CTI INDUSTRIES CORP (Form: 10-Q, Received: 11/13/2015 13:00:01)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015
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

CTI INDUSTRIES CORPORATION

(Exact name of Registrant as specified in its charter)

Illinois	36-2848943
(State or other jurisdiction of	(I.R.S. Employer Identification Number)
incorporation or organization)

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

(847) 382-1000

(Registrant’s telephone number, including area code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 þ No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller Reporting Company þ

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

The number of shares outstanding of the Registrant’s common stock as of November 1, 2015 was 3,301,116.

INDEX

Part I – Financial Information

Item No. 1.	Financial Statements	1
	Condensed Consolidated Balance Sheet at September 30, 2015 (unaudited) and December 31, 2014	1
	Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 30, 2015 and September 30, 2014	2
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2015 and September 30, 2014	3
	Condensed Consolidated Earnings per Share (unaudited) for the three and nine months ended September 30, 2015 and September 30, 2014	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item No. 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item No. 3	Quantitative and Qualitative Disclosures Regarding Market Risk	23
Item No. 4	Controls and Procedures	23

Part II – Other Information

Item No. 1	Legal Proceedings	24
Item No. 1A	Risk Factors	24
Item No. 2	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item No. 3	Defaults Upon Senior Securities	24
Item No. 4	Submission of Matters to a Vote of Security Holders	24
Item No. 5	Other Information	24
Item No. 6	Exhibits	25
	Signatures	26
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32
	Exhibit 10.1

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

CTI Industries Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

	September 30, 2015			December 31, 2014
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents (VIE $104,000 and $14,000, respectively)	$	272,543		$	150,332
Accounts receivable, (less allowance for doubtful accounts of $105,000 and $230,000, respectively) (VIE $334,000 and $9,000, respectively)		10,121,243			11,286,797
Inventories, net (VIE $805,000 and $699,000, respectively)		17,702,378			17,755,300
Net deferred income tax asset		719,397			718,694
Prepaid expenses (VIE $153,000 and $22,000, respectively)		1,291,334			1,983,915
Other current assets (VIE $58,000 and $46,000, respectively)		748,422			578,888

Total current assets		30,855,317			32,473,926

Property, plant and equipment:
Machinery and equipment (VIE $553,000 and $640,000, respectively)		26,764,353			26,739,353
Building		3,360,017			3,360,017
Office furniture and equipment (VIE $57,000 and $46,000, respectively)		3,493,997			3,473,009
Intellectual property		482,088			482,088
Land		250,000			250,000
Leasehold improvements		627,095			640,166
Fixtures and equipment at customer locations		3,174,535			3,013,747
Projects under construction		674,134			859,631
		38,826,219			38,818,011
Less : accumulated depreciation and amortization (VIE $142,000 and $129,000, respectively)		(32,112,844	)		(31,062,484	)

Total property, plant and equipment, net		6,713,375			7,755,527

Other assets:
Deferred financing costs, net		125,306			157,061
Goodwill (VIE $440,000 and $440,000, respectively)		1,473,176			1,473,176
Net deferred income tax asset		914,996			1,013,392
Other assets (due from related party $51,000 and $47,000, respectively) (VIE $225,000 and $0, respectively)		474,288			173,828

Total other assets		2,987,766			2,817,457

TOTAL ASSETS	$	40,556,458		$	43,046,910

LIABILITIES AND EQUITY
Current liabilities:
Checks written in excess of bank balance (VIE $7,000 and $0, respectively)	$	964,297		$	1,432,212
Trade payables (VIE $367,000 and $74,000, respectively)		5,117,910			4,468,859
Line of credit (VIE $491,000 and $494,000, respectively)		10,246,362			12,158,300
Notes payable - current portion (net discount of $164,000 and $146,000, respectively) (VIE $341,000 and $114,000, respectively)		537,429			328,942
Notes payable affiliates - current portion		8,526			9,034
Capital Lease - current portion		40,535			38,595
Accrued liabilities (VIE $627,000 and $60,000, respectively)		2,455,948			2,493,435

Total current liabilities		19,371,007			20,929,377

Long-term liabilities:
Notes payable - affiliates		270,425			284,547
Notes payable, net of current portion (net discount of $158,000 and $284,000, repectively) (VIE $8,000 and $322,000, respectively)		6,718,252			7,177,406
Notes payable - officers, subordinated		1,300,897			1,236,476
Capital Lease		53,464			86,555

Total long-term debt, net of current portion		8,343,038			8,784,984

Warrants Payable		523,780			525,180

Total long-term liabilities		8,866,818			9,310,164

Equity:
CTI Industries Corporation stockholders' equity:
Preferred Stock — no par value 5,000,000 shares authorized 0 shares issued and outstanding		-			-
Common stock - no par value, 10,000,000 shares authorized, 3,376,743 shares issued and 3,301,116 shares outstanding		13,775,994			13,775,994
Paid-in-capital		1,568,202			1,542,718
Accumulated earnings		987,937			623,455
Accumulated other comprehensive loss		(3,911,198	)		(2,901,212	)
Less: Treasury stock, 75,627 shares		(160,784	)		(160,784	)

Total CTI Industries Corporation stockholders' equity		12,260,151			12,880,171

Noncontrolling interest		58,482			(72,802	)

Total Equity		12,318,633			12,807,369

TOTAL LIABILITIES AND EQUITY	$	40,556,458		$	43,046,910

See accompanying notes to condensed consolidated unaudited financial statements

CTI Industries Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014

Net Sales	$	14,880,820		$	14,569,309		$	43,476,981		$	42,648,515

Cost of Sales		10,775,500			10,824,765			31,863,004			32,380,526

Gross profit		4,105,320			3,744,544			11,613,977			10,267,989

Operating expenses:
General and administrative		1,840,643			1,623,858			5,300,418			5,498,835
Selling		862,587			1,006,080			2,425,677			2,333,524
Advertising and marketing		689,244			595,622			2,005,643			1,646,395

Total operating expenses		3,392,474			3,225,560			9,731,738			9,478,754

Income from operations		712,846			518,984			1,882,239			789,235

Other (expense) income:
Interest expense		(350,960	)		(241,218	)		(1,067,895	)		(760,602	)
Interest income		5,952			5,536			30,729			18,452
Foreign currency gain		43,932			8,049			47,230			5,568

Total other expense, net		(301,076	)		(227,633	)		(989,936	)		(736,582	)

Net income before taxes		411,770			291,351			892,303			52,653

Income tax expense		161,280			122,202			386,514			36,299

Net income		250,490			169,149			505,789			16,354

Less: Net income (loss) attributable to noncontrolling interest		41,237			(40,366	)		(39,754	)		(116,096	)

Net income attributable to CTI Industries Corporation	$	209,253		$	209,515		$	545,543		$	132,450

Other Comprehensive Loss
Foreign currency adjustment		(547,475	)		(363,410	)		(1,009,986	)		(552,014	)
Comprehensive loss	$	(338,222	)	$	(153,895	)	$	(464,443	)	$	(419,564	)

Basic income per common share	$	0.06		$	0.06		$	0.17		$	0.04

Diluted income per common share	$	0.06		$	0.06		$	0.16		$	0.04

Weighted average number of shares and equivalent shares of common stock outstanding:
Basic		3,301,116			3,301,116			3,301,116			3,284,023

