x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Illinois
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36-2848943
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(State
or other jurisdiction of
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(I.R.S.
Employer Identification Number)
|
incorporation
or organization)
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22160
N. Pepper Road
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|
Barrington,
Illinois
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60010
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(Address
of principal executive offices)
|
(Zip
Code)
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Title of Each Class
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Name of Each Exchange on Which
Registered
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Common
Stock, No Par
|
NASDAQ
Capital Market
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Part of Form 10-K into Which
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||
Document
|
Document Is Incorporated
|
|
Sections
of the registrant’s Proxy Statement
To
be filed on or before April 30, 2009 for the Annual Meeting of
Stockholders
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Part
III
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FORWARD
LOOKING STATEMENTS
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||
Part
I
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||
Item
No. 1
|
Description
of Business
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1
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Item
No. 1A
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Risk
Factors
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13
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Item
No. 1B
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Unresolved
Staff Comments
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21
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Item
No. 2
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Properties
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21
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Item
No. 3
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Legal
Proceedings
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22
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Item
No. 4
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Submission
of Matters to a Vote of Security Holders
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22
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Part
II
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||
Item
No. 5
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Market
for Registrant’s Common Equity, Related Stockholder
Matters
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|
and
Issuer Purchases of Equity Securities
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22
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Item
No. 6
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Selected
Financial Data
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25
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Item
No. 7
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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27
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Item
No. 7A
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Quantitative
and Qualitative Disclosures Regarding Market Risk
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38
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Item
No. 8
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Financial
Statements and Supplementary Data
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38
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Item
No. 9
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
38
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Item
No. 9A
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Controls
and Procedures
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39
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Item
No. 9B
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Other
Information
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41
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Part
III
|
||
Item
No. 10
|
Directors
and Executive Officers of the Registrant
|
41
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Item
No. 11
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Executive
Compensation
|
41
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Item
No. 12
|
Security
Ownership of Certain Beneficial Owners and and Management and Related
Stockholder Matters
|
42
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Item
No. 13
|
Certain
Relationships and Related Transactions
|
42
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Item
No. 14
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Principal
Accounting Fees and Services
|
42
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Part
IV
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||
Item
No. 15
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Exhibits
and Financial Statement Schedules
|
42
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|
·
|
Novelty Products,
principally balloons, including foil balloons, latex balloons, punch balls
and other inflatable toy items,
|
|
·
|
Specialty and Printed
Films for food packaging, specialized consumer uses and various
commercial applications, and,
|
|
·
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Flexible Containers for
home and consumer use for the storage and preservation of food and
personal items.
|
|
·
|
Coating
and laminating plastic film. Generally, we adhere polyethylene
film to another film such as nylon or
polyester.
|
|
·
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Printing
plastic film and latex balloons. We print films, both plastic
and latex with a variety of graphics for use as packaging film or for
balloons.
|
|
·
|
Converting
printed plastic film to balloons.
|
|
·
|
Converting
plastic film to flexible
containers.
|
|
·
|
Producing
latex balloons and other latex novelty
items.
|
·
Novelty Products
|
57.5%
of revenues
|
·
Laminated Film Products
|
18.3%
of revenues
|
·
Flexible Containers
|
24.2%
of revenues
|
|
·
|
Focus on our Core Assets and
Expertise. We have been engaged in the development,
production and sale of film products for over 30 years and have developed
assets, technology and expertise which, we believe, enable us to develop,
manufacture, market and sell innovative products of high quality within
our area of knowledge and expertise. We plan to focus our
efforts in these areas which are our core assets and expertise – laminated
films, printed films, pouches and film novelty products – to develop new
products, to market and sell our products and to build our
revenues.
|
|
·
|
Maintain a Focus on Margin
Levels and Cost Controls in Order to Establish and Maintain
Profitability. We engage in constant review and effort
to control our production, and our selling, general and administrative
expenses, in order to establish and enhance
profitability.
