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 March 31, 2017
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 ¨

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 ¨

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 ¨     Accelerated filer ¨    Non-accelerated filer ¨ 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 ¨     No þ

The number of shares outstanding of the Registrant’s common stock as of May 1, 2017 was 3,525,227.

INDEX

Part I – Financial Information
Item No. 1.	Financial Statements
	Condensed Consolidated Balance Sheets at March 31, 2017 (unaudited) and December 31, 2016	1
	Condensed Consolidated Statements of Comprehensive Income  (unaudited) for the three months ended March 31, 2017 and  March 31, 2016	2
	Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2017 and March 31, 2016	3
	Condensed Consolidated Earnings per Share (unaudited) for the three months ended March 31, 2017 and March 31, 2016	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item No. 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item No. 3	Quantitative and Qualitative Disclosures Regarding Market Risk	21
Item No. 4	Controls and Procedures	21
Part II – Other Information
Item No. 1	Legal Proceedings	21
Item No. 1A	Risk Factors	22
Item No. 2	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item No. 3	Defaults Upon Senior Securities	22
Item No. 4	Submission of Matters to a Vote of Security Holders	22
Item No. 5	Other Information	22
Item No. 6	Exhibits	22
	Signatures
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

CTI Industries Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

	March 31, 2017			December 31, 2016
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents (VIE $118,000 and $51,000, respectively)	$	582,707		$	563,043
Accounts receivable, (less allowance for doubtful accounts of $145,000 and $137,000, respectively) (VIE $40,000 and $6,000, respectively)		12,485,522			14,838,978
Inventories, net (VIE $607,000 and $719,000, respectively)		17,964,194			18,348,011
Prepaid expenses (VIE $18,000 and $18,000, respectively)		798,484			678,689
Other current assets (VIE $1,000 and $0, respectively)		467,634			530,669
Total current assets		32,298,541			34,959,390
Property, plant and equipment:
Machinery and equipment (VIE $0 and $0, respectively)		26,582,676			26,348,443
Building		3,379,636			3,379,636
Office furniture and equipment (VIE $188,000 and $154,000, respectively)		3,504,468			3,597,158
Intellectual property		482,088			482,088
Land		250,000			250,000
Leasehold improvements		410,893			395,603
Fixtures and equipment at customer locations		3,302,868			3,302,868
Projects under construction		568,328			493,859
		38,480,957			38,249,655
Less : accumulated depreciation and amortization (VIE $31,000 and $29,000, respectively)		(33,253,638	)		(32,938,267	)
Total property, plant and equipment, net		5,227,319			5,311,388
Other assets:
Goodwill (VIE $440,000 and $440,000, respectively)		1,473,176			1,473,176
Net deferred income tax asset		1,606,035			1,696,690
Other assets (due from related party $47,000 and $47,000, respectively)		456,387			473,095
Total other assets		3,535,598			3,642,961
TOTAL ASSETS	$	41,061,458		$	43,913,739
LIABILITIES AND EQUITY
Current liabilities:
Checks written in excess of bank balance	$	1,059,145		$	1,688,675
Trade payables (VIE $58,000 and $92,000, respectively)		6,091,056			5,861,932
Line of credit (VIE $391,000 and $408,000, respectively)		9,490,011			11,263,531
Notes payable - current portion (net discount of $66,000 and $113,000, respectively)
(VIE $0 and $0, respectively)		6,618,520			1,709,220
Notes payable officers - current portion		0			180,000
Notes payable affiliates - current portion		9,266			8,141
Capital Lease - current portion		47,431			40,660
Accrued liabilities (VIE $157,000 and $140,000, respectively)		2,435,959			3,127,425
Total current liabilities		25,751,388			23,879,584
Long-term liabilities:
Notes payable - affiliates		213,741			218,858
Notes payable, net of current portion (net discount of $0 and $0, respectively) (VIE $246,000 and $301,000, respectively)		246,234			5,301,491
Notes payable - officers, subordinated		1,440,433			1,416,138
Capital Lease		730			4,690
Deferred gain (non current)		300,665			297,521
Total long-term debt, net of current portion		2,201,803			7,238,698
Warrants Payable		798,274			817,880
Total long-term liabilities		3,000,077			8,056,578
Equity:
CTI Industries Corporation stockholders' equity:
Preferred Stock — no par value, 2,000,000 shares authorized, 0 shares issued and outstanding		-			-
Common stock  - no par value, 5,000,000 shares authorized, 3,568,885 shares issued and 3,525,227 shares outstanding		13,898,494			13,898,494
Paid-in-capital		2,223,065			2,250,235
Accumulated earnings		2,381,795			2,323,326
Accumulated other comprehensive loss		(5,282,565	)		(5,593,878	)
Less:  Treasury stock, 75,627 shares		(160,784	)		(160,784	)
Total CTI Industries Corporation stockholders' equity		13,060,005			12,717,393
Noncontrolling interest		(750,012	)		(739,816	)
Total Equity		12,309,993			11,977,577
TOTAL LIABILITIES AND EQUITY	$	41,061,458		$	43,913,739

