Agreement), and agreed that the Company shall instead apply the net proceeds of the Offering to the Revolving Advances (as defined in the Loan Agreement) and in connection therewith the Revolving Commitment Amount (as defined in the Loan Agreement) shall be reduced on a dollar for dollar basis by the amount so applied to the Revolving Advances, and (ii) forebear from exercising the rights and remedies in respect of the Existing Defaults afforded to Lender under the Loan Agreement for a period ending

no

later than

December 31, 2020.

During

2019

we attempted to execute a major capital event with a partner that would infuse money, among other attributes. That effort was unsuccessful as envisioned. We are currently seeking to execute on

one

or more smaller transactions, as well as pursue other financing options. There is

no

assurance that any of these efforts will be successful.

In addition to the above, due to financial performance in

2016,

2017

and

2018,

including net income/(losses) attributable to the Company of

$0.7

million, (

$1.6

million), and (

$3.6

million), respectively, we believe that substantial doubt about our ability to continue as a going concern exists at

September 30, 2019.

Additionally, we have experienced challenges in maintaining adequate seasonal working capital balances, made more challenging by increases in financing and labor costs, along with a supply disruption in the helium market. These changes in cash flows have created very significant strain within our operations and have therefore increased our attempts to obtain additional funding resources.

Finally,

four

claims have been filed in court by vendors,

one

current and

three

former, regarding claims of non-payment pursuant to contractual obligations. The sum of these claims is approximately

$0.7

million. The cost of defense and potential ultimate resolution increases the strain on our financial resources.

Management’s plans include:

(

1

)     Pursuing a smaller strategically significant major capital event.

(

2

)     Working with our bank to resolve our compliance failure on a long-term basis.

(

3

)     Evaluating and potentially executing a transaction of our facility in Lake Barrington, IL.

(

4

)     Simplifying our group structure, and

(

5

)     Exploring alternative funding sources.

Management Assessment

Considering both quantitative and qualitative information, we believe that our plans to obtain additional financing

may

provide us with an ability to finance our operations through

2020

and, if successfully executed,

may

mitigate the substantial doubt about our ability to continue as a going concern.

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 01, 2019
Document Information [Line Items]
Entity Registrant Name	Yunhong CTI LTD.
Entity Central Index Key	0001042187
Trading Symbol	ctib
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		3,835,950
Entity Shell Company	false
Document Type	10-Q/A
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	true
Amendment Description	Amendment No1.
Title of 12(b) Security	Common Stock

XML

Note 7 - Other Comprehensive Income

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

Note

7

- Other Comprehensive Income

In the

nine

months ended

September 30, 2019,

the Company incurred other comprehensive gain of approximately

$16,000,

all from foreign currency translation adjustments.

The following table sets forth the accumulated balance of other comprehensive income and each component.

	Foreign Currency Items			Total Accumulated Other Comprehensive Income
Beginning balance as of January 1, 2019	$	(6,050,347	)	$	(6,050,347	)
Current period change, net of tax		15,603			15,603
Ending Balance as of September 30, 2019		(6,034,744	)		(6,034,744	)

XML

Note 15 - Subsequent Events

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

Note

15

- Subsequent Events

 

In

October 2019,

we determined that we would

not

renew our Trademark License Agreement with SC Johnson when it expired on

December 31, 2019.  

Under this Agreement, we were licensed to manufacture and sell a line of vacuum sealing machines and pouches under the Ziploc® Brand Vacuum Sealer System.   The terms of the Agreement included a run-off provision which allowed us to sell products under the Ziploc® trademark for

90

days after the end of the Agreement.   For the

three

and

nine

months ended

September 30, 2019,

we had revenue of

$2.0

million and

$6.3M,

respectively, associated with products which utilized the Ziploc® trademark.   Our exit of the Ziploc® product line is considered a strategic shift and will have a major effect on our operations and financial results on a go forward basis.   However, as we continued to utilize the Ziploc® related assets in

2020,

those assets will

not

be considered abandoned until they cease to be used at the end of the

first

quarter of

2020.

   Therefore, our Ziploc® operations cannot be classified as discontinued operations in these financial statements but will be presented as discontinued operations when all of the applicable accounting criteria are met. We have also dramatically changed our capital structure.  On

January 3, 2020

we entered into a securities purchase agreement, as amended on

February 24, 2020

and

April 13, 2020, (

the “LF Purchase Agreement”) with LF International Pte., a Singapore private limited company (the “LF International”), which is controlled by Company director Mr. Yubao Li, pursuant to which the Company agreed to issue and sell, and LF International agreed to purchase, up to

500,000

shares of the Company’s newly created Series A Convertible Preferred Stock (“Series A Preferred”), with each share of Series A Preferred initially convertible into

ten

shares of the Company’s common stock, at a purchase price of

$10.00

per share, for aggregate gross proceeds of

$5,000,000

(the “LF International Offering”).  As a result of the LF International Offering, a change of control of the Company

may

occur. As permitted by the LF Purchase Agreement, the Company

may,

in its discretion issue up to an additional

200,000

shares of Series A Preferred for a purchase price of

$10.00

per share to additional investors (the “Additional Shares Offering,” and collectively with the LF International Offering, the “Offering”). On

January 13, 2020,

the Company conducted its

first

closing of the LF International Offering, resulting in aggregate gross proceeds of

$2,500,000.

Pursuant to the LF Purchase Agreement, LF International received the right to nominate and elect

one

member to the Company’s board of directors (subject to certain adjustments), effective as of the

first

closing, as well as a

second

director by the earlier of (i) the Company’s upcoming

2020

annual meeting of shareholders and (ii)

May 15, 2020

and a

third

director by the Company’s upcoming

2020

annual meeting of shareholders. Pursuant to LF International’s nomination, effective

January 13, 2020,

the Board appointed Mr. Yubao Li as a director of the Company. Additionally, pursuant to the LF Purchase Agreement, on

March 12, 2020,

the Company changed its name to Yunhong CTI Ltd. To date, the Company has sold

492,660

shares of Series A Preferred to LF International and other accredited investors for aggregate gross proceeds of

$4,926,600.

Additionally, on

April 1, 2020,

an investor converted an accounts receivable of

$482,000

owed to the investor by the Company in exchange for

48,200

shares of Series A Preferred.  Our business and results of operations

may

be negatively impacted by the spread of COVID-

19.

  We sell our products throughout the United States and in many foreign countries and

may

be impacted by public health crises beyond our control. This could disrupt our operations and negatively impact sales of our products. Our customers, suppliers and distributors

may

experience similar disruption. 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.

XML

Note 4 - Debt (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Leverage Ratios [Table Text Block]

December 31, 2017	4.75	to	1.00
June 30, 2018	4.50	to	1.00
June 30, 2018	4.25	to	1.00
September 30, 2018	not applicable
December 31, 2018	3.50	to	1.00
March 31, 2019	not applicable
June 30, 2019	3.00	to	1.00
September 30, 2019 and thereafter	2.75	to	1.00

XML

Note 16 - Restatement of Financial Statements - Restatement of Financial Statements (Details) (Parentheticals) - USD ($) $ / shares in Thousands	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Preferred Stock, Par value (in dollars per share)		$ 0
Preferred Stock, shares authorized (in shares)		3,000,000
Preferred Stock, shares issued (in shares)		0
Preferred Stock, shares outstanding (in shares)		0
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	15,000,000	15,000,000
Common stock, shares issued (in shares)	3,879,608	3,879,608
Common stock, shares outstanding (in shares)	3,835,950	3,835,950
Treasury stock, shares (in shares)	43,658	43,658
Cash included in "Current assets of discontinued operations"	$ 57,000		$ 57,000
Previously Reported [Member]
Preferred Stock, Par value (in dollars per share)	$ 0
Preferred Stock, shares authorized (in shares)	3,000,000
Preferred Stock, shares issued (in shares)	0
Preferred Stock, shares outstanding (in shares)	0
Common stock, no par value (in dollars per share)	$ 0
Common stock, shares authorized (in shares)	15,000,000
Common stock, shares issued (in shares)	3,879,608
Common stock, shares outstanding (in shares)	3,835,950
Treasury stock, shares (in shares)	43,658
Cash included in "Current assets of discontinued operations"	$ 57,000
Revision of Prior Period, Adjustment [Member]
Preferred Stock, Par value (in dollars per share)
Preferred Stock, shares authorized (in shares)
Preferred Stock, shares issued (in shares)
Preferred Stock, shares outstanding (in shares)
Common stock, no par value (in dollars per share)
Common stock, shares authorized (in shares)
Common stock, shares issued (in shares)
Common stock, shares outstanding (in shares)
Treasury stock, shares (in shares)
Cash included in "Current assets of discontinued operations"

XML

Note 9 - Inventories, Net of Continuing Operations (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Raw materials	$ 1,852,768	$ 1,994,741
Work in process	3,124,781	3,052,224
Finished goods	11,454,025	12,300,010
In Transit	148,183	480,716
Allowance for excess quantities	(293,306)	(439,057)
Total inventories	$ 16,286,452	$ 17,388,634

XML

Note 7 - Other Comprehensive Income (Details Textual)	9 Months Ended
	Sep. 30, 2019 USD ($)
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax, Total	$ 16,000

XML

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

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Note 5 - Stock-based Compensation; Changes in Equity (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Share-based Payment Arrangement, Activity [Table Text Block]

	Shares under Option		Weighted Average Exercise Price
Balance at December 31, 2018		471,144	$	3.95
Granted		-		-
Cancelled/Expired		-		-
Exercised/Issued		-		-
Outstanding at September 30, 2019		471,144	$	3.95
Exercisable at September 30, 2019		165,264	$	4.05

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Note 8 - Geographic Segment Data - Financial Information by Geographic Area (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Revenue from Contract with Customer, Including Assessed Tax	$ 8,329,043	$ 10,128,436	$ 30,297,835	$ 36,508,220
Assets	31,973,840		31,973,840		$ 38,760,834
Assets Held for Sale International Subsidiaries	1,305,000		1,305,000		3,672,000
UNITED STATES
Revenue from Contract with Customer, Including Assessed Tax	5,984,000	7,732,000	23,468,000	29,549,000
Assets	19,409,000		19,409,000		25,613,000
MEXICO
Revenue from Contract with Customer, Including Assessed Tax	2,345,000	$ 2,396,000	6,830,000	$ 6,959,000
Assets	$ 11,260,000		$ 11,260,000		$ 9,476,000

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Note 6 - Legal Proceedings (Details Textual) - USD ($)	1 Months Ended	9 Months Ended
	Jan. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Disputed Compensation Amounts by Claimants [Member] | God’s Little Gift, Inc. (d\b\a) Helium and Balloons Across America and Gary Page [Member]
Payments for Legal Settlements	$ 5,000
Loss Contingency Accrual, Ending Balance			$ 300,000
Disputed Compensation Amounts by Claimants [Member] | God’s Little Gift, Inc. (d\b\a) Helium and Balloons Across America and Gary Page [Member] | Minimum [Member]
Royalty Monthly Payout, Amount	$ 7,667
Failure to Pay Contractually Obligations [Member]
Loss Contingency, Damages Sought, Value		$ 700,000
Loss Contingency, Amount Settled		$ 600,000
Loss Contingency, Settlement, Percentage of Amount Claimed		50.00%
Common Stock [Member] | Disputed Compensation Amounts by Claimants [Member] | God’s Little Gift, Inc. (d\b\a) Helium and Balloons Across America and Gary Page [Member]
Stock Issued During Period, Shares, New Issues (in shares)	20,000