|
|
·
|
Develop New Products, Product
Improvements and Technologies. We work to develop new
products, to improve existing products and to develop new technologies
within our core product areas, in order to enhance our competitive
position and our sales. In the novelty line, our development
work includes new designs, new character licenses and new product
developments. We developed and introduced a device to amplify
sound through a balloon so that voice and music can be played and
amplified using our Balloon Jamz™ balloons. In our commercial
line, over the past several years we have developed new pouch closure
systems and valves and new film methods for liquid packaging
applications. We have received nine patents for these
developments and have three patent applications pending. During 2008, we
introduced a line of resealable pouches with a valve and pump system for
household storage and vacuum sealing of food items. We work
with customers to develop custom film products which serve the unique
needs or requirements of the
customer.
|
|
·
|
Develop New Channels of
Distribution and New Sales Relationships. In order to
increase sales, we endeavor to develop new channels of distribution and
new sales relationships, both for existing and new products. On
February 1, 2008, we entered into a Supply and License Agreement with S.C.
Johnson & Son, Inc. to manufacture and supply to SC Johnson certain
home food management products to be sold under the SC Johnson ZipLoc®
brand.
|
|
·
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Superloons® -
18" foil balloons in round or heart shape, generally made to be filled
with helium and remain buoyant for long periods. This is the predominant
foil balloon size.
|
|
·
|
Ultraloons® -
31" jumbo foil balloons made to be filled with helium and remain
buoyant.
|
|
·
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Miniloons®-
9" foil balloons made to be air-filled and sold on holder-sticks or for
use in decorations.
|
|
·
|
Card-B-Loons®(4
1/2") - air-filled foil balloons, often sold on a stick, used in floral
arrangements or with a container of
candy.
|
|
·
|
Shape-A-Loons® -
“18 to 48” shaped foil balloons made to be filled with
helium.
|
|
·
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Minishapes
– 11” to 16”small shaped foil balloons designed to be air filled and sold
on sticks as toys or inflated
characters.
|
|
·
|
Balloon
JamzTM –
20” to 40” round and shaped foil balloons which emit and amplify sound
through a speaker attached to the
balloon.
|
United
States
|
United Kingdom
|
Mexico
|
Consolidated
|
|||||||||||||
Year
ended 12/31/08
|
||||||||||||||||
Sales
to outside customers
|
$ | 34,701,000 | $ | 2,762,000 | $ | 7,518,000 | $ | 44,981,000 | ||||||||
Operating
income
|
$ | 1,612,000 | $ | 412,000 | $ | 359,000 | $ | 2,383,000 | ||||||||
Net
income
|
$ | 795,000 | $ | 215,000 | $ | 144,000 | $ | 1,154,000 | ||||||||
Total
Assets
|
$ | 24,709,000 | $ | 740,000 | $ | 4,539,000 | $ | 29,988,000 |
United
States
|
United
Kingdom
|
Mexico
|
Consolidated
|
|||||||||||||
Year
ended 12/31/07
|
||||||||||||||||
Sales
to outside customers
|
$ | 27,326,000 | $ | 2,913,000 | $ | 6,271,000 | $ | 36,510,000 | ||||||||
Operating
income
|
$ | 810,000 | $ | 215,000 | $ | 220,000 | $ | 1,245,000 | ||||||||
Net
(loss) income
|
$ | (128,000 | ) | $ | 167,000 | $ | 43,000 | $ | 82,000 | |||||||
Total
Assets
|
$ | 23,128,000 | $ | 1,086,000 | $ | 5,110,000 | $ | 29,324,000 |
|
·
|
Economic
conditions
|
|
·
|
Sales
volume
|
|
·
|
Competition
|
|
·
|
Production
efficiencies
|
|
·
|
Variability
in raw materials prices
|
|
·
|
Seasonality
|
|
·
|
Increase
our vulnerability to general adverse economic and industry
conditions;
|
|
·
|
Require
us to dedicate a substantial portion of our cash flow from operations to
payments on our debt, thereby limiting our ability to fund working
capital, capital expenditures and other general corporate
purposes;
|
|
·
|
Limit
our flexibility in planning for, or reacting to, changes in our business
and the industry in which we
operate;
|
|
·
|
Place
us at a competitive disadvantage compared to our competitors who may have
less debt and greater financial resources;
and
|
|
·
|
Limit,
among other things, our ability to borrow additional
funds.