Diluted		3,446,808			3,450,344			3,447,938			3,436,124

See accompanying notes to condensed consolidated unaudited financial statements

CTI Industries Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

	For the Nine Months Ended September 30,
	2015			2014

Cash flows from operating activities:
Net income (loss)	$	505,789		$	16,354
Adjustment to reconcile net income to cash provided by operating activities:
Depreciation and amortization		1,379,031			1,594,444
Amortization of debt discount		107,681			92,253
Change in value of swap agreement		-			(59,859	)
Stock based compensation		25,486			60,189
Provision for losses on accounts receivable		32,557			79,943
Provision for losses on inventories		179,901			34,055
Deferred income taxes		92,208			(368,170	)
Change in assets and liabilities:
Accounts receivable		664,907			(2,449,243	)
Inventories		(688,340	)		(3,164,333	)
Prepaid expenses and other assets		106,515			412,969
Trade payables		923,251			2,020,513
Accrued liabilities		61,424			(1,119,859	)

Net cash provided by (used in) operating activities		3,390,410			(2,850,744	)

Cash used in investing activities - purchases of property, plant and equipment		(465,443	)		(838,578	)

Cash flows from financing activities:
Change in checks written in excess of bank balance		(460,401	)		338,470
Net change in revolving line of credit		(1,911,937	)		2,886,194
Proceeds from issuance of long-term debt		4,715			75,494
Repayment of long-term debt (related parties $2,000 and $4,000)		(395,609	)		(387,487	)
Cash paid for deferred financing fees		(8,050	)		-
Purchase of treasury stock		-			(19,495	)
Dividends paid		(10,000	)		(16,000	)
Proceeds from issuance of stock, net		-			300,000

Net cash (used in) provided by financing activities		(2,781,282	)		3,177,176

Effect of exchange rate changes on cash		(21,474	)		17,373

Net increase (decrease) in cash and cash equivalents		122,211			(494,773	)

Cash and cash equivalents at beginning of period		150,332			666,616

Cash and cash equivalents at end of period	$	272,543		$	171,843

Supplemental disclosure of cash flow information:
Cash payments for interest	$	929,324		$	861,760

Cash payments for taxes	$	-		$	55,466

Supplemental Disclosure of non-cash investing and financing activity
Property, Plant & Equipment acquisitions funded by liabilities	$	47,837		$	102,313

See accompanying notes to condensed consolidated unaudited financial statements

CTI Industries Corporation and Subsidiaries

Condensed Consolidated Earnings per Share (unaudited)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Basic
Average shares outstanding:
Weighted average number of common shares outstanding		3,301,116		3,301,116		3,301,116		3,284,023

Net income:
Net income attributable to CTI Industries Corporation	$	209,253	$	209,515	$	545,543	$	132,450

Per share amount	$	0.06	$	0.06	$	0.17	$	0.04

Diluted
Average shares outstanding:
Weighted average number of common shares outstanding		3,301,116		3,301,116		3,301,116		3,284,023

Effect of dilutive shares		145,692		149,228		146,822		152,101

Weighted average number of shares and equivalent shares of common stock outstanding		3,446,808		3,450,344		3,447,938		3,436,124

Net income:
Net income attributable to CTI Industries Corporation	$	209,253	$	209,515	$	545,543	$	132,450

Per share amount	$	0.06	$	0.06	$	0.16	$	0.04

See accompanying notes to condensed consolidated unaudited financial statements

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, 2014, 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, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015. 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, 2014.

Principles of consolidation and nature of operations:

The condensed consolidated financial statements include the accounts of CTI Industries Corporation and its wholly-owned subsidiaries, CTI Balloons Limited, CTI Supply, Inc. and CTF International S.A. de C.V., its majority-owned subsidiaries CTI Mexico S.A. de C.V., Flexo Universal, S.R.L. de C.V. and CTI Europe gmbH, as well as the accounts of Venture Leasing S. A. de R. L., Venture Leasing L.L.C and Clever Container Company, L.L.C. (the “Company”). The last three entities have been consolidated as variable interest entities. All significant intercompany transactions and accounts have been eliminated in consolidation. The Company (i) designs, manufactures and distributes balloon products throughout the world and (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.

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. There are three entities that have been consolidated as variable interest entities.

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, 2015 and 2014, shares to be issued upon the exercise of options and warrants aggregated 343,548 and 368,548, respectively. The number of anti-dilutive shares (not included in the determination of earnings on a diluted basis) for the three and nine months ended September 30, 2015 were 174,000, all of which were represented by options.

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, 2014. There were no significant changes to these accounting policies during the three and nine months ended September 30, 2015.

Recent Accounting Pronouncements:

In July 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” The amendments in this ASU more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). As such, an entity will measure inventory that is within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, the amendments of this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is evaluating the impact that this pronouncement may have on the Company’s financial statements.

In May 2014, the FASB issued ASU No. 2014-09, (“ASU 2014-09”), “Revenue from Contracts with Customers”. The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. In August 2015, the FASB issued ASU 2015-14, (“ASU 2015-14”), “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. Accordingly, public business entities should apply the guidance in ASU 2014-09 to annual reporting periods (including interim periods within those periods) beginning after December 15, 2017. Early adoption is permitted but not before annual periods beginning after December 15, 2016. Entities have the option of using either a full retrospective or modified approach to adopt ASU 2014-09. The Corporation is currently evaluating the new guidance and has not determined the impact this standard may have on its financial statements nor decided upon the method of adoption.

Note 2 - 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 2015 and 2014. The expected volatility is based on historical volatility of the Company’s common stock.

The Company’s net income for the three months ended September 30, 2015 and 2014 includes approximately $7,000 and $17,000, respectively of compensation costs related to share based payments. The Company’s net income for the nine months ended September 30, 2015 and 2014 includes approximately $25,000 and $60,000, respectively of compensation costs related to share based payments. As of September 30, 2015 there is $18,000 of unrecognized compensation expense related to non-vested stock option grants and stock grants. We expect approximately $4,000 of additional stock-based compensation expense to be recognized over the remainder of 2015, $11,000 to be recognized during 2016, and $3,000 to be recognized during 2017.

As of September 30, 2015, the Company had three stock-based compensation plans pursuant to which stock options were, or may be, granted. The Plans provide for the award of options, which may either be incentive stock options (“ISOs”) within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the “Code”) or non-qualified options (“NQOs”) which are not subject to special tax treatment under the Code, as well as for stock grants.

On April 12, 2001, the Board of Directors approved for adoption, effective December 27, 2001, the 2001 Stock Option Plan (“2001 Plan”). The 2001 Plan authorizes the grant of options to purchase up to an aggregate of 119,050, shares of the Company’s Common Stock. As of September 30, 2015 , options for 139,958 shares (including cancelled shares re-issued under the Plan) have been granted and were fully vested at the time of grant and options for 2,000 shares remain outstanding.

On April 24, 2002, the Board of Directors approved for adoption, effective October 12, 2002, the 2002 Stock Option Plan (“2002 Plan”). The 2002 Plan authorizes the grant of options to purchase up to an aggregate of 142,860 shares of the Company’s Common Stock . As of September 30, 2015, options for 123,430 shares have been granted and were fully vested at the time of grant and options for 27,500 shares remain outstanding.

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 authorizes the issuance of up to 250,000 shares of stock or options to purchase stock of the Company. As of September 30, 2015, options for 201,000 shares had been granted and options for 174,000 shares remain outstanding.

