Note 2 - Discontinued Operations

6 Months Ended

Jun. 30, 2020

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

September 2020.

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. 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.

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

$96,000

) and (

$169,000

) for the

three

and

six

months ended

June 30, 2019.

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

$92,000

for the

three

months ended

June 30, 2020,

compared to a gain from discontinued operations, net of taxes of

$241,000

for the

six

months ended

June 30, 2020.

The net losses, net of taxes, were (

$11,000

) and (

$158,000

) for the

three

and

six

month periods ended

June 30, 2019,

respectively.

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

$746,000

) and (

$1,550,000

) for the

three

and

six

months ended

June 30, 2020.

The net gain, net of taxes, was

$842,000

and

$284,000

for the

three

and

six

month periods ended

June 30, 2019,

respectively.

Summarized Discontinued Operations Financial Information

The following table summarizes the major line items for the 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

	June 30, 2020			June 30, 2019
Income Statement
Net Sales	$	615,388		$	3,204,434
Cost of Sales		941,230			1,987,637
Gross Loss		(325,842	)		1,216,797
Selling, general and administrative		330,446			511,164
Operating income (loss)		(656,288	)		705,633
Other income (loss)		9,233			(25,053	)
Total pretax income (loss) from discontinued operations		(665,521	)		730,686
Gain from classification to held for sale		65,565			-
Net income (loss) prior to non-controlling interest		(599,956	)		730,686
Non-controlling Interest share of profit/loss		70,576			(306	)
Net (loss) income		(670,532	)		730,992

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

six

months ending

	June 30, 2020			June 30, 2019
Income Statement
Net Sales	$	1,672,445		$	7,060,806
Cost of Sales		2,115,275			5,804,844
Gross profit (loss)		(442,830	)		1,255,962
Selling, general and administrative		854,995			1,326,343
Operating loss		(1,297,825	)		(70,381	)
Other income (expense)		22,453			(270,278	)
Total pretax loss from discontinued operations		(1,320,278	)		(43,353	)
Gain from classification to held for sale		233,685			-
Net (loss) income prior to non-controlling interest		(1,086,593	)		(43,353	)
Non-controlling Interest share of profit (loss)		222,670			(76,323	)
Net income (loss)		(1,309,263	)		32,970

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

	June 30, 2020			December 31, 2019
Balance Sheet
Assets
Current Assets
Cash on hand and Banks	$	151,680		$	4,307
Accounts Receivable		424,296			539,910
Inventory		-			74,383
Prepaid and Other		78,471			135,912
TOTAL Current Assets		654,447			754,512
NET Property, Plant, and Equipment		7,334			53,919
Other Assets
Operating lease right-of-use		181,278			220,541
Other		32,543			47,958
TOTAL Other Assets		213,821			268,499
TOTAL Non-Current Assets		221,155			322,418
Valuation Allowance on Assets Held for Sale		(87,214	)		(320,899	)
TOTAL Assets	$	788,388		$	756,031
Liabilities
Current Liabilities
Trade Accounts Payable	$	74,095		$	384,333
Operating Lease Liabilities - Current		123,153			203,291
Other/Accrued Liabilities		18,486			19,562
TOTAL Current Liabilities		215,734			607,186
Non-Current Liabilities
Operating Lease Liabilities - Non Current		58,126			17,250
Other Non-Current		33,029			32,317
TOTAL Non-Current Liabilities		91,155			49,567
TOTAL Liabilities	$	306,889		$	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:

	Six Months Ended
	June 30,
	2020		2019
Depreciation		213,491		178,997