|
|
·
|
Borrow
money;
|
|
·
|
Pay
dividends and make distributions;
|
|
·
|
Issue
stock
|
|
·
|
Make
certain investments;
|
|
·
|
Use
assets as security in other
transactions;
|
|
·
|
Create
liens;
|
|
·
|
Enter
into affiliate transactions;
|
|
·
|
Merge
or consolidate; or
|
|
·
|
Transfer
and sell assets.
|
|
·
|
We
are required to maintain a tangible net worth in excess of
$3,500,000;
|
|
·
|
We
are required to maintain specified ratios of senior debt to EBITDA on an
annual basis and determined quarterly commencing as of June 30, 2006;
and,
|
|
·
|
We
are required to maintain a specified level of EBITDA to fixed charges for
the six months ending June 30, 2006, the nine months ending September 30,
2006 and twelve months
thereafter.
|
High
|
Low
|
|||||||
January
1, 2007 to March 31, 2007
|
$ | 10.39 | $ | 4.39 | ||||
April
1, 2007 to June 30, 2007
|
8.10 | 3.68 | ||||||
July
1, 2007 to September 30, 2007
|
5.59 | 2.88 | ||||||
October
1, 2007 to December 31, 2007
|
5.44 | 2.76 | ||||||
January
1, 2008 to March 31, 2008
|
6.43 | 3.25 | ||||||
April
1, 2008 to June 30, 2008
|
6.10 | 4.16 | ||||||
July
1, 2008 to September 30, 2008
|
7.30 | 4.50 | ||||||
October
1, 2008 to December 31, 2008
|
5.29 | 1.60 |
Year ended December 31,
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Statement
of Operations Data:
|
||||||||||||||||||||
Net
Sales
|
$ | 44,981 | $ | 36,510 | $ | 35,428 | $ | 29,190 | $ | 37,193 | ||||||||||
Costs
of Sales
|
$ | 34,659 | $ | 27,826 | $ | 26,531 | $ | 22,726 | $ | 30,841 | ||||||||||
Gross
Profit
|
$ | 10,322 | $ | 8,684 | $ | 8,897 | $ | 6,464 | $ | 6,352 | ||||||||||
Operating
expenses
|
$ | 7,939 | $ | 7,439 | $ | 6,275 | $ | 5,812 | $ | 6,402 | ||||||||||
Income
(loss) from operations
|
$ | 2,383 | $ | 1,245 | $ | 2,622 | $ | 652 | $ | (50 | ) | |||||||||
Interest
expense
|
$ | 1,032 | $ | 1,286 | $ | 1,691 | $ | 1,231 | $ | 1,350 | ||||||||||
Other
(income) expense
|
$ | (50 | ) | $ | (174 | ) | $ | (191 | ) | $ | (45 | ) | $ | (208 | ) | |||||
Income
(loss) before taxes and minority interest
|
$ | 1,401 | $ | 133 | $ | 1,122 | $ | (534 | ) | $ | (1,192 | ) | ||||||||
Income
tax (benefit) expense
|
$ | 247 | $ | 51 | $ | (774 | ) | $ | (200 | ) | $ | 1,286 | ||||||||
Minority
interest
|
$ | - | $ | - | $ | 1 | $ | - | $ | 1 | ||||||||||
Net
Income (loss)
|
$ | 1,154 | $ | 82 | $ | 1,895 | $ | (333 | ) | $ | (2,479 | ) | ||||||||
Earnings
(loss) per common share
|
||||||||||||||||||||
Basic
|
$ | 0.42 | $ | 0.03 | $ | 0.91 | $ | (0.17 | ) | $ | (1.28 | ) | ||||||||
Diluted
|
$ | 0.40 | $ | 0.03 | $ | 0.85 | $ | (0.17 | ) | $ | (1.28 | ) | ||||||||
Other
Financial Data:
|
||||||||||||||||||||
Gross
margin percentage
|
22.95
|
% |
23.79
|
% |
25.11
|
% |
22.14
|
% |
17.08
|
% | ||||||||||
Capital
Expenses
|
$ | 2,200 | $ | 2,848 | $ | 553 | $ | 550 | $ | 306 | ||||||||||
Depreciation
& Amortization
|
$ | 1,593 | $ | 1,299 | $ | 1,205 | $ | 1,463 | $ | 1,651 | ||||||||||
Balance
Sheet Data:
|
||||||||||||||||||||
Working
capital (Deficit)
|
$ | 1,466 | $ | 1,318 | $ | 1,848 | $ | (2,426 | ) | $ | (2,790 | ) | ||||||||
Total
assets
|
$ | 29,988 | $ | 29,256 | $ | 26,645 | $ | 23,536 | $ | 27,888 | ||||||||||
Short-term obligations
(1)
|
$ | 10,416 | $ | 9,767 | $ | 9,422 | $ | 8,618 | $ | 9,962 | ||||||||||
Long-term
obligations
|
$ | 6,019 | $ | 6,237 | $ | 6,887 | $ | 6,039 | $ | 6,491 | ||||||||||
Stockholders’
Equity
|
$ | 7,735 | $ | 6,523 | $ | 5,102 | $ | 2,726 | $ | 2,951 |
(1)
|
Short
term obligations consist of primarily of borrowings under bank line of
credit and current portion of long-term
debt.