A summary of the Company’s stock option activity and related information is as follows:

	Shares under Option		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Balance at December 31, 2014		214,500	$	5.20		2.1	$	25,960
Granted		-		-
Cancelled		11,000	$	5.24
Exercised		-		-
Outstanding at September 30, 2015		203,500	$	5.20		1.3	$	25,665

Exercisable at September 30, 2015		159,900	$	5.19		1.0	$	25,665

On July 17, 2012, the Company entered into a Note and Warrant Purchase Agreement with BMO Private Equity (U.S.), Inc. (“BMO Equity”) pursuant to which (i) BMO Equity advanced to the Company the sum of $5 million and (ii) the Company issued to BMO Equity a warrant to purchase up to Four Percent (4%) of the outstanding shares of common stock of the Company on a fully-diluted basis (140,048 shares of common stock of the Company) at the price of One Cent ($0.01) per share. The term of the loan provided for in this Agreement is five and a half years. Interest is payable on the outstanding balance of the loan at the rate of 11.5% per annum.

On April 12, 2013, the Company entered into Amendment No. 1 to the Note and Warrant Purchase Agreement among the Company and BMO Equity. In the Amendment, non-compliance with financial covenants prior to the date of the Amendment were waived and the Note and Warrant Purchase Agreement was amended (i) to modify the Senior Leverage Ratio and Total Leverage Ratio requirements for the fiscal quarter ending June 30, 2013 and each quarter thereafter during the term of the Note and Warrant Purchase Agreement and (ii) to modify the definitions of EBITDA and Total Funded Debt.

On December 23, 2014, the Company entered into Amendment No. 2 to the Note and Warrant Purchase Agreement among the Company and BMO Equity. In the Amendment, BMO Equity waived certain anticipated events of default as of December 31, 2014 by the Company with respect the amount of capital expenditures and the change of name of the subsidiary CTI Helium, Inc., and the Note and Warrant Purchase Agreement was amended (i) to exclude from the definition of Senior Funded Debt and Total Funded Debt certain indebtedness of a variable interest entity, (ii) to require the Company to provide financial reports and variance reports within 45 days after the end of each calendar month, (iii) to change the Senior Leverage Ratio and Total Leverage Ratio requirements for fiscal quarters ending December 31, 2014 and for each fiscal quarter thereafter to the maturity of the loans, and (iv) to provide for the engagement by the Company of a financial consultant to provide business financial planning and advisory services to the Company.

As of September 30, 2015, the Company was in compliance with the financial covenants provided in the Note and Warrant Purchase Agreement, as amended.

A summary of the Company’s stock warrant activity and related information is as follows:

	Shares under Warrant		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Balance at December 31, 2014		140,048	$	0.01		7.5	$	525,180
Granted
Cancelled		-		-
Exercised		-		-
Outstanding at September 30, 2015		140,048	$	0.01		6.8	$	523,780

Exercisable at September 30, 2015		-		-		-		-

A summary of the Company’s stock option activity by grant date as of September 30, 2015 is as follows:

	Options Outstanding								Options Vested
Options by Grant Date	Shares		Weighted Avg.		Remain. Life		Intrinsic Val		Shares		Weighted Avg.		Remain. Life		Intrinsic Val
Dec 2005		29,500	$	2.88		0.3	$	25,665		29,500	$	2.88		0.3	$	25,665
Dec 2010		64,000		6.16		0.3		-		64,000		6.16		0.3		-
Jan 2011		6,000		5.96		0.3		-		6,000		5.96		0.3		-
Nov 2012		94,000		5.17		2.2		-		56,400		5.17		2.2		-
Nov 2013		10,000		5.75		3.1		-		4,000		5.75		3.1		-
TOTAL		203,500	$	5.20		1.3	$	25,665		159,900	$	5.19		1.0	$	25,665

The aggregate intrinsic value in the tables above 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, 2015 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, 2015.

Note 3 - Legal Proceedings

The Company is party to certain claims or actions arising in the normal course of business. The ultimate outcome of these matters is unknown but, in the opinion of management, the resolution of these matters is not expected to have a significant effect on the future financial position or results of operations of the Company.

Note 4 - Other Comprehensive Loss

In the three and nine months ended September 30, 2015 the company had a comprehensive loss of approximately $547,000 and $1,010,000, respectively, all from foreign currency translation adjustments.

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

	Foreign Currency Items			Total Accumulated Other Comprehensive Loss

Beginning balance as of January 1, 2015	$	(2,901,212	)	$	(2,901,212	)

Current period change, net of tax		(1,009,986	)		(1,009,986	)

Ending Balance as of September 30, 2015	$	(3,911,198	)	$	(3,911,198	)

Note 5 - Inventories, Net

	September 30, 2015			December 31, 2014
Raw materials	$	3,139,041		$	3,294,030
Work in process		1,439,578			1,657,164
Finished goods		13,948,036			13,448,796
Allowance for excess quantities		(824,277	)		(644,690	)
Total inventories	$	17,702,378		$	17,755,300

Note 6 - Geographic Segment Data

The Company has determined that it operates primarily in one business segment which 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 operations by geographic areas 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,
	2015		2014		2015		2014

United States	$	11,377,000	$	10,808,000	$	33,904,000	$	30,986,000
Europe		374,000		380,000		1,031,000		1,182,000
Mexico		2,606,000		2,789,000		6,867,000		8,424,000
United Kingdom		524,000		592,000		1,675,000		2,057,000

	$	14,881,000	$	14,569,000	$	43,477,000	$	42,649,000

	Total Assets at
	September 30,		December 31,
	2015		2014

United States	$	29,874,000	$	33,026,000
Europe		1,398,000		1,457,000
Mexico		7,755,000		7,516,000
United Kingdom		1,529,000		1,048,000

	$	40,556,000	$	43,047,000

Note 7 - 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, 2015 and 2014, 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 and nine months ended September 30, 2015 and 2014 are as follows:

	Three Months Ended					Three Months Ended
	September 30, 2015					September 30, 2014
Customer	Net Sales		% of Net Sales			Net Sales		% of Net Sales
Customer A	$	3,256,000		21.9	%	$	3,369,000		23.1	%
Customer B	$	2,282,000		15.3	%	$	2,420,000		16.6	%

	Nine Months Ended					Nine Months Ended
	September 30, 2015					September 30, 2014
Customer	Net Sales		% of Net Sales			Net Sales		% of Net Sales
Customer A	$	11,660,000		26.8	%	$	11,299,000		26.5	%
Customer B	$	6,091,000		14.0	%	$	5,583,000		13.1	%

As of September 30, 2015, the total amounts owed to the Company by these customers were approximately $1,957,000 or 19.3%, and $1,972,000 or 19.5%, of the Company’s consolidated net accounts receivable, respectively. The amounts owed at September 30, 2014 by these customers were approximately $2,089,000 or 18.8%, and $2,430,000 or 21.9% of the Company’s consolidated net accounts receivable, respectively.

Note 8 - Related Party Transactions

Stephen M. Merrick, President of the Company, is of counsel to the law firm of Vanasco Genelly and Miller PC which provides legal services to the Company. Legal fees paid by the Company to this firm for the three months ended September 30, 2015 and 2014, respectively, were $22,000 and $33,000. Legal fees paid by the Company to this firm for the nine months ended September 30, 2015 and 2014, respectively, were $114,000 and $84,000.

Interest payments have been made or accrued to John H. Schwan for loans made to the Company. During the three months ended September 30, 2015 and 2014 these interest payments totaled $22,000 and $20,000, respectively. During the nine months ended September 30, 2015 and 2014 these interest payments totaled $64,000 and $60,000, respectively.