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Note 13 - Leases - Lease Position (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Dec. 31, 2018
Operating lease right-of-use assets	$ 2,234,000	$ 2,234,000
Accumulated amortization	(216,000)	(938,000)
Net lease assets	1,295,745	1,295,745
Operating	839,836	839,836	0
Operating	455,909	455,909
Total lease liabilities	$ 1,296,000	$ 1,296,000
Weighted average remaining term (years) – operating leases (in years) (Year)	2 years	2 years
Weighted average discount rate – operating leases	11.25%	11.25%

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Note 15 - Subsequent Events (Details Textual) - USD ($)				3 Months Ended		9 Months Ended
	Apr. 01, 2020	Mar. 12, 2020	Jan. 13, 2020	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jan. 03, 2020
Revenue from Contract with Customer, Including Assessed Tax				$ 8,329,043	$ 10,128,436	$ 30,297,835	$ 36,508,220
Subsequent Event [Member]
Proceeds from Paycheck Protection Program Under CARES Act	$ 1,000,000
Forecast [Member] | Conversion of Accounts Receivable Owed to Investor to Preferred Stock [Member]
Debt Conversion, Original Debt, Amount	$ 482,000
Forecast [Member] | Series A Preferred Stock [Member] | Conversion of Accounts Receivable Owed to Investor to Preferred Stock [Member]
Debt Conversion, Converted Instrument, Shares Issued (in shares)	48,200
Forecast [Member] | Purchase Agreement [Member] | Series A Preferred Stock [Member]
Sale of Stock, Shares Agreed to Purchase (in shares)								500,000
Convertible Preferred Stock, Shares Issued upon Conversion (in shares)								10
Shares Issued, Price Per Share (in dollars per share)								$ 10
Sale of Stock, Offering Amount								$ 5,000,000
Proceeds from Issuance or Sale of Equity, Total		$ 4,926,600
Stock Issued During Period, Shares, New Issues (in shares)		492,660
Forecast [Member] | Additional Offering [Member] | Series A Preferred Stock [Member]
Shares Issued, Price Per Share (in dollars per share)								$ 10
Sale of Stock, Contingent Additional Offered Shares (in shares)								200,000
Forecast [Member] | First Closing of the Offering [Member] | Series A Preferred Stock [Member]
Proceeds from Issuance or Sale of Equity, Total			$ 2,500,000
Ziploc [Member]
Revenue from Contract with Customer, Including Assessed Tax				$ 2,000,000		$ 6,300,000

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Note 2 - Discontinued Operations - Summarized Discontinued Operating Financial Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Impairment of Long-Lived Assets			$ (4,173)
(Loss)Income prior to non-controlling interest	(999,251)	23,693	(2,730,796)	37,354
Non-controlling Interest share of profit/loss			(837,136)	46,067
Cash on hand and Banks	57,000	57,000	57,000	57,000
TOTAL Current Assets	1,304,305		1,304,305		$ 3,499,319
TOTAL Non-Current Assets					172,798
Less Valuation Allowance on Held for Sale classification	(604,483)		(604,483)
TOTAL Assets	1,305,000		1,305,000		3,672,000
TOTAL Current Liabilities	1,071,617		1,071,617		807,776
TOTAL Non-Current Liabilities					31,874
CTI Balloons and CTI Europe [Member]
Net Sales	1,177,953	1,397,033	4,152,390	4,981,152
Cost of Sales	1,163,985	1,041,266	4,881,526	3,860,225
Gross Margin	13,968	355,767	(729,136)	1,120,927
SG&A	373,625	330,898	1,342,360	1,103,266
Operating Income	(359,657)	24,869	(2,067,323)	17,662
Other Expense (income)	35,111	(8,038)	58,990	(34,219)
pretax loss from discontinued operations	(394,768)	32,907	(2,126,313)	51,880
Loss from classification to held for sale	604,483		604,483
Income Tax Expense		9,214		14,526
(Loss)Income prior to non-controlling interest	(999,251)	23,693	(2,730,796)	37,354
Non-controlling Interest share of profit/loss	(271,807)	15,411
(Loss) Income attributable to CTI shareholders	(727,444)	8,282	(1,893,660)	(8,713)
Cash on hand and Banks	56,769		56,769		169,912
Accounts Receivable	687,607		687,607		584,827
Inventory	453,395		453,395		2,618,854
Prepaid & Other					125,726
TOTAL Current Assets	1,197,771		1,197,771		3,499,319
NET Property, Plant, and Equipment	105,594		105,594		94,069
Operating lease right-of-use	561,120		561,120
Other	44,303		44,303		78,729
TOTAL Other Assets	605,423		605,423		78,729
TOTAL Non-Current Assets	711,017		711,017		172,798
TOTAL Assets	1,304,305		1,304,305		3,672,117
Trade Accounts Payable	435,785		435,785		727,741
Operating Lease Liabilities - Current	382,214		382,214
Other/Accrued Liabilities	43,425		43,425		80,035
TOTAL Current Liabilities	861,424		861,424		807,776
Operating Lease Liabilities - Non Current	178,906		178,906
Other Non-Current	31,287		31,287		31,874
TOTAL Non-Current Liabilities	210,193		210,193		31,874
TOTAL Liabilities	1,071,617		1,071,617		$ 839,650
Depreciation	$ 7,321	$ 7,963	$ 20,519	$ 21,588

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Note 13 - Leases (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Lessee, Operating Lease, Assets and Liabilities [Table Text Block]

Assets	As of September 30, 2019
Operating lease right-of-use assets		2,234,000
Accumulated amortization		(938,000	)
Net lease assets		1,296,000
Liabilities
Current
Operating		840,000
Noncurrent
Operating		456,000
Total lease liabilities		1,296,000
Weighted average remaining term (years) – operating leases (in years)	2
Weighted average discount rate – operating leases		11.25	%

Lease, Cost [Table Text Block]

Operating right-of-use lease asset amortization	216,000
Total expense during three months ended September 30, 2019	216,000

Operating right-of-use lease asset amortization	938,000
Total expense during nine months ended September 30, 2019	938,000

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

The following table summarizes the maturities of our lease liabilities for all operating leases as of September 30,2019
(in thousands)	09/30/2019
2019	192
2020	752
2021	425
2022 and thereafter	60
Total lease payments	1,429
less:  Imputed interest	(133)
Present value of lease liabilities	1,296

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Net Sales	$ 8,329,043	$ 10,128,436	$ 30,297,835	$ 36,508,220
Cost of Sales	7,706,748	8,295,669	25,651,678	28,776,700
Gross profit	622,295	1,832,767	4,646,157	7,731,520
Operating expenses:
General and administrative	1,148,482	1,277,503	3,939,289	4,307,784
Selling	233,506	629,706	842,546	2,208,925
Advertising and marketing	134,040	302,985	485,096	931,475
Impairment of long-lived assets			1,252,283
Gain on loss of control of VIEs	(218,527)		(218,534)
Gain on sale of assets	(23,054)	(24,061)	(70,263)	(71,474)
Total operating expenses	1,274,447	2,186,133	6,450,524	7,376,710
Loss from operations	(652,152)	(353,366)	(1,804,367)	354,810
Other (expense) income:
Interest expense	(464,546)	(462,855)	(1,493,264)	(1,560,130)
Interest income		(27)		(356)
Other Income/(expense)	(82,873)	(57)	(485,742)	1,601
Foreign currency loss	(25,747)	24,584	(27,458)	8,336
Total other expense, net	(573,166)	(438,355)	(2,006,464)	(1,550,549)
Loss from continuing operations before taxes	(1,225,318)	(791,721)	(3,810,831)	(1,195,739)
Income tax benefit		(221,803)		(347,318)
Loss from continuing operations	(1,225,318)	(569,918)	(3,810,831)	(848,422)
Income (Loss) from discontinued operations (including loss on HFS of $0.6M), net of tax	(999,251)	23,693	(2,730,796)	37,354
Net loss	(2,224,569)	(546,225)	(6,541,627)	(811,068)
Less: Net (loss) income attributable to noncontrolling interest	(282,985)	13,072	(861,475)	(38,968)
Net loss attributable to Yunhong CTI, LTD	(1,941,584)	(559,297)	(5,680,152)	(772,100)
Other Comprehensive Income (Loss)
Foreign currency adjustment	(281,817)	231,827	15,603	(110,605)
Comprehensive loss	$ (2,223,401)	$ (327,470)	$ (5,664,549)	$ (882,705)
Basic loss per common share
Continuing operations (in dollars per share)	$ (0.25)	$ (0.16)	$ (0.77)	$ (0.23)
Discontinued operations (in dollars per share)	(0.26)	0	(0.71)	0.01
Basic loss per common share (in dollars per share)	(0.51)	(0.16)	(1.48)	(0.22)
Diluted loss per common share
Continuing operations (in dollars per share)	(0.25)	(0.16)	(0.77)	(0.23)
Discontinued operations (in dollars per share)	(0.26)	0	(0.71)	(0.01)
Diluted loss per common share (in dollars per share)	$ (0.51)	$ (0.16)	$ (1.48)	$ (0.22)
Weighted average number of shares and equivalent shares of common stock outstanding:
Basic (in shares)	3,835,950	3,530,227	3,835,950	3,530,227
Diluted (in shares)	3,835,950	3,530,227	3,835,950	3,530,227

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Note 4 - Debt

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

4

- Debt

During

December 2017,

we terminated a prior credit arrangement and entered in new financing agreements with PNC Bank, National Association (“PNC”). The “PNC Agreements” include a

$6

million term loan and an

$18

million revolving credit facility, with a termination date of

December 2022.

Available credit under the Revolving Credit facility is determined by eligible receivables and inventory at Yunhong CTI, LTD (U.S.) and Flexo Universal (Mexico). We notified PNC of our failure to meet

two

financial covenants as of

March 31, 2018.

On

June 8, 2018,

we entered into Waiver and Amendment

No.

1

(the “Amendment

1”

) to our PNC Agreements. The Amendment modified certain covenants, added others, waived our failure to comply as previously reported, and included an amendment fee and temporary increase in interest rate. During

September 2018,

we filed a preliminary prospectus on Form S-

1

for a planned equity issuance. On

October 8, 2018,

we entered into Consent and Amendment

No.

2

(the “Amendment

2”

) to our PNC Agreements. Amendment

2

reduced the amount of new funding proceeds that must be used to repay the term loan from

$5

million to

$2

million and waived the calculation of financial ratios for the period ended

September 30, 2018,

in exchange for a new covenant committing to raise at least

$7.5

million in gross proceeds from our equity issuance by

November 15, 2018

and pay an amendment fee. Market conditions ultimately forced us to postpone the offering, and thus

no

proceeds were received by the

November 15, 2018

requirement.