|
For
the Year Ended December 31, 2008 (1)
|
||||||||||||||||
1st
|
2nd
|
3rd
|
4th
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
Net
sales
|
$ | 10,735,000 | $ | 12,461,000 | $ | 11,953,000 | $ | 9,832,000 | ||||||||
Gross
profit
|
$ | 2,332,000 | $ | 2,913,000 | $ | 2,742,000 | $ | 2,335,000 | ||||||||
Net
income
|
$ | 279,000 | $ | 485,000 | $ | 269,000 | $ | 121,000 | ||||||||
Earnings
per common share
|
||||||||||||||||
Basic
|
$ | 0.10 | $ | 0.17 | $ | 0.10 | $ | 0.04 | ||||||||
Diluted
|
$ | 0.10 | $ | 0.17 | $ | 0.09 | $ | 0.04 |
(1)
|
Earnings
per common share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly per common share
information may not equal the annual earnings per common
share
|
For
the Year Ended December 31, 2007 (1)
|
||||||||||||||||
1st
|
2nd
|
3rd
|
4th
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
Net
sales
|
$ | 8,279,000 | $ | 9,259,000 | $ | 8,673,000 | $ | 10,299,000 | ||||||||
Gross
profit
|
$ | 1,903,000 | $ | 2,744,000 | $ | 1,617,000 | $ | 2,420,000 | ||||||||
Net
(loss) income
|
$ | (52,000 | ) | $ | 423,000 | $ | (414,000 | ) | $ | 125,000 | ||||||
Earnings
per common share
|
||||||||||||||||
Basic
|
$ | (0.02 | ) | $ | 0.18 | $ | (0.18 | ) | $ | 0.05 | ||||||
Diluted
|
$ | (0.02 | ) | $ | 0.17 | $ | (0.18 | ) | $ | 0.05 |
(1)
|
Earnings
per common share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly per common share
information may not equal the annual earnings per common
share
|
(000
Omitted)
|
||||||||||||||||
$
|
%
of
|
$
|
%
of
|
|||||||||||||
Product
Category
|
2008
|
Net
Sales
|
2007
|
Net
Sales
|
||||||||||||
Metalized
Balloons
|
17,629 |
39.2%
|
15,998 |
43.8%
|
||||||||||||
|
||||||||||||||||
Films
|
8,212 |
18.3%
|
|
7,846 |
21.5%
|
|||||||||||
|
||||||||||||||||
Pouches
|
10,893 |
24.2%
|
4,938 |
13.5%
|
||||||||||||
Latex
Balloons
|
7,597 |
16.9%
|
6,853 |
18.8%
|
||||||||||||
Helium/Other
|
650 |
1.4%
|
875 |
2.4%
|
||||||||||||
Total
|
44,981 |
100.0%
|
36,510 |
100.0%
|
Customer
|
Product
|
2008
Sales
|
% of 2008
Revenues
|
2007
Sales
|
% of 2007
Revenues
|
|||||||||||||
Dollar
Tree Stores
|
Balloons
|
$ | 9,014,000 |
20.0%
|
$ | 7,419,000 |
20.3%
|
|||||||||||
Rapak
L.L.C
|
Films
|
$ | 7,608,000 |
16.9%
|
$ | 6,982,000 |
19.1%
|
|||||||||||
S.C.