On July 1, 2011, Flexo Universal, S.R.L. de C.V. (“Flexo”) entered into a lease agreement with Venture Leasing S.A. de R.L. (“Venture Leasing Mexico”) for the lease of balloon production equipment financed and owned by Venture Leasing Mexico and used by Flexo for the production of latex balloons. Venture Leasing Mexico is wholly owned by entities owned by John H. Schwan, Chief Executive Officer of the Company and Stephen M. Merrick, President of the Company. Venture Leasing Mexico and Venture Leasing L.L.C., also owned by entities owned by Mr. Schwan and Mr. Merrick, are deemed variable interest entities and are consolidated with the accounts of the Company. During the three and nine months ended September 30, 2015, Flexo made lease payments to Venture Leasing Mexico totaling $36,000 and $108,000. During the three and nine months ended September 30, 2014, Flexo made lease payments to Venture Leasing Mexico totaling $36,000 and $109,000.

John H. Schwan, Chief Executive Officer of the Company, through an investment entity, and Stephen M. Merrick, President of the Company, also through an investment entity own, in aggregate, a 50% interest in Clever Container Company L.L.C., an Illinois limited liability company. During the three months ended September 30, 2015 and 2014, Clever Container purchased various products from the Company in the amount of $127,000 and $242,000, respectively. During the nine months ended September 30, 2015 and 2014, Clever Container purchased various products from the Company in the amount of $352,000 and $567,000, respectively. As of September 30, 2015 and 2014, the balance of accounts receivable from Clever Container to the Company were $498,000 and $266,000, respectively.

Note 9 - Derivative Instruments; Fair Value

The following tables represents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

	Amount as of
Description	9/30/2015		Level 1		Level 2		Level 3

Warrant Liability	$	524,000		-	$	524,000

	$	524,000	$	-	$	524,000	$	-

	Amount as of
Description	12/31/2014		Level 1		Level 2		Level 3

Warrant Liability	$	525,000		-	$	525,000		-

	$	525,000			$	525,000

The Company is exposed to certain market risks including the effect of changes in interest rates. The Company uses derivative instruments to manage financial exposures that occur in the normal course of business. It does not hold or issue derivatives for speculative trading purposes. The Company is exposed to non-performance risk from the counterparties in its derivative instruments. This risk would be limited to any unrealized gains on current positions. To help mitigate this risk, the Company transacts only with counterparties that are rated as investment grade or higher and all counterparties are monitored on a continuous basis. The fair value of the Company’s derivatives reflects this credit risk.

On July 1, 2011, the Company entered into a swap agreement with BMO Capital Markets with respect to $6,780,000 of our loan balances with BMO Harris Bank N.A. This swap agreement limits the Company’s exposure to interest rate fluctuations on the Company’s floating rate loans. The swap agreement has the effect of fixing the interest rate on the loan balances covered by the swap at 4.65% per annum. The swap agreement is a derivative financial instrument and we determine and record the fair market value of the swap agreement each quarter. The value is recorded on the balance sheet of the Company and the amount of the unrealized gain or loss for each period is recorded as interest income or expense. The swap agreement has expired as of September 30, 2014.

The Effect of Derivative Instruments on the Statement of Financial Performance

	For the three months ended
	September 30, 2015			September 30, 2014
Derivatives not Designated as Hedging Instruments under Statement 133	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative		Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
Interest Rate Contracts	Interest Expense	$	-	Interest Expense	$	-
Interest on fixed/variable rate variances		$	-		$	21,000

The Effect of Derivative Instruments on the Statement of Financial Performance

	For the nine months ended
	September 30, 2015			September 30, 2014
Derivatives not Designated as Hedging Instruments under Statement 133	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative		Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
Interest Rate Contracts	Interest Expense	$	-	Interest Expense	$	3,000
Interest on fixed/variable rate variances		$	-		$	63,000

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 latex toy 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 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 which we purchase from a supplier.

Results of Operations

Net Sales . For the three months ended September 30, 2015, net sales were $14,881,000 compared to net sales of $14,569,000 for the same period of 2014, an increase of 2.1%. For the quarters ended September 30, 2015 and 2014, net sales by product category were as follows:

	Three Months Ended
	September 30, 2015					September 30, 2014
	$		% of			$		% of
Product Category	(000) Omitted		Net Sales			(000) Omitted		Net Sales

Foil Balloons		5,253		35	%		5,657		39	%

Latex Balloons		2,613		18	%		3,001		20	%

Vacuum Sealing Products		3,983		27	%		3,777		26	%

Film Products		1,409		9	%		1,435		10	%

Other Sales		1,623		11	%		699		5	%

Total		14,881		100	%		14,569		100	%

For the nine months ended September 30, 2015, net sales were $43,477,000 compared to net sales of $42,649,000 for the same period of 2014, an increase of 1.9%. For the nine months ended September 30, 2015 and 2014, net sales by product category were as follows:

	Nine Months Ended
	September 30, 2015					September 30, 2014
	$		% of			$		% of
Product Category	(000) Omitted		Net Sales			(000) Omitted		Net Sales

Foil Balloons		18,607		43	%		19,045		45	%

Latex Balloons		7,221		17	%		8,986		21	%

Vacuum Sealing Products		9,446		22	%		8,599		20	%

Film Products		3,289		8	%		3,364		8	%

Other Sales		4,914		11	%		2,655		6	%

Total		43,477		100	%		42,649		100	%

Foil Balloons . During the three months ended September 30, 2015 revenues from the sale of foil balloons decreased by 7.1% compared to the prior year period from $5,657,000 to $5,253,000. During the nine months ended September 30, 2015 revenues from the sale of foil balloons decreased by 2.3% compared to the prior year period from $19,045,000 to $18,607,000. During the nine months ended September 30, 2015, foil balloon sales to our largest customer increased to $11,335,000 from $10,982,000 in the nine months ended September 30, 2014. For the nine month period, sales of foil balloons to other customers decreased to $7,272,000 from $8,063,000 for the same period last year. These sales to other customers include sales in the United States, Mexico, the United Kingdom and Europe. The decrease in sales to other customers is attributable to several customers in the United Kingdom and the United States and also to the lower dollar value of Euro and Peso denominated sales in Europe and Mexico.

Latex Balloons. During the three months ended September 30, 2015 revenues from the sale of latex balloons decreased by 12.9% compared to the prior year period from $3,001,000 to $2,613,000. During the nine months ended September 30, 2015 revenues from the sale of latex balloons decreased by 19.6% compared to the prior year period from $8,986,000 to $7,221,000. The difference reflects (i) a single large sale in the first quarter of 2014 in excess of $465,000, (ii) a decline in sales of $300,000 to a customer of Flexo Universal, our Mexico subsidiary, and (iii) the lower Dollar value of Peso denominated sales by Flexo Universal for 2015 compared to 2014 due to the decline in the value of the Peso.

Vacuum Sealing Products . During the three months ended September 30, 2015 revenues from the sale of pouches and vacuum sealing machines increased by 5.4% compared to the prior year from $3,777,000 to $3,982,000. During the nine months ended September 30, 2015 revenues from the sale of pouches and vacuum sealing machines increased by 9.9% compared to the prior year from $8,599,000 to $9,446,000. Our sales in this product line in 2015 and 2014 have been in two product categories: (i) zippered pouches and (ii) vacuum sealing systems incorporating vacuum sealing machines and associated pouches and rolls of film. For the three and nine months ended 2015 and 2014, sales of pouch products (and vacuum sealing machines) in these categories have been as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014

Zippered Pouches	$	845,000	$	734,000	$	2,060,000	$	1,915,000

Vacuum Sealing Systems		3,137,000		3,043,000		7,386,000		6,684,000

Total	$	3,982,000	$	3,777,000	$	9,446,000	$	8,599,000

Zippered Pouches. Most of our sales of zippered pouches have been of branded products to a principal customer, although we have had limited sales of our ZipVac® pouch line as well. Sales of zippered pouch products increased from $1,915,000 during the nine months ended September 30, 2014 to $2,060,000 during the same period in 2015.