See accompanying notes to condensed consolidated unaudited financial statements

1

CTI Industries Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

	For the Three Months Ended March 31,
	2017			2016
Net Sales	$	15,359,637		$	15,204,994
Cost of Sales		11,742,189			11,283,147
Gross profit		3,617,448			3,921,847
Operating expenses:
General and administrative		1,901,256			1,757,351
Selling		721,390			991,361
Advertising and marketing		556,409			526,078
Gain on sale of assets		(69,300	)		-
Total operating expenses		3,109,755			3,274,790
Income from operations		507,693			647,057
Other (expense) income:
Interest expense		(377,211	)		(355,304	)
Interest income		4,346			(3,156	)
Change in fair value of warrants		19,606			(187,664	)
Foreign currency loss		(30,525	)		(10,484	)
Total other expense, net		(383,784	)		(556,608	)
Net income before taxes		123,909			90,449
Income tax expense		75,637			6,986
Net income		48,272			83,463
Less: Net (loss) income attributable to noncontrolling interest		(10,197	)		76,701
Net income attributable to CTI Industries Corporation	$	58,469		$	6,762
Other Comprehensive Income (Loss)
Foreign currency adjustment		311,313			(67,602	)
Comprehensive Income (Loss)	$	369,782		$	(60,840	)
Basic income per common share	$	0.02		$	0.00
Diluted income per common share	$	0.02		$	0.00
Weighted average number of shares and equivalent shares of common stock outstanding:
Basic		3,591,947			3,339,240
Diluted		3,748,139			3,479,069

See accompanying notes to condensed consolidated unaudited financial statements

2

CTI Industries Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

	For the Three Months Ended March 31,
	2017			2016
Cash flows from operating activities:
Net income	$	48,272		$	83,463
Adjustment to reconcile net income to cash provided by operating activities:
Depreciation and amortization		381,854			400,941
Amortization of debt discount		47,025			40,288
Change in fair value of warrants		(19,606	)		187,664
Stock based compensation		0			12,039
Amortization of deferred gain on sale/leaseback		(26,693	)		0
Provision for losses on accounts receivable		1,827			20,894
Provision for losses on inventories		20,099			28,252
Deferred income taxes		8,124			(56,112	)
Change in assets and liabilities:
Accounts receivable		2,660,360			(355,033	)
Inventories		815,593			130,720
Prepaid expenses and other assets		13,083			13,165
Trade payables		(20,172	)		832,124
Accrued liabilities		(846,643	)		(460,473	)
Net cash provided by operating activities		3,083,123			877,932
Cash flows from investing activities:
Cash used in investment in subsidiary		0			(43,750	)
Purchases of property, plant and equipment		(219,927	)		(244,121	)
Net cash used in investing activities		(219,927	)		(287,871	)
Cash flows from financing activities:
Change in checks written in excess of bank balance		(629,530	)		(747,201	)
Net change in revolving line of credit		(1,835,972	)		325,691
Repayment of long-term debt (related parties $0 and $2,000)		(390,788	)		(148,235	)
Redemption of Variable Interest Entity members		-			(455,000	)
Contributions received by Variable Interest Entity		-			288,750
Net cash used in financing activities		(2,856,290	)		(735,995	)
Effect of exchange rate changes on cash		12,759			(5,040	)
Net decrease in cash and cash equivalents		19,665			(150,974	)
Cash and cash equivalents at beginning of period		563,043			346,404
Cash and cash equivalents at end of period	$	582,708		$	195,430
Supplemental disclosure of cash flow information:
Cash payments for interest		311,768		$	304,363
Supplemental Disclosure of non-cash investing and financing activity Property, Plant & Equipment acquisitions funded by liabilities	$	63,474		$	66,960
Contributed Capital to Clever Container
Stock	$	-		$	122,500
Debt	$	-		$	43,750
Accounts Receivable	$	-		$	183,750