We engaged PNC to resolve this failure to meet our amended covenant, and as of

March 2019

entered into a forbearance agreement. Under the terms of this agreement, previously identified compliance failures were waived and financial covenants as of

March 31, 2019

were

not

considered, with the next calculation due

July 31, 2019

for the period ended

June 30, 2019.

We received a temporary over-advance of

$1.2

million, which declined to

zero

over a

six

-week period under the terms of this agreement and paid a fee of

$250,000.

On

August 1, 2019,

PNC issued a Notice of Default and Reservation of Rights letter, indicating the end of the forbearance period and continued events of default with our credit agreement, as amended. We remain out of compliance with the terms of our facility and have thus reclassified long-term bank debt to current liabilities on our balance sheet.

Available credit under the Revolving Credit facility is determined by eligible receivables and inventory at Yunhong CTI, LTD (U.S.) and Flexo Universal (Mexico).

Certain terms of the PNC Agreements include:

● Restrictive Covenants : The Credit Agreement includes several restrictive covenants under which we are prohibited from, or restricted in our ability to:

o Borrow money;

o Pay dividends and make distributions;

o Make certain investments;

o Use assets as security in other transactions;

o Create liens;

o Enter into affiliate transactions;

o Merge or consolidate; or

o Transfer and sell assets.

● Financial Covenants : The Credit Agreement includes a series of financial covenants we are required to meet including:

o We are required to maintain a "Leverage Ratio", which is defined as the ratio of (a) Funded Debt (other than the Shareholder Subordinated Loan) as of such date of determination to (b) EBITDA (as defined in the PNC Agreements) for the applicable period then ended. The highest values for this ratio allowed by the PNC Agreements are:

Fiscal Quarter Ratio

December 31, 2017	4.75	to	1.00
June 30, 2018	4.50	to	1.00
June 30, 2018	4.25	to	1.00
September 30, 2018	not applicable
December 31, 2018	3.50	to	1.00
March 31, 2019	not applicable
June 30, 2019	3.00	to	1.00
September 30, 2019 and thereafter	2.75	to	1.00

o We are required to maintain a "Fixed Charge Coverage Ratio", which is defined as the ratio of (a) EBITDA for such fiscal period, minus Unfinanced Capital Expenditures made during such period, minus distributions (including tax distributions) and dividends made during such period, minus cash taxes paid during such period to (b) all Debt Payments made during such period. This ratio must not exceed 1.1 : 1.0 for any quarterly calculation.

The credit agreement provides for interest at varying rates in excess of the prime rate, depending on the level of senior debt to EBITDA over time. We also entered into a swap agreement with PNC Bank to fix the rate of interest for

$3

million of the notes over

3

years at

2.25%.

This contract was made at market value upon

December 14, 2017

execution and accounted for as a hedge. This contract terminated during

2019

under the terms of the forbearance agreement.

Failure to comply with these covenants has caused us to pay a higher rate of interest (by

2%

per the Agreements), and other potential penalties

may

impact the availability of the credit facility itself, and thus might negatively impact our ability to remain a going concern. As described above in this Note as well as in Note

2,

we remain out of compliance with the terms of this facility.

As of

December 2017,

Mr. Schwan was owed a total of

$1,099,000,

with additional accrued interest of

$400,000,

by the Company. As part of the

December 2017

financing with PNC, Mr. Schwan executed a subordination agreement related to these amounts due him, as evidenced by a related note representing the amount owed to Mr. Schwan. During

January 2019,

Mr. Schwan converted

$600,000

of his balance into approximately

181,000

shares of our common stock at the then market rate.

No

payments were issued to Mr. Schwan during

2018

or the

three

or

nine

months ended

September 30, 2019,

with

$15,000

and

$45,000,

respectively, of interest recorded as an expense.

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Note 8 - Geographic Segment Data

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

8

- Geographic Segment Data

The Company has determined that it operates primarily in

one

business segment that designs, manufactures and distributes film and film related products for use in packaging, storage and novelty balloon products. The Company operates in foreign and domestic regions. Information about the Company's continuing operations by geographic area is as follows:

	Net Sales to Outside Customers				Net Sales to Outside Customers
	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	5,984,000	$	7,732,000	$	23,468,000	$	29,549,000
Mexico		2,345,000		2,396,000		6,830,000		6,959,000
	$	8,329,000	$	10,128,000	$	30,298,000	$	36,508,000

	Total Assets at
	September 30,		December 31,
	2019		2018
United States	$	19,409,000	$	25,613,000
Mexico		11,260,000		9,476,000
Assets Held for Sale International Subsidiaries		1,305,000		3,672,000
	$	31,974,000	$	38,761,000

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Note 1 - Basis of Presentation

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

1

- Basis of Presentation

The accompanying condensed (a) consolidated balance sheet as of

December 31, 2018,

which has been derived from audited consolidated financial statements, and (b) the unaudited interim condensed consolidated financial statements have been prepared and, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the consolidated financial position and the consolidated statements of comprehensive income and consolidated cash flows for the periods presented in conformity with generally accepted accounting principles for interim consolidated financial information and the instructions to Form

10

-Q and Article

8

of Regulation S-

X.

Accordingly, they do

not

include all the information and footnotes required by accounting principles generally accepted in the United States of America. Operating results for the

three

and

nine

months ended

September 30, 2019

are

not

necessarily indicative of the results that

may

be expected for the fiscal year ending

December 31, 2019.

It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form

10

-K for the fiscal year ended

December 31, 2018.

Principles of consolidation and nature of operations:

The condensed consolidated financial statements include the accounts of Yunhong CTI Ltd. (formerly CTI Industries Corporation) and its wholly-owned subsidiaries, CTI Balloons Limited (CTI Balloons) and CTI Supply, Inc., its majority-owned subsidiaries, Flexo Universal, S. de R.L. de C.V. (Flexo) and CTI Europe GmbH (CTI Europe), as well as the accounts of Venture Leasing S. A. de R. L. (VLM). As discussed in Note

2

Discontinued Operations, effective in the

third

quarter, the Company determined that it is exiting CTI Balloons and CTI Europe. Accordingly, the operations of these entities are classified as discontinued operations in these financial statements.

The Company (i) designs, manufactures and distributes balloon and related novelty (candy and party related) products, (ii) operates systems for the production, lamination, coating and printing of films used for food packaging and other commercial uses and for conversion of films to flexible packaging containers and other products, and (iii) distributes vacuum sealing products and home organization products in the United States.

Variable Interest Entities (“VIE’s”):

The determination of whether or

not

to consolidate a variable interest entity under U.S. GAAP requires a significant amount of judgment concerning the degree of control over an entity by its holders of variable interest. To make these judgments, management has conducted an analysis of the relationship of the holders of variable interest to each other, the design of the entity, the expected operations of the entity, which holder of variable interests is most “closely associated” to the entity and which holder of variable interests is the primary beneficiary required to consolidate the entity. Upon the occurrence of certain events, management reviews and reconsiders its previous conclusion regarding the status of an entity as a variable interest entity.

The Company has variable interests in Venture Leasing L.L.C (VL) and Clever Container Company, L.L.C. (Clever). Through

June 30, 2019,

the Company had determined that it was the primary beneficiary of these entities and included them in our consolidated results. In the

third

quarter, we determined that operationally material changes in our involvement with Clever and VL resulted in us having

no

power over the decisions which impact their financial performance. Therefore, we are

no

longer the primary beneficiary of these entities. Effective

July 1, 2019,

we deconsolidated these entities and their results are

not

included in our Consolidated Statements of Comprehensive Income subsequent to

June 30, 2019.

Upon deconsolidation of these entities, we recognized a gain of

$219,000.

In accordance with ASC

810

-

10

because the carrying value of the noncontrolling interest of Clever which was eliminated exceeded the net carrying value of the assets and liabilities of Clever. The Company determined that there was

no

fair value associated with its remaining noncontrolling interest in Clever based on an income approach.

Use of estimates:

In preparing condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of revenue and expenses during the reporting period in the condensed consolidated financial statements and accompanying notes. Actual results

may

differ from those estimates. The Company’s significant estimates include reserves for doubtful accounts, reserves for the lower of cost or market of inventory, reserves for deferred tax assets and recovery value of goodwill.

Earnings per share:

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during each period.

Diluted earnings per share is computed by dividing the net income by the weighted average number of shares of common stock and equivalents (stock options and warrants), unless anti-dilutive, during each period.

As of

September 30, 2019,

and

2018,

shares to be issued upon the exercise of options and warrants aggregated

471,000

and

471,000,

respectively. The number of shares included in the determination of earnings on a diluted basis for the

three

months ended

September 30, 2019

and

2018

were

25,000

and

25,000,

respectively. For the

nine

months ended

September 30, 2019

and

2018,

the same share disclosure was

25,000

and

25,000,

respectively.

Significant Accounting Policies:

The Company’s significant accounting policies are summarized in Note

2

of the Company’s consolidated financial statements for the year ended

December 31, 2018.

There were

no

significant changes to these accounting policies during the

three

or

nine

months ended

September 30, 2019,

except for the adoption of Accounting Standards Codification (ASC) Topic

842,

Leases.

On

January 1, 2019,

we adopted ASC Topic

842

(Leases). The adoption of this standard significantly increased our assets and liabilities and further discussed in Note

12.

ASC

842

requires a lessee to recognize assets and liabilities related to leases with terms in excess of

12

months. Such assets are typically considered Right-Of-Use (“ROU”) assets. Prior information has

not

been restated and continues to be reported under the accounting standards in effect for those periods.

On

January 1, 2018,

we adopted ASC

606

(Revenue From Contracts With Customers) using the modified retrospective method. The adoption of ASC

606

did

not

have a material impact on our consolidated financial position or results of operations, as our revenue arrangements generally consist of a single performance obligation to transfer promised goods at a fixed price.

Net sales include revenues from sales of products and shipping and handling charges, net of estimates for product returns. Revenue is measured at the amount of consideration the Company expects to receive in exchange for the transferred products. Revenue is recognized at the point in time when we transfer the promised products to the customer and the customer obtains control over the products. The Company recognizes revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight are included in cost of sales, as we have elected the practical expedient included in ASC

606.

The Company provides for product returns based on historical return rates. While we incur costs for sales commissions to our sales employees and outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than

one

year and we have elected the practical expedient included in ASC

606.

We do

not

incur incremental costs to obtain contracts with our customers. Our product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Therefore, the product warranties are

not

a separate performance obligation and are accounted for as described herein. Sales taxes assessed by governmental authorities are accounted for on a net basis and are excluded from net sales.

Auditor Replacement Process:

During

April 2019,

our independent registered accounting firm, Plante & Moran PLLC, declined to stand for reappointment as auditor.  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.  

Previously, the quarterly report on Form

10

-Q was prepared without the benefit of auditor review.  This Form

10

-Q/A is filed with review from RBSM.