Vacuum Sealing Systems. Since 2012, we have offered a line of vacuum sealing systems which include vacuum sealing machines and associated pouches and rolls of film.

In December 2011, we entered into a Trademark License Agreement with S. C. Johnson & Son, Inc. pursuant to which we received a license to market and sell vacuum sealing machines as well as pouches and rolls of film for use with those machines, under the Ziploc brand name. In the first quarter 2012, we introduced and began to market and sell that branded line of vacuum sealing machines and associated open-top bags and rolls. Since that time, we have offered our branded vacuum sealing system lines of product principally to chain stores in the United States, including several major chains.

Our sales of our branded vacuum sealing systems increased from $6,684,000 during the nine months ended September 30, 2014 to $7,386,000 during the same period this year, principally as the result of increased sales to several retail chain stores.

Films . During the three months ended September 30, 2015 revenues from the sale of laminated film products decreased by 1.8% compared to the prior year period from $1,435,000 to $1,409,000. During the nine months ended September 30, 2015 revenues from the sale of laminated film products decreased by 2.2% compared to the prior year period from $3,364,000 to $3,289,000. The decrease is attributable to a decrease in sales to a principal customer. All of the sales of laminated film products during the nine months ended September 30, 2015 were to one principal customer.

Other Revenues . During the three months ended September 30, 2015, we had revenues from the sale of various other products totaling $1,623,000 compared to revenues from other products in the same period in 2014 of $699,000. During the nine months ended September 30, 2015, we had revenues from the sale of various other products totaling $4,914,000 compared to revenues from other products in the same period during 2014 of $2,655,000. The revenues from the sale of other products during 2015 include (i) sales of home container products by a variable interest entity which we now consolidate with our financial results in the amount of $2,690,000, (ii) $1,173,000 in sales of a line of “Candy Blossoms” and “Candy Loons” consisting of candy and small inflated balloons sold in small containers, and (iii) 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 of our top three and ten customers for the three and nine months ended September 30, 2015 and 2014.

	Three Months Ended September 30,						Nine Months Ended September 30,
	% of Sales						% of Sales
	2015			2014			2015			2014

Top 3 Customers		46.5	%		49.4	%		48.3	%		47.4	%

Top 10 Customers		68.6	%		70.8	%		67.2	%		65.4	%

During the three and nine months ended September 30, 2015, 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, 2015 were $3,256,000 or 21.9%, and $2,282,000 or 15.3%, of consolidated net sales, respectively. Sales to these customers for the three months ended September 30, 2014, were $3,369,000 or 23.1%, and $2,420,000 or 16.6% of consolidated net sales, respectively. Sales to these customers for the nine months ended September 30, 2015 were $11,660,000 or 26.8%, and $6,091,000 or 14.0%, of consolidated net sales, respectively. Sales to these customers for the nine months ended September 30, 2014, were $11,299,000 or 26.5% and $5,583,000 or 13.1% of consolidated net sales, respectively. The amount owed at September 30, 2015 by these customers were $1,957,000 or 19.3%, and $1,972,000 or 19.5%, of the Company’s consolidated net accounts receivable, respectively. As of September 30, 2014, the total amounts owed to the Company by these customers were $2,089,000 or 18.8% and $2,430,000 or 21.9% of the Company’s consolidated net accounts receivable, respectively.

Cost of Sales . During the three months ended September 30, 2015, the cost of sales represented 72.4% of net sales compared to 74.3% for the three months ended September 30, 2014. During the nine months ended September 30, 2015, the cost of sales represented 73.3% of net sales compared to 75.9% for the nine months ended September 30, 2014. The improvement in gross margins is attributable principally to an increase in the gross margins at our Mexico subsidiary, an increase in sales of higher margin products, and higher margins achieved on the sales of home container products. The improvement in gross margins at our Mexico subsidiary is attributable principally to (i) a decline in the price of natural latex, and (ii) improvement in manufacturing efficiencies.

General and Administrative . During the three months ended September 30, 2015, general and administrative expenses were $1,840,000 or 12.4% of net sales, compared to $1,624,000 or 11.1% of net sales for the same period in 2014. During the nine months ended September 30, 2015, general and administrative expenses were $5,300,000 or 12.2% of net sales, compared to $5,499,000 or 12.9% of net sales for the same period in 2014. The increase in general and administrative expenses in the third quarter compared to the third quarter last year is attributable principally to (i) an increase in administrative expenses of a variable interest entity consolidated with our financial statements and (ii) a marginal increase in administrative expenses of our European subsidiaries.

Selling . During the three months ended September 30, 2015, selling expenses were $863,000 or 5.8% of net sales, compared to $1,006,000 or 6.9% of net sales for the same period in 2014. During the nine months ended September 30, 2015, selling expenses were $2,426,000 or 5.6% of net sales, compared to $2,334,000 or 5.5% of net sales for the same period in 2014.

Advertising and Marketing . During the three months ended September 30, 2015, advertising and marketing expenses were $689,000 or 4.6% of net sales for the period, compared to $596,000 or 4.1% of net sales for the same period of 2014. During the nine months ended September 30, 2015, advertising and marketing expenses were $2,006,000 or 4.6% of net sales for the period, compared to $1,646,000 or 3.9% of net sales for the same period of 2014. The increase is attributable to an increase of $305,000 in advertising and marketing expenses in US operations.

Other Income (Expense) . During the three months ended September 30, 2015, the Company incurred interest expense of $345,000, compared to interest expense during the same period of 2014 in the amount of $236,000. During the nine months ended September 30, 2015, the Company incurred net interest expense of $1,037,000, compared to net interest expense during the same period of 2014 in the amount of $742,000. In addition to the interest on our line of credit with BMO Harris, the interest charges include (i) interest paid on our mezzanine loan with BMO Equity, (ii) a charge for the amount of the debt discount attributable to the warrants used in the BMO Equity transaction and (iii) a variable charge relating to the change in value of the warrants by reason of change in market price of our common stock.

For the three months ended September 30, 2015, the Company had a foreign currency transaction gain of $44,000 compared to a foreign currency transaction gain of $8,000 during the same period of 2014. For the nine months ended September 30, 2015, the Company had a foreign currency transaction gain of $47,000 compared to a foreign currency transaction gain of $6,000 during the same period of 2014.

Income Taxes . For the three months ended September 30, 2015, the Company reported a consolidated income tax expense of $161,000, compared to a consolidated income tax expense of $122,000 for the same period of 2014. For the nine months ended September 30, 2015, the Company reported a consolidated income tax expense of $387,000, compared to a consolidated income tax expense of $36,000 for the same period of 2014. For the nine months ended September 30, 2015, this income tax expense was composed of an income tax expense in the United States, income tax expense in Mexico of Flexo Universal, our Mexican subsidiary, an income tax benefit in the United Kingdom of CTI Balloons Limited, our United Kingdom subsidiary and income tax benefit in Europe of CTI Europe gmbH, our Germany subsidiary.