See accompanying notes to condensed consolidated unaudited financial statements

3

CTI Industries Corporation and Subsidiaries

Condensed Consolidated Earnings per Share (unaudited)

	For the Three Months Ended March 31,
	2017		2016
Basic
Average shares outstanding:
Weighted average number of common shares  outstanding		3,591,947		3,339,240
Net income:
Net income attributable to CTI Industries Corporation	$	58,469	$	6,762
Per share amount	$	0.02	$	0.00
Diluted
Average shares outstanding:
Weighted average number of common shares  outstanding		3,591,947		3,339,240
Effect of dilutive shares		156,192		139,829
Weighted average number of shares and equivalent shares of common stock outstanding		3,748,139		3,479,069
Net income:
Net income attributable to CTI Industries Corporation	$	58,469	$	6,762
Per share amount	$	0.02	$	0.00

See accompanying notes to condensed consolidated unaudited financial statements

4

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, 2016, 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 months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017. 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, 2016.

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 and CTI Supply, Inc., its majority-owned subsidiaries, Flexo Universal, S. de 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, (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, and (iii) distributes vacuum sealing products and home organization products in the United States.

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.

5

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 March 31, 2017 and 2016, shares to be issued upon the exercise of options and warrants aggregated 359,817 and 288,048, respectively. The number of anti-dilutive shares (not included in the determination of earnings on a diluted basis) for the three months ended March 31, 2017 and 2016 were 76,675 and 119,000, respectively, 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, 2016. There were no significant changes to these accounting policies during the three months ended March 31, 2017.

Reclassification:

Certain 2016 amounts have been reclassified to conform to the 2017 presentation (see footnote regarding ASU 2015-17.)

Recent Accounting Pronouncements:

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This guidance amended the existing requirements for disclosing information about an entity’s ability to continue as a going concern and to provide related disclosure in certain circumstances. This guidance is effective for annual reporting periods ending after December 2016 and for annual and interim reporting periods thereafter. The adoption of this accounting standard update did not have a material impact to our consolidated financial statements.

In 2014, the FASB issued guidance on revenue recognition, which provides for a single five-step model to be applied to all revenue contracts with customers. The guidance also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. The guidance provides an option to use either a retrospective approach or a cumulative effect adjustment approach to implement the guidance. In 2015, the FASB issued a deferral of the effective date of the guidance to 2018, with early adoption permitted in 2017. In 2016, the FASB issued final amendments clarifying the implementation guidance for principal versus agent considerations, identifying performance obligations and the accounting of intellectual property licenses. In addition, the FASB introduced practical expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectibility, non-cash consideration and the presentation of sales and other similar taxes. We are currently evaluating the impact of this guidance on our financial statements and the timing of adoption, and have not yet selected a transition approach.

6

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. Under this ASU, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016. The adoption of this accounting standard update did not have a material impact to our consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, to eliminate the current requirements to classify deferred income tax assets and liabilities between current and noncurrent. To simplify the presentation of deferred income taxes, the amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company has adopted this standard and the impact to our consolidated financial statements for the period ending March 31, 2017 is a reclassification of $745,000 in deferred tax assets to noncurrent, and a reclassification of $773,000 in deferred tax assets to noncurrent for the period ending December 31, 2016.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), aimed at making leasing activities more transparent and comparable. The new standard requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including today’s operating leases. For public business entities, the standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all entities. When the standard becomes effective, we expect that our property, plant and equipment will increase significantly due to the addition of assets under lease and the lease liabilities will correspondingly increase. There is not expected to be a significant impact on the income statement.

