22.

Discontinued Operations

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) subsidiary in the

first

half of

2020.

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

$1.75

million for the year ended

December 31, 2019,

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

December 31, 2019

were comprised of the following:

$1.0M

inventory,

$67,000

allowance for doubtful accounts; and

$8,000

for other assets. Depreciation for discontinued operations was

$7,000

and

$29,000

for the years ended

December 31, 2019

and

2018,

respectively.

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

$1,006,000

) for

2019,

including an estimated loss on sale of

$321,000.

The losses, net of taxes, for

2018

$310,000.

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

$1,005,000

) for the year ended

December 31, 2019

respectively (including an estimated loss on sale of

$683,000

). The income, net of taxes was

$46,812

for the year ended

December 31, 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 year ended

	12/31/19			12/31/18
Income Statement
Net Sales		4,952,896			6,169,691
Cost of Sales		5,879,299			4,780,719

Gross Margin		(926,403	)		1,388,972

Impairment of Long-Lived Assets		(4,173	)
SG&A		1,618,971			1,510,924

Operating Income		(2,541,200	)		(121,952	)

Other Expense		67,853			(38,313	)

Total pretax loss from discontinued operations		(2,609,053	)		(83,639	)

Loss from classification to held for sale		(604,483	)		-
Income Tax Expense		-			(179,939)

Net Income prior to non-controlling interest		(3,213,536	)		(263,578	)

Non-controlling Interest share of profit/loss		(1,239,611	)		22,470

Net Income		(1,973,925	)		(286,048	)

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

	12/31/2019			12/31/2018
Balance Sheet
Assets
Current Assets
Cash on hand and Banks		4,307			169,912
Accounts Receivable		539,910			584,827
Inventory		74,383			2,618,854
Prepaid & Other		135,912			125,726

TOTAL Current Assets		754,512			3,499,319

NET Property, Plant, and Equipment		53,919			94,069

Other Assets
Deferred Income Tax asset		-			-
Goodwill		-			-
Operating lease right-of-use		220,541			-
Other		47,960			78,729
TOTAL Other Assets		268,501			78,729
TOTAL Non-Current Assets		322,420			172,798
Valuation Allowance on Assets Held For Sale`		(320,899	)		-
TOTAL Assets		756,033			3,672,117

Liabilities
Current Liabilities		-			-
Trade Accounts Payable		384,333			727,741
Operating Lease Liabilities - Current		203,291			-
Other/Accrued Liabilities		19,562			80,035
TOTAL Current Liabilities		607,187			807,776

Non-Current Liabilities
Notes Payable		-			-
Operating Lease Liabilities - Non Current		17,250			-
Other Non-Current		32,317			31,874
TOTAL Non-Current Liabilities		49,567			31,874
		-			-
TOTAL Liabilities		656,753			839,650