Note

–

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) in

2020.

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

days after the end of the Agreement. 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 therefore, this product line has been presented as discontinued operations and was abandoned as of

March 31, 2020.

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

$73,000

) for the

three

months ended

March 31, 2019.

CTI Europe recorded a gain from discontinued operations, net of taxes of

$317,000

for the

three

months ended

March 31, 2020.

The net losses, net of taxes, was (

$147,000

) for the

three

months ended

March 31, 2019.

Our Ziploc product line recorded a loss from discontinued operations, net of taxes of (

$804,000

) for the

three

months ended

March 31, 2020.

The net gain, net of taxes, was (

$558,000

) for the

three

months ended

March 31, 2019.

Summarized Discontinued Operations Financial Information

The following table summarizes the major line items from CTI Europe and Ziploc product line 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

	03/31/20			03/31/19
Income Statement
Net Sales		1,057,058			3,856,372
Cost of Sales		1,174,045			3,817,207

Gross Margin		(116,987	)		39,165

SG&A		524,550			815,179

Operating Income		(641,537	)		(776,014	)

Other Expense		13,220			(1,974	)

Total pretax loss from discontinued operations		(654,757	)		(774,040	)

Gain from re-measurement of valuation allowance		168,120			-

Net loss prior to non-controlling interest		(486,637	)		(774,040	)

Non-controlling Interest share of profit/loss		152,094			(76,017	)

Net Loss		(638,731	)		(698,023	)

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

Yunhong CTI Ltd.

Consolidated Balance Sheet

	3/31/2020			12/31/2019
Balance Sheet
Assets
Current Assets
Cash on hand and Banks		6,073			4,307
Accounts Receivable		686,639			539,910
Inventory					74,383
Prepaid & Other		112,889			135,912

TOTAL Current Assets		805,601			754,512

NET Property, Plant, and Equipment		8,517			53,919

Other Assets
Operating lease right-of-use		220,039			220,541
Other		-			47,958
TOTAL Other Assets		220,039			268,499
TOTAL Non-Current Assets		228,556			322,418

Valuation Allowance on Assets Held for Sale		(152,779	)		(320,899	)

TOTAL Assets		881,378			756,031

Liabilities
Current Liabilities
Trade Accounts Payable		31,339			384,333
Operating Lease Liabilities - Current		121,070			203,291
Other/Accrued Liabilities		20,149			19,562
TOTAL Current Liabilities		172,558			607,187

Non-Current Liabilities
Operating Lease Liabilities - Non Current		98,968			17,250
Other Non-Current		32,189			32,317
TOTAL Non-Current Liabilities		131,157			49,567

TOTAL Liabilities		303,715			656,753

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
	March 31,
	2020		2019
Depreciation		154,892		89,574