7

On March 30, 2016, the FASB issued Accounting Standards Updated No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). Among other things, ASU 2016-09 requires that entities recognize tax benefits and deficiencies related to employee share-based payment transactions as income tax expense or benefit. ASU 2016-09 also eliminates the requirement to reclassify excess tax benefits and deficiencies from operating activities to financing activities in the statement of cash flows. The guidance is effective for the annual periods and interim periods within those annual periods beginning after December 15, 2016. The adoption of this accounting standard update did not have a material impact to our consolidated financial statements.

On August 26, 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230), a consensus of the FASB’s Emerging Issues Task Force (“ASU 2016-15”). The new guidance amends Accounting Standards Codification No. 230 (“ASC 230”) to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASC 230 lacks consistent principles for evaluating the classification of cash payments and receipts in the statement of cash flows. This has led to diversity in practice and, in certain circumstances, financial statement restatements. Therefore, the FASB issued the ASU 2016-15 with the intent of reducing diversity in practice with respect to eight types of cash flows. ASU 2016-15 is effective for annual and interim periods in fiscal years beginning after December 15, 2017, and is effective for the Company for the year ending December 31, 2018. The Company is currently evaluating the impact that the implementation of this standard will have on the Company’s consolidated financial statements.

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 2017 and 2016. The expected volatility is based on historical volatility of the Company’s common stock.

The Company’s net income for the three months ended March 31, 2017 and 2016 includes approximately $5,000 and $12,000, respectively, of compensation costs related to share based payments. As of March 31, 2017, there is $20,000 of unrecognized compensation expense related to non-vested stock option grants and stock grants. We expect approximately $9,000 of additional stock-based compensation expense to be recognized over the remainder of 2017, $7,000 to be recognized during 2018, $3,000 to be recognized during 2019 and $1,000 to be recognized during 2020.

8

As of March 31, 2017, 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 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 (including cancelled shares reissued under the plan.) As of March 31, 2017, options for 250,000 shares had been granted and options for 143,094 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, 2016		143,094	$	5.22		2.9	$	89,494
Granted		-		-		-		-
Cancelled/Expired		-		-		-		-
Exercised		-		-		-		-
Outstanding at March 31, 2017		143,094	$	5.22		1.7	$	69,661
Exercisable at March 31, 2017		84,075	$	5.20		1.0	$	42,739

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. As of March 31, 2017, the Company was in compliance with all of the financial covenants under the Note and Warrant Purchase Agreement.

On July 29, 2016, the Company and certain accredited investors entered into a Securities Purchase Agreement wherein the investors purchased 152,850 shares of common stock of the Company at a price of $6.00 per share. As additional consideration for the purchases of the shares in the offering, each investor received, with each share of common stock purchased, one-half of a warrant, with one warrant entitling the investor to purchase one share of the Company’s common stock at the price of $7.00. The warrants are exercisable between six months and three years from the investment date. As a result of the completion of the sale under the Purchase Agreement, warrants to purchase 76,675 shares of common stock at $7.00 per share were issued.

9

In addition to the Purchase Agreement, the Company and each of the investors entered into a Registration Rights Agreement pursuant to which the Company agreed to file a Registration Statement with the SEC to register the common stock sold to the investors.

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, 2016		216,723	$	2.48		4.49	$	817,880
Granted		-		-		-		-
Cancelled		-		-		-		-
Exercised		-		-		-		-
Outstanding at March 31, 2017		216,723	$	2.48		4.25	$	798.274
Exercisable at March 31, 2017		76,675	$	7.00		2.33		-

A summary of the Company’s stock option activity by grant date as of March 31, 2017 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		-		-		-		-		-		-		-		-
Dec 2010		-		-		-		-		-		-		-		-
Jan 2011		-		-		-		-		-		-		-		-
Nov 2012		90,000	$	5.17		0.7	$	48,600		72,000	$	5.17		0.7	$	38,880
Nov 2013		5,000	$	5.75		1.6	$	0		3,000	$	5.75		1.6	$	0
Dec 2015		48,094	$	5.27		3.8	$	21,061		9,075	$	5.27		3.8	$	3,859
TOTAL		143,094	$	5.22		1.7	$	69,661		84,075	$	5.20		1.0	$	42,739

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 March 31, 2017 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 March 31, 2017.

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.

10

Note 4 - Other Comprehensive Income

In the three months ended March 31, 2017,the Company incurred other comprehensive income of approximately $311,000, all from foreign currency translation adjustments.