Net Income. For the three months ended September 30, 2015, the Company had net income of $209,000 or $0.06 per share (basic and diluted,) compared to net income of $210,000 for the same period of 2014 or $0.06 per share (basic and diluted). For the nine months ended September 30, 2015, the Company had net income of $546,000 or $0.17 per share (basic) and $0.16 per share (diluted,) compared to net income of $132,000 for the same period of 2014 or $0.04 per share (basic and diluted). For the nine months ended September 30, 2015, the Company had income from operations of $1,882,000 compared to income from operations during the same period in 2014 of $789,000.

Financial Condition, Liquidity and Capital Resources

Cash Flow Items.

Operating Activities . During the nine months ended September 30, 2015, net cash provided by operations was $3,390,000, compared to net cash used in operations during the nine months ended September 30, 2014 of $2,851,000.

Significant changes in working capital items during the nine months ended September 30, 2015 included:

Increases to cash flow: (i) depreciation and amortization in the amount of $1,379,000 compared to $1,594,000 for the same period last year, (ii) a decrease in accounts receivable of $665,000 compared to an increase of $2,449,000 for the same period last year, (iii) an increase in trade payables of $923,000 compared to an increase of $2,021,000 for the same period last year, (iv) an increase of accrued liabilities of $61,000 compared to a decrease of $1,120,000 last year and (v) a decrease in prepaid expenses of $107,000 compared to a decrease of $413,000 last year, and

Cash flow was decreased as a result of an increase in inventory of $688,000, which is substantially less than the increase in inventory for the same period last year of $3,164,000.

Investing Activity. During the nine months ended September 30, 2015, cash used in investing activity was $465,000, compared to $839,000 in the same period of 2014. Substantially all of this expense is related to equipment acquisitions and capitalized maintenance, leasehold improvements, tooling and related expense.

Financing Activities . During the nine months ended September 30, 2015, cash used in financing activities was $2,781,000 compared to cash provided by financing activities for the same period of 2014 in the amount of $3,177,000. During the nine months ended September 30, 2015, financing activities included payment of $396,000 on long-term debt obligations and a decrease in the amount outstanding under our revolving line of credit of $1,912,000.

Liquidity and Capital Resources . At September 30, 2015, the Company had cash balances of $273,000 compared to cash balances of $172,000 for the same period in 2014 and there was $2,164,000 available to advance under the Company’s revolving line of credit.

At September 30, 2015, the Company had a working capital balance of $11,484,000 compared to a working capital balance of $11,545,000 at December 31, 2014.

The Company’s liquidity is dependent significantly on its bank financing and the Company relies on its revolving line of credit to maintain liquidity. On April 29, 2010, the Company entered into a Credit Agreement with BMO Harris Bank N.A. (“BMO Harris”). Under the Credit Agreement, BMO Harris agreed to provide loans and credits to the Company in the aggregate maximum amount of $14,417,000. The arrangement included:

A revolving credit line up to a maximum amount of $9,000,000 based upon a borrowing base of 85% of eligible receivables and 60% of eligible inventory (up to a maximum of $5,000,000);

ii.

A mortgage loan in the principal amount of $2,333,350, amortized over 25 years;

iii.

A term loan in the principal amount of $583,333 maturing in monthly principal installments of $58,333; and

iv.

An equipment loan commitment in the amount of up to $2,500,000 providing for loan advances from time to time until April 29, 2012 based upon 100% of the purchase price of equipment purchased, the loans to be amortized on a five year basis commencing April 29, 2012.

The Credit Agreement included various representations, warranties and covenants of the Company, including various financial covenants.

In connection with the Credit Agreement, the Company executed and delivered to BMO Harris, a Term Loan Note, a Mortgage Loan Note, an Equipment Note and a Revolving Note, as well as a form of Mortgage, Security Agreement, Pledge Agreement (pursuant to which shares of capital stock of the Registrant’s Mexico subsidiary were pledged as security for the loans), Patent Security Agreement and Trademark Security Agreement. Two officers and principal shareholders of the Company, John H. Schwan and Stephen M. Merrick each executed Limited Guaranties of the loans and also executed Subordination Agreements with respect to obligations of the Company to them.

The Credit Agreement, as amended, provides that the outstanding balance of all loans under the agreement will bear interest with reference to a base rate or, at the option of the Company, with reference to an adjusted LIBOR. At September 30, 2015, the effective rate on the outstanding loan balances was 4.0%.

As of September 30, 2015, the outstanding balances on the loans with BMO Harris were: (i) revolving line of credit, $9,755,000, (ii) mortgage loan, $1,828,000, and (iii) equipment loan, $402,000.

On July 17, 2012, the Company entered into Amendment Number 3 to the Credit Agreement among the Company and BMO Harris pursuant to which (i) the amount of the loan commitment on the revolver loan of BMO Harris was increased from $9 million to $12 million, (ii) BMO Harris consented to a transaction among the Company and BMO Private Equity (U.S.), Inc. (“BMO Equity”) and (iii) the term of credit and loans to the Company provided in the Credit Agreement and BMO Harris was extended to July 17, 2017.

Also, on July 17, 2012, the Company entered into a Note and Warrant Purchase Agreement with BMO Equity pursuant to which (i) BMO Equity advanced to the Company the sum of $5 million and (ii) the Company issued to BMO Equity a warrant to purchase up to Four Percent (4%) of the outstanding shares of common stock of the Company on a fully-diluted basis (140,048 shares of common stock of the Company) at the price of One Cent ($0.01) per share. The term of the loan provided for in this Agreement is five and a half years. Interest is payable on the outstanding balance of the loan at the rate of 11.5% per annum.

The Note and Warrant Purchase Agreement included provisions for:

(i) a closing fee of $100,000

(ii) payment of the principal amount in five and a half years with optional prepayment subject to certain prepayment premiums;

(iii) security for the note obligations in all assets of the Company junior to the security interest of BMO Harris;

(iv) various representations and warranties and covenants of the Company;

(v) financial covenants including an applicable senior leverage ratio, fixed charge coverage ratio and tangible net worth amount.

On April 12, 2013, the Company entered into Amendment No. 4 to the Credit Agreement among the Company and BMO Harris, and Amendment No. 1 to the Note and Warrant Purchase Agreement among the Company and BMO Equity. In the Amendments, non-compliance with financial covenants prior to the date of the Amendments was waived and both the Credit Agreement and the Note and Warrant Purchase Agreement were amended (i) to modify the Senior Leverage Ratio and Total Leverage Ratio requirements for the fiscal quarter ending June 30, 2013 and each quarter thereafter during the term of the Credit Agreement and the Note and Warrant Purchase Agreement and (ii) to modify the definitions of EBITDA and Total Funded Debt in the Credit Agreement and the Note and Warrant Purchase Agreement.

On December 23, 2014, the Company entered into Amendment No. 5 to the Credit Agreement among the Company and BMO Harris, and Amendment No. 2 to the Note and Warrant Purchase Agreement among the Company and BMO Equity. In the Amendments, BMO Harris and BMO Equity waived certain anticipated events of default as of December 31, 2014 by the Company with respect the amount of capital expenditures and the change of name of a subsidiary, and both the Credit Agreement and the Note and Warrant Purchase Agreement were amended (i) to exclude from the definition of Senior Funded Debt and Total Funded Debt certain indebtedness of a variable interest entity, (ii) to require the Company to provide financial reports and variance reports to the Bank within 45 days after the end of each calendar month, (iii) to change the Senior Leverage Ratio and Total Leverage Ratio requirements for fiscal quarters ending December 31, 2014 and for each fiscal quarter thereafter to the maturity of the loans, and (iv) to provide for the engagement by the Company of a financial consultant to provide business financial planning and advisory services to the Company.