Johnson & Son, Inc
|
Pouches
|
$ | 6,990,000 |
|
15.5%
|
$ | 284,000 |
0.8%
|
Year
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Net
sales
|
100.0%
|
100.0%
|
||||||
Costs
and expenses:
|
||||||||
Cost
of products sold
|
77.1
|
76.2
|
||||||
Operating
Expenses
|
17.6
|
20.4
|
||||||
Income
from operations
|
5.3
|
3.4
|
||||||
Interest
expense
|
(2.3)
|
(3.5)
|
||||||
Other
income
|
0.1
|
0.5
|
||||||
Income
before income taxes
|
3.1
|
0.4
|
||||||
Provision
for income taxes
|
0.5
|
0.2
|
||||||
|
||||||||
Net
profit
|
2.6%
|
0.2%
|
|
·
|
Depreciation
and amortization of $1,593,000
|
|
·
|
An
increase in net inventory of
$1,380,000
|
|
·
|
A
decrease in trade payables of
$784,000
|
|
·
|
An
increase in accounts receivable of
$588,000
|
|
·
|
A
decrease in prepaid expenses and other assets of
$122,000
|
|
·
|
A
decrease in accrued liabilities of
$455,000
|
|
·
|
Restrictive
Covenants: The Loan Agreement includes several
restrictive covenants under which we are prohibited from, or restricted in
our ability to:
|
|
o
|
Borrow
money;
|
|
o
|
Pay
dividends and make distributions;
|
|
o
|
Issue
stock;
|
|
o
|
Make
certain investments;
|
|
o
|
Use
assets as security in other
transactions;
|
|
o
|
Create
liens;
|
|
o
|
Enter
into affiliate transactions;
|
|
o
|
Merge
or consolidate; or
|
|
o
|
Transfer
and sell assets.
|
|
·
|
Financial
Covenants: The loan agreement includes a series of
financial covenants we are required to meet
including:
|
|
o
|
We
are required to maintain a tangible net worth in excess of
$3,500,000;
|
|
o
|
We
are required to maintain specified ratios of senior debt to EBITDA on an
annual basis and determined quarterly commencing as of June 30, 2006;
and,
|
|
o
|
We
are required to maintain a specified level of EBITDA to fixed charges for
the six months ending June 30, 2006, the nine months ending September 30,
2006 and twelve months thereafter.
|
When
Senior Debt to EBITDA is:
|
The
Premium
to
the Prime
Rate
is:
|
|||
Greater
or equal to 4.00 to 1.00
|
1.50%
|
|||
Greater
than or equal to 3.50 to 1.00; Less than 4.00 to 1.00
|
1.25%
|
|||
Greater
than or equal to 3.25 to 1.00; Less than 3.50 to 1.00
|
1.00%
|
|||
Greater
than or equal to 2.75 to 1.00; Less than 3.25 to 1.00
|
0.75%
|
|||
Less
than 2.75 to 1.00
|
0.50%
|
|
·
|
Initial
and ongoing periodic review of all vendors by individuals who are not
involved in the purchasing process with such
vendors;
|
|
·
|
Enhanced
documentation and review requirements of invoices prior to authorization
for payment;
|
|
·
|
Periodic
testing of invoices by individuals not involved in purchasing or in the
approval process of the invoices for
payment;
|
|
·
|
Initiation
of an internal audit function with respect to purchasing and treasury
functions.
|
|
1.
|
The
Consolidated Financial Statements filed as part of this report on Form
10-K are listed on the accompanying Index to Consolidated Financial
Statements and Consolidated Financial Statement
Schedules.
|
|
2.
|
Financial
schedules required to be filed by Item 8 of this form, and by Item 15(d)
below:
|
|
3.
|
Exhibits:
|
Exhibit
|
||
Number
|
Document
|
|
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 the Commission on October 25,
1999)
|
3.2
|
By-Laws
of CTI Industries Corporation (Incorporated by reference to Exhibits,
contained in Registrant’s Form SB-2 Registration Statement (File No.