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

	Foreign Currency Items			Total Accumulated Other Comprehensive Income
Beginning balance as of January 1, 2017	$	(5,593,878	)	$	(5,593,878	)
Current period change, net of tax		311,313			311,313
Ending Balance as of March 31, 2017		(5,282,565	)		(5,282,565	)

Note 5 - Inventories, Net

	March 31, 2017			December 31, 2016
Raw materials	$	3,479,323		$	3,310,310
Work in process		2,271,295			1,942,600
Finished goods		13,027,883			13,889,328
Allowance for excess quantities		(814,307	)		(794,227	)
Total inventories	$	17,964,194		$	18,348,011

Note 6 - Geographic Segment Data

The Company has determined that it operates primarily in one business segment that 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 area is as follows:

	Net Sales to Outside Customers
	For the Three Months Ended				Total Assets at
	March 31,				March 31,		December 31,
	2017		2016		2017		2016
United States	$	11,647,000	$	12,087,000	$	28,989,000	$	33,108,000
Europe		947,000		547,000		2,597,000		2,418,000
Mexico		2,023,000		1,863,000		8,058,000		7,064,000
United Kingdom		743,000		708,000		1,417,000		1,324,000
	$	15,360,000	$	15,205,000	$	41,061,000	$	43,914,000

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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 months ended March 31, 2017 and 2016, 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 months ended March 31, 2017 and 2016 are as follows:

	Three Months Ended					Three Months Ended
	March 31, 2017					March 31, 2016
Customer	Net Sales		% of Net Sales			Net Sales		% of Net Sales
Customer A	$	4,427,000		28.8	%	$	5,165,000		34.0	%
Customer B	$	2,609,000		17.0	%	$	2,340,000		15.4	%

As of March 31, 2017, the total amounts owed to the Company by these customers were approximately $3,301,000 or 27.7%, and $2,657,000 or 22.3%, of the Company’s consolidated net accounts receivable, respectively. The amounts owed at March 31, 2016 by these customers were approximately $2,498,000 or 25.1%, and $3,546,000 or 35.6% 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 March 31, 2017 and 2016, respectively, were $26,000 and $38,000.

Interest payments have been made or accrued to John H. Schwan, Chief Executive Officer of the Company, for loans made to the Company. During the three months ended March 31, 2017 and 2016, these interest accruals totaled $24,000 and $23,000, respectively.

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 (“Clever Container”). The Company owns a 28.5% interest in Clever Container. During the three months ended March 31, 2017 and 2016, Clever Container purchased various products from the Company in the amount of $204,000 and $185,000, respectively. As of March 31, 2017 and 2016, the balance of accounts receivable from Clever Container to the Company were $711,000 and $300,000, respectively.

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On September 30, 2016, John H. Schwan advanced to the Company the sum of $530,000 and on the same date, Stephen M. Merrick advanced to the Company the sum of $370,000 to provide short-term working capital to the Company to fund the Company’s obligation to purchase and produce inventory for a substantial order for vacuum sealing systems to be delivered in November `2016. In consideration of such advances, the Company issued a Promissory Note to Mr. Schwan in the principal amount of $530,000 and to Mr. Merrick in the amount of $370,000 dated September 30, 2016 and bearing interest at the rate of 6% per annum. Effective on the same date, Mr. Schwan and Mr. Merrick entered into Subordination Agreements with BMO Harris and BMO equity pursuant to which each of them agreed to subordinate the Company’s obligation to them under the Promissory Notes to the Company’s obligations to BMO Harris and BMO Equity, subject to certain rights of payment as provided in the Agreements. Further, effective on September 30, 2016, the Company and BMO Harris entered into Amendment No. 9 to the Credit Agreement and the Company and BMO Equity entered into Amendment No. 4 to the Note and Warrant Purchase Agreement pursuant to which each of BMO Harris and BMO Equity agreed to consent to payments of principal and interest to Mr. Schwan and Mr. Merrick under the Promissory Notes out of the proceeds received by the Company from the sale of vacuum sealing machines to a major retail chain in a promotional program. The entire principal balances of these loans have been paid.