On October 13, 2015, the Company entered into Amendment No. 6 to the Credit Agreement among the Company and BMO Harris. Pursuant to the terms of the Amendment, the company will be able to obtain advances under the revolving line of credit with BMO Harris in the amount provided for in the borrowing base formula plus an overadvance amount of up to $1 million, up to a total maximum amount under the revolving line of credit of $12 million. The provision for the overadvance amount is available to the company for the period from October 1, 2015 to April 30, 2016.

Management believes that the funds available under the Credit Agreement, as amended, as well as internally generated funds will be sufficient for the Company to meet its working capital needs for at least the next 12 months.

As of September 30, 2015, the Company was in compliance with all the financial covenants under the Credit Agreement and the Note and Warrant Purchase Agreement.

Seasonality

In recent years, sales in the foil balloon product line have historically been seasonal with approximately 40% occurring in the period from December through March and 24% being generated in the period from July through October. The sales of latex balloons and laminated film products have not historically been seasonal.

Critical Accounting Policies

Please see pages 26-29 of our Annual Report on Form 10-K for the year ended December 31, 2014 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. No material changes to such information have occurred during the three and nine months ended September 30, 2015.

Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk

Not applicable.

Item 4. Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2015. Based on such review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of September 30, 2015, to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, (a) is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms and (b) is accumulated and communicated to our management, including the officers, as appropriate to allow timely decisions regarding required disclosure. There were no material changes in our internal control over financial reporting during the three and nine months ended September 30, 2015 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

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.

Item 6. Exhibits

The following are being filed as exhibits to this report:

Exhibit Number		Description

3.1		Third Restated Certificate of Incorporation of CTI Industries Corporation (incorporated by reference to Exhibit A contained in Registrant’s Schedule 14A Definitive Proxy Statement for solicitation of written consent of shareholders, as filed with Commission on October 25, 1999).
3.2		By-laws of CTI Industries Corporation (incorporated by reference to Exhibit 3.1 contained in Registrant’s Form SB-2 Registration Statement (File No. 333-31969) effective November 5, 1997).
10.1		Sixth Amendment to Loan Agreement between BMO Harris Bank, N.A. and the Company dated October 13, 2015
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 for the quarter ended September 30, 2015, 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.

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: November 12, 2015	CTI INDUSTRIES CORPORATION

	By:	/s/ John H. Schwan
		John H. Schwan
		Chief Executive Officer

	By:	/s/ Stephen M. Merrick
		Stephen M. Merrick
		President

	By:	/s/ Timothy S. Patterson
		Timothy S. Patterson
		Chief Financial Officer
		Senior Vice President Finance

Exhibit Index

Exhibit Number		Description
3.1		Third Restated Certificate of Incorporation of CTI Industries Corporation (incorporated by reference to Exhibit A contained in Registrant’s Schedule 14A Definitive Proxy Statement for solicitation of written consent of shareholders, as filed with Commission on October 25, 1999).
3.2		By-laws of CTI Industries Corporation (incorporated by reference to Exhibit 3.1 contained in Registrant’s Form SB-2 Registration Statement (File No. 333-31969) effective November 5, 1997).
10.1		Sixth Amendment to Loan Agreement between BMO Harris Bank, N.A. and the Company dated October 13, 2015
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 for the quarter ended September 30, 2015, 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.

EXHIBIT 10.1

Amendment No. 6
to Credit Agreement

This Amendment No. 6 to Credit Agreement is dated as of October 13 , 2015, and is between CTI Industries Corporation , an Illinois corporation (the “ Borrower ”); CTI Supply, Inc. , an Illinois corporation f/k/a CTI Helium, Inc., and a Wholly-Owned Subsidiary of the Borrower, in its capacity as a guarantor (the “ Subsidiary Guarantor ”); and BMO Harris Bank N.A. , a national banking association, successor to Harris N.A. (the “ Bank ”).

The Borrower and the Bank entered into a Credit Agreement dated as of April 29, 2010 (the “ Credit Agreement ”), under which the Bank has extended certain credit facilities to the Borrower.

In connection with the Credit Agreement, the Subsidiary Guarantor entered into a Guaranty dated as of April 29, 2010 (the “ Subsidiary Guaranty ”), under which, among other things, the Subsidiary Guarantor guarantees the prompt and complete payment and performance of the Obligations.

The parties now desire to amend the Credit Agreement in certain respects.

The parties therefore agree as follows:

1. Definitions . Defined terms used but not defined in this agreement are as defined in the Credit Agreement.

2. Amendments to Credit Agreement . (a) The second sentence of section 1.4 of the Credit Agreement (which sentence begins, “The Revolving Credit may be utilized by the Borrower…”) is hereby amended to read in its entirety as follows:

“The Revolving Credit may be utilized by the Borrower in the form of Revolving Loans and Letters of Credit, all as more fully hereinafter set forth, provided that the aggregate principal amount of Revolving Loans and Letters of Credit outstanding at any one time shall not exceed the Revolving Credit Availability.”

(b) Section 1.4 of the Credit Agreement is hereby further amended by inserting the following new sentence at the end of that section:

“The Bank shall have the right, at any time and from time to time in the exercise of its reasonable discretion, to establish, modify, or eliminate reserves (including, without limitation, in respect of Credit Product Obligations) on the Revolving Credit Commitment, the Borrowing Base, or, without duplication, both the Revolving Credit Commitment and the Borrowing Base.”

(c) The definition of “Borrowing Base” in section 5.1 of the Credit Agreement is hereby amended to read in its entirety as follows, effective as of October 1, 2015:

“ “Borrowing Base” means, as of any time it is to be determined, the sum of: (a) 85% of the then outstanding unpaid amount of Eligible Receivables; plus (b) the lesser of (i) $6,500,000 and (ii) 60% of the value (computed at the lower of market or cost using the first-in/first-out method of inventory valuation applied by the Borrower in accordance with GAAP) of Eligible Inventory; (c) the Temporary Overadvance Amount; provided that the Borrowing Base shall be computed only as against and on so much of the Collateral as is included on the certificates to be furnished from time to time by the Borrower pursuant to Section 8.5(a) hereof and, if required by the Bank pursuant to any of the terms hereof or any Collateral Document, as verified by such other evidence required to be furnished to the Bank pursuant hereto or pursuant to any such Collateral Document.”

(d) The definition of “Revolving Credit Availability” in section 5.1 of the Credit Agreement is hereby amended to read in its entirety as follows:

“ “Revolving Credit Availability” means, as of any time it is to be determined, an amount equal to the lesser of (a) the result of (i) the Revolving Credit Commitment at such time, minus (ii) the amount of reserves then imposed on the Revolving Credit Commitment by the Bank in accordance with this Agreement, and (b) the result of (i) the Borrowing Base as then determined and computed, minus (ii) the amount of reserves then imposed on the Borrowing Base by the Bank in accordance with this Agreement.”

(e) The definition of “Revolving Credit Commitment” in section 5.1 of the Credit Agreement is hereby amended to read in its entirety as follows:

“ “Revolving Credit Commitment” means an amount equal to Twelve Million and 00/100 Dollars ($12,000,000.00), as such amount may be reduced pursuant to the terms of this Agreement.”

(f) Section 5.1 of the Credit Agreement is hereby further amended by inserting the following new definition in the appropriate alphabetical order, effective as of October 1, 2015:

“ “Temporary Overadvance Amount” means (a) on and after October 1, 2015, through and including April 30, 2016, an amount equal to $1,000,000; and (b) at any other time (including on and after May 1, 2016), an amount equal to $0.”