XML

Note 12 - Derivative Instruments; Fair Value

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Derivatives and Fair Value [Text Block]

Note

12

-

Derivative Instruments; Fair Value

The Company accounts for derivative instruments in accordance with U.S. GAAP, which requires that all derivative instruments be recognized on the balance sheet at fair value. We

may

enter into interest rate swaps to fix the interest rate on a portion of our variable interest rate debt to reduce the potential volatility in our interest expense that would otherwise result from changes in market interest rates. Our derivative instruments are recorded at fair value and are included in accrued liabilities of our consolidated balance sheet. Our accounting policies for these instruments are based on whether they meet our criteria for designation as hedging transactions, which include the instrument’s effectiveness, risk reduction and, in most cases, a

one

-to-

one

matching of the derivative instrument to our underlying transaction. As of

September 30, 2019,

we had

no

such instrument. The only derivative instrument, terminated during

2019,

was accounted for as a hedge. Changes in fair value for the respective periods were recognized in the consolidated statement of operations.

The interest rate swap we entered into

December 14, 2017

had a

three

-year term (ending

December 14, 2020)

and a notional amount of

$3

million. The Company purchased a

2.25%

fixed rate in exchange for the variable rate on a portion of the notes payable under the PNC Agreements, which was

1.47%

at time of execution. The swap was terminated during

2019

as a result of the

first

forbearance agreement with the bank.

XML

Note 8 - Geographic Segment Data (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Net Sales to Outside Customers				Net Sales to Outside Customers
	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	5,984,000	$	7,732,000	$	23,468,000	$	29,549,000
Mexico		2,345,000		2,396,000		6,830,000		6,959,000
	$	8,329,000	$	10,128,000	$	30,298,000	$	36,508,000

	Total Assets at
	September 30,		December 31,
	2019		2018
United States	$	19,409,000	$	25,613,000
Mexico		11,260,000		9,476,000
Assets Held for Sale International Subsidiaries		1,305,000		3,672,000
	$	31,974,000	$	38,761,000

XML

Note 14 - Impairment

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Asset Impairment Charges [Text Block]

Note

1

4

 - 

Impairment

Upon closing of the

first

quarter of

2019,

the Company identified an impairment indicator related to the goodwill associated with Clever Container.  As a result of an impairment test, the Company fully impaired the goodwill related to Clever Container in the

first

quarter and recorded an impairment charge of

$220,000.

  Upon closing of the

first

quarter of

2019,

the Company identified an impairment indicator related to the goodwill associated with Flexo.  As a result of an impairment test, the Company fully impaired the goodwill related to Flexo in the

first

quarter of

2019

and recorded an impairment charge of

$1,033,000.

XML

Note 2 - Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Disposal Groups, Including Discontinued Operations [Table Text Block]

	09/30/19			09/30/18
Income Statement
Net Sales	$	1,177,953		$	1,397,033
Cost of Sales		1,163,985			1,041,266
Gross Margin		13,968			355,767
Impairment of Long-Lived Assets
SG&A		373,625			330,898
Operating Income		(359,657)			24,869
Other Expense (income)		35,111			(8,038	)
pretax loss from discontinued operations		(394,768	)		32,907
Loss from classification to held for sale		604,483			-
Income Tax Expense		-			9,214
(Loss)Income prior to non-controlling interest		(999,251	)		23,693
Non-controlling Interest share of profit/loss		(271,807	)		15,411
(Loss) Income attributable to CTI shareholders	$	(727,444	)	$	8,282

		09/30/19			09/30/18
Income Statement
Net Sales	$	4,152,390		$	4,981,152
Cost of Sales		4,881,526			3,860,225
Gross Margin		(729,136	)		1,120,927
Impairment of Long-Lived Assets		(4,173	)
SG&A		1,342,360			1,103,266
Operating Income		(2,067,323	)		17,662
Other Expense (income)		58,990			(34,219	)
Pretax loss from discontinued operations		(2,126,313	)		51,880
Loss from classification to held for sale		604,483			-
Income Tax Expense		-			14,526
Income (loss) prior to non-controlling interest		(2,730,796	)		37,354
Non-controlling Interest share of (loss)/income		(837,136	)		46,067
Income (loss) attributable to CTI shareholders	$	(1,893,660	)	$	(8,713	)

	9/30/2019		12/31/2018
Balance Sheet
Assets
Current Assets
Cash on hand and Banks	$	56,769	$	169,912
Accounts Receivable		687,607		584,827
Inventory		453,395		2,618,854
Prepaid & Other		-		125,726
TOTAL Current Assets		1,197,771		3,499,319
NET Property, Plant, and Equipment		105,594		94,069
Other Assets
Operating lease right-of-use		561,120		-
Other		44,303		78,729
TOTAL Other Assets		605,423		78,729
TOTAL Non-Current Assets		711,017		172,798
Less Valuation Allowance on Held for Sale classification		(604,483)
TOTAL Assets	$	1,304,305	$	3,672,117
Liabilities
Current Liabilities
Trade Accounts Payable	$	435,785	$	727,741
Operating Lease Liabilities - Current		382,214		-
Other/Accrued Liabilities		43,425		80,035
TOTAL Current Liabilities		861,424		807,776
Non-Current Liabilities
Operating Lease Liabilities - Non Current		178,906		-
Other Non-Current		31,287		31,874
TOTAL Non-Current Liabilities		210,193		31,874
		-		-
TOTAL Liabilities	$	1,071,617	$	839,650

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Depreciation		7,321		7,963		20,519		21,588

XML

Note 7 - Other Comprehensive Income - Accumulated Other Comprehensive Loss Balances (Details)	9 Months Ended
	Sep. 30, 2019 USD ($)
Balance	$ 6,255,729
Balance	1,792,141
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]
Balance	(6,050,347)
Accumulated Other Comprehensive Loss, Current period change	15,603
Balance	(6,034,744)
AOCI Attributable to Parent [Member]
Balance	(6,050,347)
Accumulated Other Comprehensive Loss, Current period change	15,603
Balance	$ (6,034,744)

XML

Note 5 - Stock-based Compensation; Changes in Equity (Details Textual) - USD ($) xbrli-pure in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Apr. 10, 2009
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate			0.00%		0.00%
Share-based Payment Arrangement, Expense	$ 20,000	$ 34,000	$ 72,000	$ 139,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	118,000		118,000
Expected Recognized Compensation Expenses, Remainder of the Fiscal Year	18,000		18,000
Expected Recognized Compensation Expenses in Year Two	$ 56,000		$ 56,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares)	471,144		471,144		471,144
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value	$ 83,000		$ 83,000
Stock Incentive Plan 2009 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)						510,000
Stock Incentive Plan 2018 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares)	471,144		471,144

XML

Note 10 - Concentration of Credit Risk (Details Textual) - Customer Concentration Risk [Member]	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)
Revenue Benchmark [Member]
Number of Major Customers	2	2	2	2
Revenue Benchmark [Member] | Customer One [Member]
Concentration Risk, Percentage	22.00%	24.00%	27.00%	27.00%
Revenue Benchmark [Member] | Customer Two [Member]
Concentration Risk, Percentage	19.00%	27.00%	28.00%	30.00%
Accounts Receivable [Member] | Customer One [Member]
Accounts Receivable, before Allowance for Credit Loss	$ 1,777,000	$ 2,241,000	$ 1,777,000	$ 2,241,000
Concentration Risk, Percentage			26.00%	22.00%
Accounts Receivable [Member] | Customer Two [Member]
Accounts Receivable, before Allowance for Credit Loss	$ 996,000	$ 1,702,000	$ 996,000	$ 1,702,000
Concentration Risk, Percentage			14.00%	17.00%