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 March 31, 2017 and December 31, 2016, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

	Amount as of
Description	3/31/2017		Level 1		Level 2		Level 3
Warrant Liability	$	798,000		-	$	798,000		-
	$	798,000		-	$	798,000		-

	Amount as of
Description	12/31/2016		Level 1		Level 2		Level 3
Warrant Liability	$	818,000		-	$	818,000		-
	$	818,000			$	818,000

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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 and we market and sell home organizing and container products.

Results of Operations

Net Sales. For the three months ended March 31, 2017, net sales were $15,360,000 compared to net sales of $15,205,000 for the same period of 2016, an increase of 1%. For the quarters ended March 31, 2017 and 2016, net sales by product category were as follows:

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	Three Months Ended
	March 31, 2017					March 31, 2016
	$		% of			$		% of
Product Category	(000) Omitted		Net Sales			(000) Omitted		Net Sales
Foil Balloons		8,891		58	%		8,014		53	%
Latex Balloons		2,105		14	%		2,044		13	%
Vacuum Sealing Products		1,708		11	%		2,323		15	%
Film Products		838		5	%		1,020		7	%
Other Sales		1,818		12	%		1,804		12	%
Total		15,360		100	%		15,205		100	%

Foil Balloons. During the three months ended March 31, 2017, revenues from the sale of foil balloons increased by 10.9% compared to the prior year period from $8,014,000 to $8,891,000. During the three months ended March 31, 2017, foil balloon sales to our largest customer decreased to $4,427,000 from $5,130,000 for the same period last year. Sales of foil balloons to other customers increased by 54.8% to $4,464,000 from $2,884,000 for the same period last year. These increased sales represents certain new customers but principally increases in sales to significant existing customers in each of the United States, Mexico, the United Kingdom and Europe.

Latex Balloons. During the three months ended March 31, 2017, revenues from the sale of latex balloons increased by 3% compared to the prior year period from $2,044,000 to $2,105,000.

Vacuum Sealing Products. During the three months ended March 31, 2017, revenues from the sale of pouches and vacuum sealing machines decreased by 26.4% compared to the prior year from $2,323,000 to $1,708,000.

Films. During the three months ended March 31, 2017, revenues from the sale of laminated film products decreased by 17.8% compared to the prior year period from $1,020,000 to $838,000. Virtually all of the sales of this product line were to a single long-term customer.

Other Revenues. During the three months ended March 31, 2017, revenues from the sale of various other products increased by 0.8% to $1,818,000 compared to revenues from other products in the same period in 2016 of $1,804,000. The revenues from the sale of other products during 2017 include (i) sales of a line of “Candy Blossoms” and “Candy Loons” consisting of candy and small inflated balloons sold in small containers, (ii) the sale of accessories and supply items related to balloon products, (iii) sales by Clever Container Company, L.L.C. which engages in the direct sale of container and organizing products through a network of independent distributors and (iv) sales of party goods in Mexico by Flexo Universal.

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 months ended March 31, 2017 and 2016.

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	Three Months Ended March 31,
	% of Sales
	2017			2016
Top 3 Customers		51.1	%		55.8	%
Top 10 Customers		67.0	%		68.7	%

During the three months ended March 31, 2017, 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 March 31, 2017 were $4,427,000 or 28.8%, and $2,609,000 or 17.0%, of consolidated net sales, respectively. Sales to these customers for the three months ended March 31, 2016 were $5,165,000 or 34.0%, and $2,340,000 or 15.4%, of consolidated net sales, respectively. The amounts owed at March 31, 2017 by these customers were $3,301,000 or 27.7%, and $2,657,000 or 22.3%, of the Company’s consolidated net accounts receivable, respectively. As of March 31, 2016, the total amounts owed to the Company by these customers were $2,498,000 or 25.1%, and $3,546,000 or 35.6% of the Company’s consolidated net accounts receivable, respectively.

Cost of Sales. During the three months ended March 31, 2017, the cost of sales represented 76.4% of net sales compared to 74.2% for the three months ended March 31, 2016. The increase in cost of sales was the result of changes in the mix of products sold.

General and Administrative. During the three months ended March 31, 2017, general and administrative expenses were $1,901,000 or 12.4% of net sales, compared to $1,757,000 or 11.6% of net sales for the same period in 2016.