333-31969) effective November 5, 1997)
|
4.1
|
Form
of CTI Industries Corporation’s common stock certificate (Incorporated by
reference to Exhibits, contained in Registrant’s Form SB-2 Registration
Statement (File No. 333-31969) effective November 5,
1997)
|
10.1
|
CTI
Industries Corporation 1999 Stock Option Plan (Incorporated by reference
to Exhibit contained in Registrant’s Schedule 14A Definitive Proxy
Statement, as filed with the Commission on March 26,
1999)
|
10.2
|
CTI
Industries Corporation 2001 Stock Option Plan (Incorporated by reference
to Exhibit contained in Registrant’s Schedule 14A Definitive Proxy
Statement, as filed with the Commission on May 21,
2001)
|
10.3
|
CTI
Industries Corporation 2002 Stock Option Plan (Incorporated by reference
to Exhibit contained in Registrant’s Schedule 14A Definitive Proxy
Statement, as filed with the Commission on May 15,
2002)
|
10.4
|
CTI
Industries Corporation 2007 Stock Incentive Plan (Incorporated by
reference to Exhibit contained in Registrant’s Schedule 14A Definitive
Proxy Statement, as filed with the Commission on April 30,
2007)
|
10.5
|
Employment
Agreement dated June 30, 1997, between CTI Industries Corporation and
Howard W. Schwan (Incorporated by reference to Exhibits, contained in
Registrant’s Form SB-2 Registration Statement (File No. 333-31969)
effective November 5, 1997.)
|
10.6
|
Warrant
dated July 17, 2001 to purchase 79,364 shares of Common Stock John H.
Schwan (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.7
|
Warrant
dated July 17, 2001 to purchase 39,683 shares of Common Stock Stephen M.
Merrick (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.8
|
Note
dated January 28, 2003, CTI Industries Corporation to Stephen M. Merrick
in the sum of $500,000 (Incorporated by reference to Exhibits contained in
the Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.9
|
Note
dated February 28, 2003, CTI Industries Corporation to Stephen M. Merrick
in the sum of $200,000 (Incorporated by reference to Exhibits contained in
the Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.10
|
Note
dated February 10, 2003, CTI Industries Corporation to John H. Schwan in
the sum of $150,000 (Incorporated by reference to Exhibits contained in
the Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.11
|
Note
dated February 15, 2003, CTI Industries Corporation to John Schwan in the
sum of $680,000 (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.12
|
Note
dated March 3, 2003, CTI Industries Corporation to John H. Schwan in the
sum of $100,000 (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.13
|
Warrant
dated March 20, 2003, to purchase 70,000 shares of Common Stock - Stephen
M. Merrick (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.14
|
Warrant
dated March 20, 2003, to purchase 93,000 shares of Common Stock - John H.
Schwan (Incorporated by reference to Exhibits contained in the
Registrant’s 2002 10-KSB, as filed with the Commission on May 1,
2003)
|
10.15
|
Loan
and Security Agreement between RBS Citizens, N.A. and the Company dated
February 1, 2006 (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
10.16
|
Warrant
dated February 1, 2006, to purchase 151,515 shares of Common Stock - John
H. Schwan (Incorporated by reference to Exhibits contained in Registrant’s
Report on Form 8-K dated February 3, 2006)
|
10.17
|
Warrant
dated February 1, 2006, to purchase 151,515 shares of Common Stock –
Stephen M. Merrick (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
10.18
|
Note
dated February 1, 2006, CTI Industries Corporation to John Schwan in the
sum of $500,000 (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
10.19
|
Note
dated February 1, 2006, CTI Industries Corporation to Stephen M. Merrick
in the sum of $500,000 (Incorporated by reference to Exhibits contained in
Registrant’s Report on Form 8-K dated February 3, 2006)
|
10.20
|
Production
and Supply Agreement between ITW Spacebag and the Company dated March 17,
2006 (Incorporated by reference to Exhibits contained in Registrant’s
Report on Form 8-K dated March 17, 2006)
|
10.21
|
License
Agreement between Rapak, LLC and the Company dated April 28, 2006
(Incorporated by reference to Exhibit contained in Registrant’s Report on
Form 8-K dated May 3, 2006)
|
10.22
|
Standby
Equity Distribution Agreement between Cornell Capital Partners and the
Company dated December 28,
2006
|
10.23
|
Second
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated December 18, 2006 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K dated December 21,
2006.)