XML

Note 16 - Restatement of Financial Statements - Restatement of Financial Statements (Details) - USD ($)		3 Months Ended				9 Months Ended				12 Months Ended
	Jul. 01, 2019	Sep. 30, 2019		Sep. 30, 2018		Sep. 30, 2019		Sep. 30, 2018		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash and cash equivalents		$ 59,205				$ 59,205				$ 258,238
Accounts receivable		6,914,584				6,914,584				10,245,728
Inventories, net		16,286,452				16,286,452				17,388,634
Prepaid expenses		452,125				452,125				834,690
Other current assets		1,145,545				1,145,545				784,125
Receivable from related party		1,392,666				1,392,666
Current assets of discontinued operations		1,304,305				1,304,305				3,499,319
Total current assets		27,554,882				27,554,882				33,010,734
Machinery and equipment		23,747,842				23,747,842				23,668,082
Building		3,374,334				3,374,334				3,367,082
Office furniture and equipment		2,285,345				2,285,345				2,573,095
Intellectual property		783,179				783,179				783,179
Land		250,000				250,000				250,000
Leasehold improvements		409,347				409,347				409,188
Fixtures and equipment at customer locations		518,450				518,450				518,450
Projects under construction		96,696				96,696				150,272
Property, Plant and Equipment, Gross, Ending Balance		31,465,193				31,465,193				31,719,348
Less : accumulated depreciation and amortization		(28,600,235)				(28,600,235)				(27,998,437)
Total property, plant and equipment, net		2,864,958				2,864,958				3,720,912
Goodwill										1,473,176
Net deferred income tax asset		135,094				135,094				135,094
Net lease assets		1,295,745				1,295,745
Other non-current assets
Other assets		123,160				123,160
Assets, Noncurrent, Excluding Property, Plant, and Equipment		1,554,000				1,554,000				1,856,390
Other non-current assets of discontinued operations										172,798
TOTAL ASSETS		31,973,840				31,973,840				38,760,834
Checks written in excess of bank balance		244,201				244,201				636,142
Trade payables		8,032,613				8,032,613				5,951,929
Line of credit		12,560,206				12,560,206				16,582,963
Notes payable - current portion		3,787,533				3,787,533				4,432,320
Notes payable affiliates - current portion		11,789				11,789				10,821
Operating		839,836				839,836				0
Accrued liabilities		1,062,601				1,062,601				1,786,761
Current liabilities of discontinued operations		1,071,617				1,071,617				807,776
Liabilities, Current, Total		27,610,396				27,610,396				30,208,712
Notes payable - affiliates		19,347				19,347				167,248
Notes payable, net of current portion		839,207				839,207				399,912
Operating Lease Liabilities		455,909				455,909
Notes payable - officers, subordinated		1,042,766				1,042,766				1,597,019
Other long-term liabilities		214,074				214,074				100,340
Deferred income tax liability
Other long-term liabilities of discontinued operations										31,874
Total long-term debt, net of current portion		2,571,303				2,571,303
Liabilities, Noncurrent, Total		2,571,303				2,571,303				2,296,393
TOTAL LIABILITIES		30,181,699				30,181,699				32,505,105
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				13,898,494
Paid-in-capital		3,481,838				3,481,838				2,506,437
Accumulated earnings		(8,545,637)				(8,545,637)				(2,865,486)
Accumulated other comprehensive loss		(6,034,745)				(6,034,745)				(6,050,347)
Less: Treasury stock, 43,658 shares		(160,784)				(160,784)				(160,784)
Total Yunhong CTI, LTD stockholders' equity		2,639,166				2,639,166				7,328,314
Noncontrolling interest		(847,025)				(847,025)				(1,072,585)
Total Equity		1,792,141				1,792,141				6,255,729
TOTAL LIABILITIES AND EQUITY		31,973,840				31,973,840				38,760,834
Revenue from Contract with Customer, Including Assessed Tax		8,329,043		$ 10,128,436		30,297,835		$ 36,508,220
Cost of Sales		7,706,748		8,295,669		25,651,678		28,776,700
Gross profit		622,295		1,832,767		4,646,157		7,731,520
General and administrative		1,148,482		1,277,503		3,939,289		4,307,784
Selling		233,506		629,706		842,546		2,208,925
Advertising and marketing		134,040		302,985		485,096		931,475
Impairment on long-lived assets						1,252,283
Gain on deconsolidation of Clever	$ (219,000)	(218,527)				(218,534)
Gain on sale of assets		(23,054)		(24,061)		(70,263)		(71,474)
Total operating expenses		1,274,447		2,186,133		6,450,524		7,376,710
Income/(Loss) from operations		(652,152)		(353,366)		(1,804,367)		354,810
Interest expense		(464,546)		(462,855)		(1,493,264)		(1,560,130)
Interest income				(27)				(356)
Other Expense		(82,873)				(485,742)
Foreign currency loss		(25,747)		24,584		(27,458)		8,336
Total other expense, net		(573,166)		(438,355)		(2,006,464)		(1,550,549)
Income from continuing operations before taxes		(1,225,318)		(791,721)		(3,810,831)		(1,195,739)
Income tax expense				(221,803)				(347,318)
Income from continuing operations		(1,225,318)		(569,918)		(3,810,831)		(848,422)
Income (Loss) from discontinued operations (including loss on HFS of $0.6M), net of tax		(999,251)		23,693		(2,730,796)		37,354
Net income (loss)		(2,224,569)		(546,225)		(6,541,627)		(811,068)
Less: Net (loss) income attributable to noncontrolling interest		(282,985)		13,072		(861,475)		(38,968)
Net Income (Loss) Attributable to Parent, Total		(1,941,584)		(559,297)		(5,680,152)		(772,100)		(3,600,000)	$ (1,600,000)	$ 700,000
Foreign currency adjustment		(281,817)		231,827		15,603		(110,605)
Comprehensive Income (Loss)		$ (2,223,401)		$ (327,470)		$ (5,664,549)		$ (882,705)
Continuing operations (in dollars per share)		$ (0.25)		$ (0.16)		$ (0.77)		$ (0.23)
Discontinued operations (in dollars per share)		(0.26)		0		(0.71)		0.01
Basic income per common share (in dollars per share)		(0.51)		(0.16)		(1.48)		(0.22)
Continuing operations (in dollars per share)		(0.25)		(0.16)		(0.77)		(0.23)
Discontinued operations (in dollars per share)		(0.26)		0		(0.71)		(0.01)
Diluted income per common share (in dollars per share)		$ (0.51)		$ (0.16)		$ (1.48)		$ (0.22)
Basic (in shares)		3,835,950		3,530,227		3,835,950		3,530,227
Diluted (in shares)		3,835,950		3,530,227		3,835,950		3,530,227
Depreciation and amortization						$ 835,302		$ 981,449
Operating Cash Flows from Operating Leases
Amortization of deferred gain on sale/leaseback						(82,422)		(83,394)
Other						248,974
Provision for losses on accounts receivable						399,463		(40,924)
Provision for losses on inventories						1,249,519		14,250
Stock based compensation						72,401		139,450
Impairment of Prepaids, Current Assets, and Other Non-Current Assets						168,931
Impairment of assets held for sale						604,483
Deferred income taxes								(347,725)
Loss on disposition of asset						17,480
Accounts receivable						2,776,396		1,717,018
Inventories						1,435,411		(819,293)
Prepaid expenses and other assets						228,389		(776,294)
Trade payables						1,892,671		385,715
Accrued liabilities						(166,823)		(267,938)
Net cash provided by (used in) operating activities						4,172,297		91,246
Purchases of property, plant and equipment						(144,222)		(323,785)
Net cash (used in) investing activities						(144,222)		(323,785)
Change in checks written in excess of bank balance						(391,313)		149,447
Net change in revolving line of credit						(3,808,012)		821,390
Repayment of long-term debt						(913,855)		(697,040)
Proceeds from issuance of stock						0
Cash paid for deferred financing fees						(82,763)		(32,805)
Proceeds from issuance of long-term debt						650,000
Net cash (used in) financing activities						(4,545,943)		240,992
Effect of exchange rate changes on cash						205,692		84,360
Net increase/(decrease) in cash and cash equivalents						(312,176)		92,813
Cash and cash equivalents at beginning of period						428,150		181,026		181,026
Cash and cash equivalents at end of period		$ 115,974	[1],[2]	$ 273,839	[1]	115,974	[1],[2]	273,839	[1]	428,150	$ 181,026
Cash payments for interest						1,558,817		1,381,149
Conversion from Accounts Payable To Common Stock [Member]
Common stock issued						303,000
Conversion from Notes Payable To Common Stock [Member]
Common stock issued						600,000
Previously Reported [Member]
Cash and cash equivalents		126,647				126,647
Accounts receivable		8,134,291				8,134,291
Inventories, net		18,345,406				18,345,406
Prepaid expenses		556,594				556,594
Other current assets		1,293,899				1,293,899
Receivable from related party
Current assets of discontinued operations
Total current assets		28,456,837				28,456,837
Machinery and equipment		23,883,267				23,883,267
Building		3,374,334				3,374,334
Office furniture and equipment		2,692,423				2,692,423
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				189,795
Property, Plant and Equipment, Gross, Ending Balance		32,100,795				32,100,795
Less : accumulated depreciation and amortization		(28,865,571)				(28,865,571)
Total property, plant and equipment, net		3,235,224				3,235,224
Goodwill		1,473,176				1,473,176
Net deferred income tax asset		1,051,128				1,051,128
Net lease assets		1,711,812				1,711,812
Other non-current assets		(3,000,000)				(3,000,000)
Other assets		(31,086)				(31,086)
Assets, Noncurrent, Excluding Property, Plant, and Equipment		1,205,030				1,205,030
Other non-current assets of discontinued operations
TOTAL ASSETS		32,897,091				32,897,091
Checks written in excess of bank balance		244,829				244,829
Trade payables		8,522,419				8,522,419
Line of credit		12,774,347				12,774,347
Notes payable - current portion		3,787,533				3,787,533
Notes payable affiliates - current portion		11,789				11,789
Operating		1,268,257				1,268,257
Accrued liabilities		1,550,238				1,550,238
Current liabilities of discontinued operations
Liabilities, Current, Total		28,159,412				28,159,412
Notes payable - affiliates		221,362				221,362
Notes payable, net of current portion
Operating Lease Liabilities		868,707				868,707
Notes payable - officers, subordinated		443,555				443,555
Other long-term liabilities		1,042,766				1,042,766
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				2,790,464
Liabilities, Noncurrent, Total		2,790,464				2,790,464
TOTAL LIABILITIES		30,949,876				30,949,876
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)				(8,007,958)
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				3,176,845
Noncontrolling interest		(1,229,630)				(1,229,630)
Total Equity		1,947,215				1,947,215
TOTAL LIABILITIES AND EQUITY		32,897,091				32,897,091
Revenue from Contract with Customer, Including Assessed Tax		8,537,475				33,480,704
Cost of Sales		7,729,851				28,139,175
Gross profit		807,624				5,341,529
General and administrative		1,466,830				5,054,028
Selling		377,577				1,230,181
Advertising and marketing		222,061				766,297
Impairment on long-lived assets
Gain on deconsolidation of Clever
Gain on sale of assets		(23,054)				(70,263)
Total operating expenses		2,043,414				6,980,243
Income/(Loss) from operations		(1,235,790)				(1,638,714)
Interest expense		(486,636)				(1,549,703)
Interest income		99				435
Other Expense						(3,000,000)
Foreign currency loss		(28,420)				(27,568)
Total other expense, net		(514,957)				(4,576,836)
Income from continuing operations before taxes		(1,750,747)				(6,215,550)
Income tax expense		(511,823)				(916,033)
Income from continuing operations		(1,238,924)				(5,299,517)
Income (Loss) from discontinued operations (including loss on HFS of $0.6M), net of tax
Net income (loss)		(1,238,924)				(5,299,517)
Less: Net (loss) income attributable to noncontrolling interest		(71,559)				(157,045)
Net Income (Loss) Attributable to Parent, Total		(1,167,365)				(5,142,472)
Foreign currency adjustment		(281,817)				15,603
Comprehensive Income (Loss)		$ (1,449,182)				$ (5,126,869)
Continuing operations (in dollars per share)		$ (0.30)				$ (1.34)
Discontinued operations (in dollars per share)
Basic income per common share (in dollars per share)		(0.30)				(1.34)
Continuing operations (in dollars per share)		(0.30)				(1.34)
Discontinued operations (in dollars per share)
Diluted income per common share (in dollars per share)		$ (0.30)				$ (1.34)
Basic (in shares)		3,835,950				3,835,950
Diluted (in shares)		3,835,950				3,835,950
Depreciation and amortization						$ 835,302
Operating Cash Flows from Operating Leases						606,356
Amortization of deferred gain on sale/leaseback						116,277
Other
Provision for losses on accounts receivable						27,362
Provision for losses on inventories						(157,243)
Stock based compensation
Impairment of Prepaids, Current Assets, and Other Non-Current Assets
Impairment of assets held for sale						3,000,000
Deferred income taxes						(916,033)
Loss on disposition of asset						17,480
Accounts receivable						2,626,396
Inventories						1,685,411
Prepaid expenses and other assets						228,389
Trade payables						1,846,575
Accrued liabilities						(23,878)
Net cash provided by (used in) operating activities						4,592,877
Purchases of property, plant and equipment						(144,222)
Net cash (used in) investing activities						(144,222)
Change in checks written in excess of bank balance						(391,313)
Net change in revolving line of credit						(3,808,012)
Repayment of long-term debt						(913,855)
Proceeds from issuance of stock						975,401
Cash paid for deferred financing fees						(82,763)
Proceeds from issuance of long-term debt						125,000
Net cash (used in) financing activities						(4,095,542)
Effect of exchange rate changes on cash						(654,616)
Net increase/(decrease) in cash and cash equivalents						(301,503)
Cash and cash equivalents at beginning of period						428,150
Cash and cash equivalents at end of period		$ 126,647	[2]			126,647	[2]			428,150
Cash payments for interest						1,558,817
Previously Reported [Member] | Conversion from Accounts Payable To Common Stock [Member]
Common stock issued
Previously Reported [Member] | Conversion from Notes Payable To Common Stock [Member]
Common stock issued
Revision of Prior Period, Adjustment [Member]
Cash and cash equivalents		(67,442)				(67,442)
Accounts receivable		(1,219,707)				(1,219,707)
Inventories, net		(2,058,954)				(2,058,954)
Prepaid expenses		(104,469)				(104,469)
Other current assets		(148,354)				(148,354)
Receivable from related party		1,392,666				1,392,666
Current assets of discontinued operations		1,304,305				1,304,305
Total current assets		(901,955)				(901,955)
Machinery and equipment		(135,425)				(135,425)
Building
Office furniture and equipment		(407,078)				(407,078)
Intellectual property
Land
Leasehold improvements
Fixtures and equipment at customer locations
Projects under construction		(93,099)				(93,099)
Property, Plant and Equipment, Gross, Ending Balance		(635,602)				(635,602)
Less : accumulated depreciation and amortization		265,336				265,336
Total property, plant and equipment, net		(370,266)				(370,266)
Goodwill		(1,473,176)				(1,473,176)
Net deferred income tax asset		(916,034)				(916,034)
Net lease assets		(416,067)				(416,067)
Other non-current assets		3,000,000				3,000,000
Other assets		154,246				154,246
Assets, Noncurrent, Excluding Property, Plant, and Equipment		348,970				348,970
Other non-current assets of discontinued operations
TOTAL ASSETS		(923,251)				(923,251)
Checks written in excess of bank balance		(628)				(628)
Trade payables		(489,806)				(489,806)
Line of credit		(214,141)				(214,141)
Notes payable - current portion
Notes payable affiliates - current portion
Operating		(428,421)				(428,421)
Accrued liabilities		(487,637)				(487,637)
Current liabilities of discontinued operations		1,071,617				1,071,617
Liabilities, Current, Total		(549,016)				(549,016)
Notes payable - affiliates		(202,015)				(202,015)
Notes payable, net of current portion		839,207				839,207
Operating Lease Liabilities		(412,798)				(412,798)
Notes payable - officers, subordinated		599,211				599,211
Other long-term liabilities		(828,692)				(828,692)
Deferred income tax liability		(214,074)				(214,074)
Other long-term liabilities of discontinued operations
Total long-term debt, net of current portion		(219,161)				(219,161)
Liabilities, Noncurrent, Total		(219,161)				(219,161)
TOTAL LIABILITIES		(768,177)				(768,177)
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
Paid-in-capital
Accumulated earnings		(537,679)				(537,679)
Accumulated other comprehensive loss
Less: Treasury stock, 43,658 shares
Total Yunhong CTI, LTD stockholders' equity		(537,679)				(537,679)
Noncontrolling interest		382,605				382,605
Total Equity		(155,074)				(155,074)
TOTAL LIABILITIES AND EQUITY		(923,251)				(923,251)
Revenue from Contract with Customer, Including Assessed Tax		(208,432)				(3,182,869)
Cost of Sales		(23,103)				(2,487,497)
Gross profit		(185,329)				(695,372)
General and administrative		(318,348)				(1,114,739)
Selling		(144,071)				(387,635)
Advertising and marketing		(88,021)				(281,201)
Impairment on long-lived assets						1,472,382
Gain on deconsolidation of Clever		(218,527)				(218,527)
Gain on sale of assets
Total operating expenses		(768,967)				(529,719)
Income/(Loss) from operations		583,638				(165,653)
Interest expense		22,090				56,439
Interest income		(99)				(435)
Other Expense		(82,873)				2,514,258
Foreign currency loss		2,673				110
Total other expense, net		(58,209)				2,570,372
Income from continuing operations before taxes		525,429				2,404,719
Income tax expense		511,823				916,033
Income from continuing operations		13,606				1,488,686
Income (Loss) from discontinued operations (including loss on HFS of $0.6M), net of tax		(999,251)				(2,730,796)
Net income (loss)		(985,645)				(1,242,110)
Less: Net (loss) income attributable to noncontrolling interest		(211,426)				(704,430)
Net Income (Loss) Attributable to Parent, Total		(774,219)				(537,680)
Foreign currency adjustment
Comprehensive Income (Loss)		$ (774,219)				$ (537,680)
Continuing operations (in dollars per share)		$ 0.05				$ 0.57
Discontinued operations (in dollars per share)		(0.26)				(0.71)
Basic income per common share (in dollars per share)		(0.21)				(0.14)
Continuing operations (in dollars per share)		0.50				0.57
Discontinued operations (in dollars per share)		(0.26)				(0.71)
Diluted income per common share (in dollars per share)		$ (0.21)				$ (0.14)
Basic (in shares)
Diluted (in shares)
Depreciation and amortization
Operating Cash Flows from Operating Leases						(606,356)
Amortization of deferred gain on sale/leaseback						(198,699)
Other						248,974
Provision for losses on accounts receivable						372,101
Provision for losses on inventories						1,406,762
Stock based compensation						72,401
Impairment of Prepaids, Current Assets, and Other Non-Current Assets						168,931
Impairment of assets held for sale						(2,395,517)
Deferred income taxes						916,033
Loss on disposition of asset
Accounts receivable						150,000
Inventories						(250,000)
Prepaid expenses and other assets
Trade payables						46,096
Accrued liabilities						(142,945)
Net cash provided by (used in) operating activities						(421,580)
Purchases of property, plant and equipment
Net cash (used in) investing activities
Change in checks written in excess of bank balance
Net change in revolving line of credit
Repayment of long-term debt
Proceeds from issuance of stock						(975,401)
Cash paid for deferred financing fees
Proceeds from issuance of long-term debt						525,000
Net cash (used in) financing activities						(450,401)
Effect of exchange rate changes on cash						861,308
Net increase/(decrease) in cash and cash equivalents						(10,673)
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period		$ (10,673)	[2]			(10,673)	[2]
Cash payments for interest
Revision of Prior Period, Adjustment [Member] | Conversion from Accounts Payable To Common Stock [Member]
Common stock issued
Revision of Prior Period, Adjustment [Member] | Conversion from Notes Payable To Common Stock [Member]
Common stock issued