Selling. During the three months ended March 31, 2017, selling expenses were $721,000 or 4.7% of net sales, compared to $991,000 or 6.5% of net sales for the same period in 2016. The decline is attributable principally to a decline in the commissions payable by Clever Container Company.

Advertising and Marketing. During the three months ended March 31, 2017, advertising and marketing expenses were $556,000 or 3.6% of net sales for the period, compared to $526,000 or 3.5% of net sales for the same period of 2016.

Other Income (Expense). During the three months ended March 31, 2017, the Company incurred interest expense of $353,000, compared to interest expense during the same period of 2016 in the amount of $546,000. In addition to interest expense, there is a variable charge relating to the change in value of our outstanding warrants issued in connection with our mezzanine loan by reason of change in market price of our common stock. The amount of that change was ($20,000) in the first quarter of 2017, compared to $188,000 in the first quarter of 2016.

For the three months ended March 31, 2017, the Company had a foreign currency transaction loss of $31,000 compared to a foreign currency transaction loss of $10,000 during the same period of 2016.

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Income Taxes. For the three months ended March 31, 2017, the Company reported a consolidated income tax expense of $76,000, compared to a consolidated income tax expense of $7,000 for the same period of 2016. For the three months ended March 31, 2017, 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 expense in Europe of CTI Europe gmbH, our Germany subsidiary.

Net Income. For the three months ended March 31, 2017, the Company had net income of $58,000 or $0.02 per share (basic and diluted,) compared to net income of $7,000 for the same period of 2016 or $0.00 per share (basic and diluted.) For the three months ended March 31, 2017, the Company had income from operations of $508,000 compared to income from operations during the same period in 2016 of $647,000.

Financial Condition, Liquidity and Capital Resources

Cash Flow Items.

Operating Activities. During the three months ended March 31, 2017, net cash provided by operations was $3,083,000, compared to net cash provided by operations during the three months ended March 31, 2016 of $878,000.

Significant changes in working capital items during the three months ended March 31, 2017 included:

· A decrease in accounts receivable of $2,660,000 compared to an increase in accounts receivable of $355,000 in the same period of 2016.

· A decrease in inventory of $816,000 compared to a decrease in inventory of $131,000 in 2016.

· A decrease in trade payables of $20,000 compared to an increase in trade payables of $832,000 in 2016.

· A decrease in accrued liabilities of $847,000 compared to a decrease in accrued liabilities of $460,000 in 2016.

Investing Activity. During the three months ended March 31, 2017, cash used in investing activity was $220,000, compared to cash used in investing activity for the same period of 2016 in the amount of $288,000. Investing activity consisted principally of investment in equipment and equipment maintenance.

Financing Activities. During the three months ended March 31, 2017, cash used in financing activities was $2,856,000 compared to cash used in financing activities for the same period of 2016 in the amount of $736,000. Financing activities consisted principally of reduction in the balances of revolving and long term debt.

Liquidity, Capital Resources and Going Concern.

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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:

i. 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.

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 March 31, 2017, the effective rate on the outstanding loan balances was 4.5%.

As of March 31, 2017, the outstanding balances on the loans with BMO Harris were: (i) revolving line of credit, $9,099,000, (ii) mortgage loan, $1,688,000, and (iii) equipment loan, $44,000.

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. The loans subject to the Credit Agreement mature on July 17, 2017.

18

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 loan matures on January 31, 2018. 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.

19

On July 29, 2016, the Company and certain accredited investors entered into a Securities Purchase Agreement in which the investors purchased 152,850 shares of common stock at the price of $6.00 per share. As additional consideration for the purchase of shares in the Company, each investor received one-half of a warrant, with one warrant entitling the investor to purchase one share of common stock at the price of $7.00 per share. The warrants are exercisable between six months and three years from the investment date. In addition to the Purchase Agreement, the Company and the investors entered into a Registration Rights Agreement under which the Company agreed to file a Registration Statement with the SEC on or before August 29, 2016 to register the common stock purchased by the investors.

The issuance of shares in this placement resulted in gross proceeds to the Company of $917,000, and after commissions and fees, net proceeds to the Company of approximately $638,328. The Company used these proceeds for general working capital purposes.

