14.

Variable Interest Entities (“VIE”) and Transactions

During

2010,

two

entities owned by officers and/or principal shareholders of the Company (John H. Schwan and Stephen M. Merrick) provided financing for Flexo Universal, the Company’s Mexico subsidiary, for the acquisition and construction of latex balloon production and related equipment. The entities included Venture Leasing L.L.C., (“VLUS”), an Illinois limited liability company which is

100%

owned by an entity owned by Mr. Schwan and Mr. Merrick, and Venture Leasing Mexico S. A. de R. L (“VLM”), a Mexico company which is also owned

100%

by entities owned by Mr. Schwan and Mr. Merrick. The Company is the primary beneficiary of VLUS & VLM and accordingly consolidated the result of the entities in its financial statements.

Mr. Schwan and Mr. Merrick, through entities owned by them, arranged for a line of credit in the amount of

$1,000,000

from Barrington Bank in order to loan monies to VLUS as needed. During

2010,

VLUS received advances on this line totaling

$700,000.

VLUS loaned substantially all of these funds to VLM. VLM utilized the funds to purchase materials, parts, components and services for the acquisition and construction of balloon production and related equipment to be placed at the premises of Flexo Universal. Assembly and construction of this equipment was completed on or about

December 31, 2010

and, in

January 2011,

the equipment was placed in service at Flexo Universal.

The Company has

not

provided any guarantees related to VLUS or VLM and

creditors of the variable interest entities have recourse to the general credit of the Company as a result of including VLUS & VLM in the consolidated financial statements. The accounts of VLM and VLUS have been consolidated with the accounts of the Company. On

May 31, 2016,

Flexo Universal purchased the equipment from VLM for

8,700,000

in Mexican Pesos and the lease was terminated.

Mr. Schwan and Mr. Merrick are partial owners of Clever Container, an Illinois limited liability company engaged in the sale and distribution through a network of independent distributors, of household items including containers and organizing products. Together they own roughly half of Clever Container. The Company acquired a

28.5%

interest in Clever Container from

third

parties in

2016.

The Company produces and sells certain container products to Clever Container and also purchases and re-sells products to Clever Container. By reason of the level of ownership of Clever Container by

two

principal officers and/or shareholders of the Company, the ownership interest of the Company in Clever Container and the transactions among the Company and Clever Container, the determination was made to consolidate the results of Clever Container in the consolidated financial statements of the Company commencing as of

October 1, 2013.

During the

twelve

months ended

December 31, 2018

and

2017,

Clever Container purchased various products from the Company in the amount of

$858,000

and

$955,000,

respectively. As of

December 31, 2018

and

2017,

the balance of accounts receivable from Clever Container to the Company were

$1,352,000

and

$988,000,

respectively.

During

November 2018,

the Company announced its intent to divest its interest in Clever Container. During

February 2019,

the Company agreed in principle to sell its

28.5%

interest in Clever Container to Messrs. Schwan and Merrick in exchange for their

30%

ownership (combined) of CTI Europe. Due to this transaction and an ongoing reduction in involvement between the entities, the Company intends to deconsolidate Clever Container during

2019.

As a result of these subsequent events and expected deconsolidation, the Company performed a valuation of its investment with respect to Clever Container. The Company recognized an impairment of equity interest in Clever Container of

$0.2

million in

2018.

The following sets forth the condensed balance sheet of VLM, VLUS and Clever Container for

December 31, 2018

and

2017.

	Dec. 31, 2018		Dec. 31, 2017
Current Assets	$	490,000	$	608,000
Property, plant and equipment, net		200,000		231,000
Other noncurrent assets		800,000		740,000
Total assets	$	1,490,000	$	1,579,000

Mortgages and other debt payable	$	2,133,000	$	2,062,000
Total liabilities	$	2,133,000	$	2,062,000