[1] 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."

[2] 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."

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Note 12 - Derivative Instruments; Fair Value (Details Textual) - PNC [Member] - Interest Rate Swap [Member] - Designated as Hedging Instrument [Member]	Dec. 14, 2017 USD ($)
Derivative, Term of Contract (Year)	3 years
Derivative Liability, Notional Amount	$ 3,000,000
Derivative, Fixed Interest Rate	2.25%
Derivative, Variable Interest Rate	1.47%

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Note 13 - Leases - Maturities for Operating Lease Liabilities (Details)	Sep. 30, 2019 USD ($)
2019	$ 192,000
2020	752,000
2021	425,000
2022 and thereafter	60,000
Total lease payments	1,429,000
less: Imputed interest	(133,000)
Total lease liabilities	$ 1,296,000

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Note 6 - Legal Proceedings

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

Note

6

- Legal Proceedings

The Company

may

be party to certain lawsuits or claims arising in the normal course of business. The ultimate outcome of these matters is unknown but, in the opinion of management, we do

not

believe any of these proceedings will have, individually or in the aggregate, a material adverse effect upon our financial condition, cash flows or future results of operation.

In

July 2017,

God’s Little Gift, Inc. (d\b\a) Helium and Balloons Across America and Gary Page (“Claimants”) filed an action against the Company based on disputed compensation amounts over several years. This action was resolved by mutual agreement between the parties during

January 2019.

Mr. Page received

20,000

shares of CTI common stock,

$5,000

in cash, and a minimum payout in his monthly royalty calculation of

$7,667

beginning

March 1, 2019

and ending

August 1, 2021.

The Company accrued the

$0.3

million in committed costs under this settlement in its

December 31, 2018

financial statements.

During

2019,

four

claims have been filed against us claiming failure to pay contractually obligated amounts. Three of these claims have been filed by former vendors, and the

fourth

by a current vendor. The total of these

four

claims exceeds

$0.7

million. All are being actively defended, and the claimed amount is recorded on our balance sheet as of

September 30, 2019.

Some of the largest with a combined claimed value of approximately

$0.6M

have subsequently been settled at approximately

50%

of the amount claimed. Additional smaller amounts are pending some form of resolution.

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Condensed Consolidated Statements of Cash Flows (Unaudited) (Parentheticals) - USD ($)	Sep. 30, 2019	Sep. 30, 2018
Cash included in "Current assets of discontinued operations"	$ 57,000	$ 57,000

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Note 10 - Concentration of Credit Risk

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

Note

10

- Concentration of Credit Risk

Concentration of credit risk with respect to trade accounts receivable is generally limited due to the large number of entities comprising the Company's customer base. The Company performs ongoing credit evaluations and provides an allowance for potential credit losses against the portion of accounts receivable which is estimated to be uncollectible. Such losses have historically been within management's expectations. During the

three

and

nine

months ended

September 30, 2019

and

2018,

there were

two

customers whose purchases represented more than

10%

of the Company’s consolidated net sales, respectively. Sales to these customers for the

three

ended

September 30, 2019

and

2018

are as follows:

	Three Months Ended				Three Months Ended
	September 30, 2019				September 30, 2018
Customer	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Customer A	$	1,799,000		22%	$	2,395,000		24%
Customer B	$	1,559,000		19%	$	2,686,000		27%

Sales to these customers for the

nine

months ended

September 30, 2019

and

2018

are as follows:

	Nine Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2018
Customer	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Customer A	$	8,136,000		27%	$	9,738,000		27%
Customer B	$	8,424,000		28%	$	10,796,000		30%

As of

September 30, 2019,

the total amounts owed to the Company by these customers were approximately

$1,777,000

or

26%,

and

$996,000

or

14%,

of the Company’s consolidated net accounts receivable, respectively. The amounts owed at

September 30, 2018

by these customers were approximately

$2,241,000

or

22%,

and

$1,702,000

or

17%

of the Company’s consolidated net accounts receivable, respectively.