On September 30, 2016, John H. Schwan advanced to the Company the sum of $530,000 and on the same date, Stephen M. Merrick advanced to the Company the sum of $370,000 to provide short-term working capital to the Company to fund the Company’s obligation to purchase and produce inventory for a substantial order for vacuum sealing systems to be delivered in November 2016. In consideration of such advances, the Company issued a Promissory Note to Mr. Schwan in the principal amount of $530,000 and to Mr. Merrick in the amount of $370,000 dated September 30, 2016 and bearing interest at the rate of 6% per annum. Effective on the same date, Mr. Schwan and Mr. Merrick entered into Subordination Agreements with BMO Harris and BMO equity pursuant to which each of them agreed to subordinate the Company’s obligation to them under the Promissory Notes to the Company’s obligations to BMO Harris and BMO Equity, subject to certain rights of payment as provided in the Agreements. Further, effective on September 30, 2016, the Company and BMO Harris entered into Amendment No. 9 to the Credit Agreement and the Company and BMO Equity entered into Amendment No. 4 to the Note and Warrant Purchase Agreement pursuant to which each of BMO Harris and BMO Equity agreed to consent to payments of principal and interest to Mr. Schwan and Mr. Merrick under the Promissory Notes out of the proceeds received by the Company from the sale of vacuum sealing machines to a major retail chain in a promotional program. The entire balance of these advances has been repaid to Mr. Schwan and Mr. Merrick.

At March 31, 2017, the Company had cash balances of $583,000 compared to cash balances of $195,000 for the same period of 2016, and there was $2,150,000 available to advance on the Company’s revolving line of credit.

Also at March 31, 2017, the Company had a working capital balance of $6,547,000 compared to a working capital balance of $11,080,000 on December 31, 2016.

Further, as of March 31, 2017, the Company was in compliance with all of the financial covenants under the Credit Agreement and the Note and Warrant Purchase Agreement.

With such funds, and the funds currently available under the line of credit, as well as internally generated funds, management believes that the Company will be able to meet its working capital needs.

The Credit Agreement with BMO Harris, and all loans under that agreement, including the revolving loan and the term loan (having a balance then of approximately $1.7 million) mature on July 17, 2017.

Further, the loan of $5 million in principal amount to the Company from BMO Equity matures on January 31, 2018.

We are currently negotiating with BMO Harris regarding the extension of renewal of the Credit Agreement and, while no assurance can be given, believe that we will be able to obtain such an agreement with BMO Harris or other financial institution.

Further, we are engaged in efforts to address the maturity of our loan with BMO Equity which matures in January 2018, including extension of the loan or alternative financing.

20

Seasonality

In the foil balloon product line, sales have historically been seasonal with approximately 40% occurring in the period from December through March of the succeeding year and 24% being generated in the period July through October in recent years. Vacuum sealing product sales are also seasonal; approximately 60% of sales in this product line occur in the period from July through December.

Critical Accounting Policies

Please see pages 25-28 of our Annual Report on Form 10-K for the year ended December 31, 2016 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 months ended March 31, 2017.

Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk

Not applicable.

Item 4. Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we conducted an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2017, the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2017, to ensure that the information required to be disclosed by us in the reports that we file or submit under Security Exchange Act of 1934, as amended, (a) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) is accumulated and communicated to our management, including officers, as appropriate, to allow for timely decisions regarding required disclosure. There were no material changes in our internal control over financial reporting during the first quarter of 2017 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

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.

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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	Restated Articles of Incorporation (Incorporated by reference to Exhibit A to Registrant’s Schedule 14A Definitive Proxy Statement filed April 29, 2015.)
3.2	Amended and Restated By-Laws of CTI Industries Corporation (Incorporated by reference to Exhibit 3.2, contained in Registrant’s Form 8-K filed on March 17, 2017)
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 March 31, 2017, 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.

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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: May 15, 2017	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

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Exhibit Index

Exhibit Number	Description
3.1	Restated Articles of Incorporation (Incorporated by reference to Exhibit A to Registrant’s Schedule 14A Definitive Proxy Statement filed April 29, 2015.)
3.2	Amended and Restated By-Laws of CTI Industries Corporation (Incorporated by reference to Exhibit 3.2, contained in Registrant’s Form 8-K filed on March 17, 2017)
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 March 31, 2017, 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.

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