(g) Exhibit F to the Credit Agreement is hereby amended to read in its entirety as set forth in Exhibit F to this agreement.

3. Reaffirmation of Subsidiary Guaranty . The Subsidiary Guarantor hereby expressly does each of the following:

(1)

consents to the execution by the Borrower and the Bank of this agreement;

(2)

acknowledges that the “Indebtedness” (as defined in the Subsidiary Guaranty) includes all of the “Obligations” under and as defined in the Credit Agreement, as amended from time to time (including as amended by this agreement);

(3)

acknowledges that the Subsidiary Guarantor does not have any set-off, defense, or counterclaim to the payment or performance of any of the obligations of the Borrower under the Credit Agreement or the Subsidiary Guarantor under the Subsidiary Guaranty;

(4)

reaffirms, assumes, and binds itself in all respects to all of the obligations, liabilities, duties, covenants, terms, and conditions contained in the Subsidiary Guaranty;

(5)

agrees that all such obligations and liabilities under the Subsidiary Guaranty continue in full force and that the execution and delivery of this agreement to, and its acceptance by, the Bank will not in any manner whatsoever do any of the following:

(A)

impair or affect the liability of the Subsidiary Guarantor to the Bank under the Subsidiary Guaranty;

(B)

prejudice, waive, or be construed to impair, affect, prejudice, or waive the rights and abilities of the Bank at law, in equity, or by statute against the Subsidiary Guarantor pursuant to the Subsidiary Guaranty; or

(C)

release or discharge, or be construed to release or discharge, any of the obligations and liabilities owing to the Bank by the Subsidiary Guarantor under the Subsidiary Guaranty; and

(6)

represents and warrants that each of the representations and warranties made by the Subsidiary Guarantor in any of the documents executed in connection with the Loans remain true and correct as of the date of this agreement.

4. Representations and Warranties . To induce the Bank to enter into this agreement, the Borrower hereby represents to the Bank as follows:

(1)

that the Borrower is duly authorized to execute and deliver this agreement and is and will continue to be duly authorized to borrow monies under the Credit Agreement, as amended by this agreement, and to perform its obligations under the Credit Agreement, as amended by this agreement;

(2)

that the execution and delivery of this agreement and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this agreement, do not and will not conflict with any provision of law or of the articles of organization or operating agreement of the Borrower or of any agreement binding upon the Borrower;

(3)

that the Credit Agreement, as amended by this agreement, is a legal, valid, and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability might be limited by bankruptcy, insolvency, or other similar laws of general application affecting the enforcement of creditors’ rights or by general principles of equity limiting the availability of equitable remedies;

(4)

that the representation and warranties set forth in section 6 of the Credit Agreement, as amended by this agreement, are true and correct with the same effect as if those representations and warranties had been made on the date hereof, except that all references to the financial statements mean the financial statements most recently delivered to the Bank and except for changes specifically permitted under the Credit Agreement, as amended by this agreement;

(5)

that the Borrower has complied with and is in compliance with all of the covenants set forth in the Credit Agreement, as amended by this agreement, including the covenants stated in section 8 of the Credit Agreement; and

(6)

that as of the date of this agreement no Default and no Event of Default under section 10 of the Credit Agreement, as amended by this agreement, has occurred or is continuing.

Conditions . The effectiveness of this agreement is subject to satisfaction of the following conditions:

(1)

that the Bank has received the following:

(A)

a copy of this agreement, duly executed by the parties; and

(B)

all other documents, certificates, resolutions, and opinions of counsel as the Bank requests; and

(2)

that all legal matters incident to the execution and delivery of this agreement are satisfactory to the Bank and its counsel.

6. General . (a) This agreement and the rights and duties of the parties hereto are governed by, and are to be construed in accordance with, the internal laws of State of Illinois without regard to principles of conflicts of laws. Wherever possible each provision of the Credit Agreement and this agreement is to be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Credit Agreement and this agreement is prohibited by or invalid under any such law, that provision will be deemed ineffective to the extent of that prohibition or invalidity, without invalidating the remainder of that provision or the remaining provisions of the Credit Agreement and this agreement.

(b) This agreement is a Loan Document.

(c) This agreement binds each party and their respective successors and assigns, and this agreement inures to the benefit of each party and the successors and assigns of the Bank.

(d) Except as specifically modified or amended by the terms of this agreement, the terms and provisions of the Credit Agreement, the Subsidiary Guaranty, and the other Loan Documents are incorporated by reference herein and in all respects continue in full force and effect. The Borrower, by execution of this agreement, hereby reaffirms, assumes, and binds itself to all of the obligations, duties, rights, covenants, terms, and conditions contained in the Credit Agreement and the other Loan Documents to which it is a party.

(e) Each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” or words of like import, and each reference to the Credit Agreement in any and all instruments or documents delivered in connection therewith, are deemed to refer to the Credit Agreement, as amended by this agreement.

(f) The Borrower shall pay all costs and expenses in connection with the preparation of this agreement and other related loan documents, including, without limitation, reasonable attorneys’ fees and time charges of attorneys who are employees of the Bank or any affiliate or parent of the Bank. The Borrower shall pay any and all stamp and other taxes, UCC search fees, filing fees, and other costs and expenses in connection with the execution and delivery of this agreement and the other instruments and documents to be delivered hereunder, and agrees to save the Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses.

(g) The Borrower hereby waives and releases any and all current existing claims, counterclaims, defenses, or set-offs of every kind and nature which it has or might have against the Bank arising out of, pursuant to, or pertaining in any way to the Credit Agreement, any and all documents and instruments in connection with or relating to the foregoing, or this agreement. The Borrower hereby further covenants and agrees not to sue the Bank or assert any claims, defenses, demands, actions, or liabilities against the Bank arising out of, pursuant to, or pertaining in any way to the Credit Agreement, any and all documents and instruments in connection with or relating to the foregoing, or this agreement.

(h) The parties may sign this agreement in several counterparts, each of which will be deemed an original but all of which together will constitute one instrument.

[ Signature pages follow ]

The parties are signing this Amendment No. 6 to Credit Agreement as of the date stated in the introductory clause.

	CTI Industries Corporation

	By:	/s/ Stephen M. Merrick
	Name:	Stephen M. Merrick
	Title:	President

	CTI Supply, Inc.
	(f/k/a CTI Helium, Inc.)

	By:	/s/ Stephen M. Merrick
	Name:	Stephen M. Merrick
	Title:	President

	BMO Harris BANK N.A.

	By:	/s/ Joseph C. Mikulskis
	Name:	Joseph C. Mikulskis
	Title:	Senior Vice President

EXHIBIT 31.1

CERTIFICATIONS

I, John H. Schwan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CTI Industries Corporation.

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:

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;

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;

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

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):

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

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: November 12, 2015
	/s/ John H. Schwan
	John H. Schwan,
	Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS

I, Timothy S. Patterson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CTI Industries Corporation.

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: November 12, 2015

	By:	/s/ Timothy S. Patterson
		Timothy S. Patterson
		Chief Financial Officer
		Senior Vice President Finance

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 of CTI Industries Corporation (the “Company”) for the quarterly period ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), John H. Schwan, as Chief Executive Officer of the Company, and Timothy S. Patterson, as Senior Vice President Finance and Chief Financial Officer of the Company, each 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/ John H. Schwan
John H. Schwan
Chief Executive Officer

Date: November 12, 2015

/s/ Timothy S. Patterson
Timothy S. Patterson
Chief Financial Officer
Senior Vice President Finance

Date: November 12, 2015

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 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.