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Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 59,205	$ 258,238
Accounts receivable, net	6,914,584	10,245,728
Inventories, net	16,286,452	17,388,634
Prepaid expenses	452,125	834,690
Other current assets	1,145,545	784,125
Receivable from related party	1,392,666
Current assets of discontinued operations	1,304,305	3,499,319
Total current assets	27,554,882	33,010,734
Property, plant and equipment:
Machinery and equipment	23,747,842	23,668,082
Building	3,374,334	3,367,082
Office furniture and equipment	2,285,345	2,573,095
Intellectual property	783,179	783,179
Land	250,000	250,000
Leasehold improvements	409,347	409,188
Fixtures and equipment at customer locations	518,450	518,450
Projects under construction	96,696	150,272
Property, Plant and Equipment, Gross	31,465,193	31,719,348
Less : accumulated depreciation and amortization	(28,600,235)	(27,998,437)
Total property, plant and equipment, net	2,864,958	3,720,912
Other assets:
Goodwill		1,473,176
Net deferred income tax asset	135,094	135,094
Operating lease right-of-use	1,295,745
Other assets	123,160	248,120
Total other assets	1,554,000	1,856,390
Other non-current assets of discontinued operations		172,798
TOTAL ASSETS	31,973,840	38,760,834
Current liabilities:
Checks written in excess of bank balance	244,201	636,142
Trade payables	8,032,613	5,951,929
Line of credit	12,560,206	16,582,963
Notes payable - current portion	3,787,533	4,432,320
Notes payable affiliates - current portion	11,789	10,821
Operating Lease Liabilities	839,836	0
Accrued liabilities	1,062,601	1,786,761
Current liabilities of discontinued operations	1,071,617	807,776
Total current liabilities	27,610,396	30,208,712
Long-term liabilities:
Notes payable - affiliates	19,347	167,248
Notes payable, net of current portion	839,207	399,912
Operating Lease Liabilities	455,909
Notes payable - officers, subordinated	1,042,766	1,597,019
Deferred gain (non-current)	214,074	100,340
Other long-term liabilities of discontinued operations		31,874
Total long-term liabilities	2,571,303	2,296,393
TOTAL LIABILITIES	30,181,699	32,505,105
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	2,506,437
Accumulated earnings	(8,545,637)	(2,865,486)
Accumulated other comprehensive loss	(6,034,745)	(6,050,347)
Less: Treasury stock, 43,658 shares	(160,784)	(160,784)
Total Yunhong CTI, LTD stockholders' equity	2,639,166	7,328,314
Noncontrolling interest	(847,025)	(1,072,585)
Total Equity	1,792,141	6,255,729
TOTAL LIABILITIES AND EQUITY	$ 31,973,840	$ 38,760,834

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Note 1 - Basis of Presentation (Details Textual) - USD ($)		3 Months Ended		9 Months Ended
	Jul. 01, 2019	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Deconsolidation, Gain (Loss), Amount	$ 219,000	$ 218,527		$ 218,534
Common Stock, Capital Shares Reserved for Future Issuance (in shares)		471,000	471,000	471,000	471,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)		25,000	25,000	25,000	25,000

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Note 9 - Inventories, Net of Continuing Operations (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30, 201 9			December 31, 2018
Raw materials	$	1,852,768		$	1,994,741
Work in process		3,124,781			3,052,224
Finished goods		11,454,025			12,300,010
In Transit		148,183			480,716
Allowance for excess quantities		(293,306	)		(439,057	)
Total inventories	$	16,286,452		$	17,388,634

XML

Note 4 - Debt (Details Textual)					3 Months Ended		6 Months Ended	9 Months Ended		12 Months Ended
	Jan. 11, 2019 USD ($) shares	Oct. 08, 2018 USD ($)	Jun. 08, 2018	Dec. 14, 2017 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Interest Expense, Total					$ 464,546	$ 462,855		$ 1,493,264	$ 1,560,130
PNC [Member] | Interest Rate Swap [Member] | Designated as Hedging Instrument [Member]
Derivative Liability, Notional Amount				$ 3,000,000
Derivative, Term of Contract (Year)				3 years
Derivative, Fixed Interest Rate				2.25%
Promissory Note [Member] | John H Schwan [Member]
Due to Related Parties, Total											$ 1,099,000
Interest Payable											400,000
Debt Conversion, Original Debt, Amount	$ 600,000
Debt Conversion, Converted Instrument, Shares Issued (in shares) | shares	181,000
Repayments of Related Party Debt										$ 0
Interest Expense, Total					$ 15,000			$ 45,000
PNC [Member] | PNC Agreements [Member]
Debt Instrument, Temporary Over-Advance							$ 1,200,000
Debt Instrument, Temporary Over-Advance, End Balance							$ 0
Debt Instrument, Temporary Over-Advance, Term (Week)							42 days
Debt instrument, Amendment Fee							$ 250,000
Debt Instrument, Interest Rate, Increase (Decrease)			2.00%
PNC [Member] | PNC Agreements [Member] | Maximum [Member]
Fixed Charge Coverage Ratio			1.1
PNC [Member] | PNC Agreements [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity											18,000,000
PNC [Member] | PNC Agreements [Member] | Term Loan [Member]
Long-term Debt, Total											$ 6,000,000
PNC [Member] | PNC Agreements, Amendment Two [Member]
Debt Instrument, Funding Proceeds Used to Repay Term Loan		$ 2,000,000							$ 5,000,000
Debt Instrument, Covenant, Required Proceeds from Equity Issuance		7,500,000
Proceeds from Issuance or Sale of Equity, Total		$ 0

XML

Note 11 - Related Party Transactions (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jul. 01, 2019
Legal Fees	$ 0	$ 0	$ 0	$ 88,000
Schwan Incorporated [Member]
Due to Related Parties, Noncurrent, Total					$ 1,300,000

XML

Note 13 - Leases - Lease Cost (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Operating right-of-use lease asset amortization	$ 216,000	$ 938,000
Total expense	$ 216,000	$ 938,000

XML

Note 16 - Restatement of Financial Statements (Details Textual)	3 Months Ended
	Jun. 30, 2019 USD ($)
Goodwill, Impairment Loss	$ 3,000,000

XML

Note 5 - Stock-based Compensation; Changes in Equity

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note

5

- Stock-Based Compensation; Changes in Equity

The Company has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic

718

which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated financial statements based on their grant-date fair values.

The Company has applied the Black-Scholes model to value stock-based awards and issued warrants related to notes payable. 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 our common stock. The risk-free rate of interest is the related U.S. Treasury yield curve for periods within the expected term of the option at the time of grant. The dividend yield on our common stock is estimated to be

0%

,

as the Company did

not

issue dividends during

2019

and

2018.

The expected volatility is based on historical volatility of the Company’s common stock.

The Company’s net loss for the

three

months ended

September 30, 2019

and net loss for the

three

months ended

September 30, 2018

includes approximately

$20,000

and

$34,000,

respectively, of compensation costs related to share based payments. The Company’s net loss for the

nine

months ended

September 30, 2019

and

2018

includes approximately

$72,000

and

$139,000

respectively, of compensation costs related to share based payments. As of

September 30, 2019,

there was

$118,000

of unrecognized compensation expense related to non-vested stock option grants and stock grants. We expect approximately

$18,000

of additional stock-based compensation expense to be recognized over the remainder of

2019,

and

$56,000

to be recognized during

2020.

On

April 10, 2009,

the Board of Directors approved for adoption, and on

June 5, 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 approved the

2018

Stock Incentive Plan (

“2018

Plan”). The

2018

Plan authorizes the issuance of up to

300,000

shares of our common stock in the form of equity-based awards. Because

no

registration on Form S-

8

was filed for these additional shares within

12

months of approval by our shareholders, those additional shares are

not

available for issuance in the normal course. As of

September 30, 2019,

options for

471,144

shares remain outstanding.

A summary of the Company’s stock option activity, which includes grants of restricted stock, non-qualified stock options, incentive stock options, warrants and related information, is as follows:

	Shares under Option		Weighted Average Exercise Price
Balance at December 31, 2018		471,144	$	3.95
Granted		-		-
Cancelled/Expired		-		-
Exercised/Issued		-		-
Outstanding at September 30, 2019		471,144	$	3.95
Exercisable at September 30, 2019		165,264	$	4.05

The instruments above have an aggregate intrinsic value of

$83,000,

which represents the total pre-tax intrinsic value (the difference between the closing price of the Company’s common stock on the last trading day of the quarter ended

September 30, 2019

and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all the holders exercised their options on

September 30, 2019.

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2019 - USD ($)	Common Stock Outstanding [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]	Total
Balance (in shares) at Dec. 31, 2018	3,578,885				(43,658)
Balance at Dec. 31, 2018	$ 13,898,494	$ 2,506,437	$ (2,865,486)	$ (6,050,347)	$ (160,784)	$ (1,072,585)	$ 6,255,729
Note conversion - Schwan (in shares)	180,723
Note conversion - Schwan		600,000					600,000
Less deconsolidation of VIE						1,087,035	1,087,035
Stock Issued (in shares)	120,000
Stock Issued		303,000					303,000
Stock Option Expense		72,401					72,401
Net loss			(5,680,152)			(861,475)	(6,541,627)
Foreign currency translation
Balance September 30, 2019, restated (in shares) at Sep. 30, 2019	3,879,608				(43,658)
Balance at Sep. 30, 2019	$ 13,898,494	$ 3,481,838	$ (8,545,638)	$ (6,034,744)	$ (160,784)	$ (847,025)	$ 1,792,141

XML

Note 9 - Inventories, Net of Continuing Operations

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note

9

-

Inventories, Net of Continuing Operations

	September 30, 201 9			December 31, 2018
Raw materials	$	1,852,768		$	1,994,741
Work in process		3,124,781			3,052,224
Finished goods		11,454,025			12,300,010
In Transit		148,183			480,716
Allowance for excess quantities		(293,306	)		(439,057	)
Total inventories	$	16,286,452		$	17,388,634

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares $ / shares in Thousands	Sep. 30, 2019	Dec. 31, 2018
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	15,000,000	15,000,000
Common stock, shares issued (in shares)	3,879,608	3,879,608
Common stock, shares outstanding (in shares)	3,835,950	3,835,950
Treasury stock, shares (in shares)	43,658	43,658

XML

Note 4 - Debt - Leverage Ratios (Details)	3 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Maximum [Member]
Leverage ratio	2.75	3		3.5		4.25	4.5	4.75
Minimum [Member]
Leverage ratio	1	1		1		1	1	1

XML

Note 2 - Discontinued Operations (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest, Total	$ (999,251)	$ 23,693	$ (2,730,796)	$ 37,354
CTI Balloons and CTI Europe [Member]
Disposal Group, Including Discontinued Operation, Assets Write-offs	88,000		1,700,000
Disposal Group, Including Discontinued Operation, Inventory and Other Assets Write-offs	78,000
Disposal Group, Including Discontinued Operation, Charge of Allowance for Doubtful Accounts	10,000		76,000
Disposal Group, Including Discontinued Operation, Inventory Write-offs			1,300,000
Disposal Group, Including Discontinued Operation, Other Assets Write-offs			280,000
Disposal Group, Including Discontinued Operation, Impairment Charge			1,000,000
Disposal Group, Including Discontinued Operation, Currency Translation Adjustment Losses			167,000
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest, Total	(999,251)	23,693	(2,730,796)	37,354
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax, Total	604,483		604,483
CTI Balloons Limited [Member]
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest, Total	(433,000)	(8,000)	(996,000)	(59,000)
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax, Total	(321,000)		(321,000)
CTI Europe [Member]
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest, Total	(566,000)		(1,735,000)
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax, Total	$ (283,000)	$ 32,000	$ (283,000)	$ 96,000

XML

Note 10 - Concentration of Credit Risk (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	Three Months Ended				Three Months Ended
	September 30, 2019				September 30, 2018
Customer	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Customer A	$	1,799,000		22%	$	2,395,000		24%
Customer B	$	1,559,000		19%	$	2,686,000		27%

	Nine Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2018
Customer	Net Sales		% of Net Sales		Net Sales		% of Net Sales
Customer A	$	8,136,000		27%	$	9,738,000		27%
Customer B	$	8,424,000		28%	$	10,796,000		30%

XML

Note 13 - Leases

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note

13

- Leases

We adopted ASC Topic

842

(Leases) on

January 1, 2019.

This standard requires us to record certain operating lease liabilities and corresponding right-of-use assets on our balance sheet. Results for periods beginning after

January 1, 2019

are presented under Topic

842,

while prior period amounts are

not

adjusted and continue to be reported in accordance with our historic accounting under Topic

840.

We elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of whether contracts are (or contain) leases, as well as lease classification tests and treatment of initial direct costs. We also elected to

not

separate lease components from non-lease components for all fixed payments, and we exclude variable lease payments in the measurement of right-of-use assets and lease obligations.

Upon adoption of ASC

842

we recorded a

$2.8

million increase in other assets, a

$1.1

million increase in current liabilities, and a

$1.7

million increase in non-current liabilities. We did

not

record any cumulative effect adjustments in opening retained earnings, and adoption of ASC

842

had

no

impact on cash flows from operating, investing, or financing activities.

We determine if an arrangement is a lease at inception. Most of our operating leases do

not

provide an implicit rate of interest so we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. We lease various assets in the course of ordinary business including warehouses and manufacturing facilities, as well as vehicles and equipment used in our operations. Leases with an initial term of

12

months or less are

not

recorded on the balance sheet as we recognize lease expense for these leases on a straight-line basis over the lease term. The depreciable life of assets and related improvements are limited by the expected lease term, unless there is a reasonably certain expected transfer or title or purchase option. Some lease agreements include renewal options at our sole discretion. Any guaranteed residual value is included in our lease liability.

The table below describes our lease position as of

September 30, 2019:

Assets	As of September 30, 2019
Operating lease right-of-use assets		2,234,000
Accumulated amortization		(938,000	)
Net lease assets		1,296,000
Liabilities
Current
Operating		840,000
Noncurrent
Operating		456,000
Total lease liabilities		1,296,000
Weighted average remaining term (years) – operating leases (in years)	2
Weighted average discount rate – operating leases		11.25	%

During the

three

months ended

September 30, 2019,

we recorded expenses related to

Operating right-of-use lease asset amortization	216,000
Total expense during three months ended September 30, 2019	216,000

During the

nine

months ended

September 30, 2019,

we recorded expenses related to

Operating right-of-use lease asset amortization	938,000
Total expense during nine months ended September 30, 2019	938,000

Operating lease expense were approximately 

$216,000

for the

three

months and

$938,000

for the

nine

months ended

September 30, 2019.

Operating lease costs are included within selling, general and administrative expenses on the condensed consolidated statements of operations.  The Company does

not

have any finance leases.  Cash paid for amounts included in the measurement of operating lease liabilities were approximately

$216,000

for the

three

months and 

$938,000

 for the

nine

months ended 

September 30, 2019.

The following table summarizes the maturities of our lease liabilities for all operating leases as of September 30,2019
(in thousands)	09/30/2019
2019	192
2020	752
2021	425
2022 and thereafter	60
Total lease payments	1,429
less:  Imputed interest	(133)
Present value of lease liabilities	1,296

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

The accompanying condensed (a) consolidated balance sheet as of

December 31, 2018,

which has been derived from audited consolidated financial statements, and (b) the unaudited interim condensed consolidated financial statements have been prepared and, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the consolidated financial position and the consolidated statements of comprehensive income and consolidated cash flows for the periods presented in conformity with generally accepted accounting principles for interim consolidated financial information and the instructions to Form

10

-Q and Article

8

of Regulation S-

X.

Accordingly, they do

not

include all the information and footnotes required by accounting principles generally accepted in the United States of America. Operating results for the

three

and

nine

months ended

September 30, 2019

are

not

necessarily indicative of the results that

may

be expected for the fiscal year ending

December 31, 2019.

It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form

10

-K for the fiscal year ended

December 31, 2018.

Consolidation, Policy [Policy Text Block]

Principles of consolidation and nature of operations:

The condensed consolidated financial statements include the accounts of Yunhong CTI Ltd. (formerly CTI Industries Corporation) and its wholly-owned subsidiaries, CTI Balloons Limited (CTI Balloons) and CTI Supply, Inc., its majority-owned subsidiaries, Flexo Universal, S. de R.L. de C.V. (Flexo) and CTI Europe GmbH (CTI Europe), as well as the accounts of Venture Leasing S. A. de R. L. (VLM). As discussed in Note

2

Discontinued Operations, effective in the

third

quarter, the Company determined that it is exiting CTI Balloons and CTI Europe. Accordingly, the operations of these entities are classified as discontinued operations in these financial statements.

The Company (i) designs, manufactures and distributes balloon and related novelty (candy and party related) products, (ii) operates systems for the production, lamination, coating and printing of films used for food packaging and other commercial uses and for conversion of films to flexible packaging containers and other products, and (iii) distributes vacuum sealing products and home organization products in the United States.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Variable Interest Entities (“VIE’s”):

The determination of whether or

not

to consolidate a variable interest entity under U.S. GAAP requires a significant amount of judgment concerning the degree of control over an entity by its holders of variable interest. To make these judgments, management has conducted an analysis of the relationship of the holders of variable interest to each other, the design of the entity, the expected operations of the entity, which holder of variable interests is most “closely associated” to the entity and which holder of variable interests is the primary beneficiary required to consolidate the entity. Upon the occurrence of certain events, management reviews and reconsiders its previous conclusion regarding the status of an entity as a variable interest entity.

The Company has variable interests in Venture Leasing L.L.C (VL) and Clever Container Company, L.L.C. (Clever). Through

June 30, 2019,

the Company had determined that it was the primary beneficiary of these entities and included them in our consolidated results. In the

third

quarter, we determined that operationally material changes in our involvement with Clever and VL resulted in us having

no

power over the decisions which impact their financial performance. Therefore, we are

no

longer the primary beneficiary of these entities. Effective

July 1, 2019,

we deconsolidated these entities and their results are

not

included in our Consolidated Statements of Comprehensive Income subsequent to

June 30, 2019.

Upon deconsolidation of these entities, we recognized a gain of

$219,000.

In accordance with ASC

810

-

10

because the carrying value of the noncontrolling interest of Clever which was eliminated exceeded the net carrying value of the assets and liabilities of Clever. The Company determined that there was

no

fair value associated with its remaining noncontrolling interest in Clever based on an income approach.

Use of Estimates, Policy [Policy Text Block]

Use of estimates:

In preparing condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of revenue and expenses during the reporting period in the condensed consolidated financial statements and accompanying notes. Actual results

may

differ from those estimates. The Company’s significant estimates include reserves for doubtful accounts, reserves for the lower of cost or market of inventory, reserves for deferred tax assets and recovery value of goodwill.

Earnings Per Share, Policy [Policy Text Block]

Earnings per share:

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during each period.

Diluted earnings per share is computed by dividing the net income by the weighted average number of shares of common stock and equivalents (stock options and warrants), unless anti-dilutive, during each period.

As of

September 30, 2019,

and

2018,

shares to be issued upon the exercise of options and warrants aggregated

471,000

and

471,000,

respectively. The number of shares included in the determination of earnings on a diluted basis for the

three

months ended

September 30, 2019

and

2018

were

25,000

and

25,000,

respectively. For the

nine

months ended

September 30, 2019

and

2018,

the same share disclosure was

25,000

and

25,000,

respectively.

New Accounting Pronouncements, Policy [Policy Text Block]

Significant Accounting Policies:

The Company’s significant accounting policies are summarized in Note

2

of the Company’s consolidated financial statements for the year ended

December 31, 2018.

There were

no

significant changes to these accounting policies during the

three

or

nine

months ended

September 30, 2019,

except for the adoption of Accounting Standards Codification (ASC) Topic

842,

Leases.

On

January 1, 2019,

we adopted ASC Topic

842

(Leases). The adoption of this standard significantly increased our assets and liabilities and further discussed in Note

12.

ASC

842

requires a lessee to recognize assets and liabilities related to leases with terms in excess of

12

months. Such assets are typically considered Right-Of-Use (“ROU”) assets. Prior information has

not

been restated and continues to be reported under the accounting standards in effect for those periods.

On

January 1, 2018,

we adopted ASC

606

(Revenue From Contracts With Customers) using the modified retrospective method. The adoption of ASC

606

did

not

have a material impact on our consolidated financial position or results of operations, as our revenue arrangements generally consist of a single performance obligation to transfer promised goods at a fixed price.

Net sales include revenues from sales of products and shipping and handling charges, net of estimates for product returns. Revenue is measured at the amount of consideration the Company expects to receive in exchange for the transferred products. Revenue is recognized at the point in time when we transfer the promised products to the customer and the customer obtains control over the products. The Company recognizes revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight are included in cost of sales, as we have elected the practical expedient included in ASC

606.

The Company provides for product returns based on historical return rates. While we incur costs for sales commissions to our sales employees and outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than

one

year and we have elected the practical expedient included in ASC

606.

We do

not

incur incremental costs to obtain contracts with our customers. Our product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Therefore, the product warranties are

not

a separate performance obligation and are accounted for as described herein. Sales taxes assessed by governmental authorities are accounted for on a net basis and are excluded from net sales.

Auditor Replacement Process [Policy Text Block]

Auditor Replacement Process:

During

April 2019,

our independent registered accounting firm, Plante & Moran PLLC, declined to stand for reappointment as auditor.  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.  

Previously, the quarterly report on Form

10

-Q was prepared without the benefit of auditor review.  This Form

10

-Q/A is filed with review from RBSM.

XML

Note 7 - Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Foreign Currency Items			Total Accumulated Other Comprehensive Income
Beginning balance as of January 1, 2019	$	(6,050,347	)	$	(6,050,347	)
Current period change, net of tax		15,603			15,603
Ending Balance as of September 30, 2019		(6,034,744	)		(6,034,744	)

XML

Note 10 - Concentration of Credit Risk - Concentration of Credit Risk, Net Sales (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Net Sales	$ 8,329,043	$ 10,128,436	$ 30,297,835	$ 36,508,220
Customer One [Member]
Net Sales	$ 1,799,000	$ 2,395,000	$ 8,136,000	$ 9,738,000
Customer One [Member] | Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Percent of net sales	22.00%	24.00%	27.00%	27.00%
Customer Two [Member]
Net Sales	$ 1,559,000	$ 2,686,000	$ 8,424,000	$ 10,796,000
Customer Two [Member] | Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Percent of net sales	19.00%	27.00%	28.00%	30.00%

XML

Note 8 - Geographic Segment Data (Details Textual)	9 Months Ended
	Sep. 30, 2019
Number of Operating Segments	1

XML

Note 5 - Stock-based Compensation; Changes in Equity - Option Activity (Details)	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Outstanding, beginning of period (in shares) | shares	471,144
Outstanding, beginning of period (in dollars per share) | $ / shares	$ 3.95
Granted (in shares) | shares
Granted (in dollars per share) | $ / shares
Cancelled/Expired (in shares) | shares
Cancelled/Expired (in dollars per share) | $ / shares
Exercised/Issued (in shares) | shares
Exercised/Issued (in dollars per share) | $ / shares
Outstanding at the end of period (in shares) | shares	471,144
Outstanding at the end of period (in dollars per share) | $ / shares	$ 3.95
Exercisable at the end of period (in shares) | shares	165,264
Exercisable at the end of period (in dollars per share) | $ / shares	$ 4.05