|
10.24
|
Third
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated November 13, 2007 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 10-Q dated November 13,
2007)
|
10.25
|
CTI
Industries Corporation Incentive Compensation Plan (Incorporated by
reference to Exhibit contained in Registrant’s Report on Form 8-K dated
October 2, 2007)
|
10.26
|
Supply
and License Agreement among Registrant and S.C. Johnson & Son, Inc.
dated February 1, 2008 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K/A dated March 19, 2008)
|
10.27
|
Agreement
between Babe Winkelman Productions Inc and the Company dated April 10,
2008 (Incorporated by reference to Exhibit contained in Registrant’s
Report on Form 8-K dated April 14, 2008)
|
10.28
|
Amendment
to the License Agreement between Rapak, LLC and the Company dated May 6,
2008 (Incorporated by reference to Exhibit contained in Registrant’s
Report on Form 8-K dated May 8, 2008)
|
10.29
|
Fifth
Amendment to Loan Agreement between RBS Citizens, N.A. and the Company
dated January 30, 2009 (Incorporated by reference to Exhibit contained in
Registrant’s Report on Form 8-K dated February 2, 2009)
|
14
|
Code
of Ethics (Incorporated by reference to Exhibit contained in the
Registrant’s Form 10-K/A Amendment No. 2, as filed with the Commission on
October 8, 2004)
|
21
|
Subsidiaries
(description incorporated in Form 10-K under Item No.
1)
|
23.1
|
Consent
of Independent Auditors, Blackman Kallick, LLP
|
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)
|
(a)
|
The
Exhibits listed in subparagraph (a)(3) of this Item 15 are attached hereto
unless incorporated by reference to a previous
filing.
|
(b)
|
The
Schedule listed in subparagraph (a)(2) of this Item 15 is attached
hereto.
|
CTI
INDUSTRIES CORPORATION
|
|
By:
|
/s/ Howard W. Schwan
|
Howard
W. Schwan, President
|
Signatures
|
Title
|
Date
|
|
/s/ Howard W. Schwan
|
President
and Director
|
March
31, 2009
|
|
Howard
W. Schwan
|
|||
/s/ John H. Schwan
|
Chairman
and Director
|
March
31, 2009
|
|
John
H. Schwan
|
|||
/s/ Stephen M. Merrick
|
Executive
Vice President,
|
||
Stephen
M. Merrick
|
Secretary,
Chief Financial
Officer and Director |
March
31, 2009
|
|
/s/ Stanley M. Brown
|
|||
Stanley
M. Brown
|
Director
|
March
31, 2009
|
|
/s/ Bret Tayne
|
|||
Bret
Tayne
|
Director
|
March
31, 2009
|
|
/s/ John I. Collins
|
|||
John
I. Collins
|
Director
|
March
31, 2009
|
|
/s/ Phil Roos
|
Director
|
March
31, 2009
|
|
Phil
Roos
|
Consolidated
Financial Statements:
|
||
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
F-2
|
|
Consolidated
Statements of Operations for the years ended
|
||
December
31, 2008 and 2007
|
F-3
|
|
Consolidated
Statements of Stockholders’ Equity and Comprehensive Loss
for
|
||
the
years ended December 31, 2008 and 2007
|
F-4
|
|
Consolidated
Statements of Cash Flows for the years ended
|
||
December
31, 2008 and 2007
|
F-5
|
|
Notes
to Consolidated Financial Statements – December 31, 2008
|
F-6
|
|
Financial
Statement Schedule:
|
||
Schedule
II – Valuation and Qualifying Accounts for the years ended
|
||
December
31, 2008 and 2007
|
F-31
|
CTI
Industries Corporation and Subsidiaries
|
Consolidated
Balance Sheets
|
December 31, 2008
|
December 31, 2007
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 180,578 | $ | 483,112 | ||||
Accounts
receivable, (less allowance for doubtful accounts of $39,000 and $312,000,
respectively)
|
5,821,593 | 5,950,551 | ||||||
Inventories,
net
|
10,504,769 | 9,700,618 | ||||||
Net
deferred income tax asset
|
674,872 | 1,014,451 | ||||||
Prepaid
expenses and other current assets
|
506,225 | 651,969 | ||||||
Total
current assets
|
17,688,037 | 17,800,701 | ||||||
Property,
plant and equipment:
|
||||||||
Machinery
and equipment
|
21,612,995 | 19,520,741 | ||||||
Building
|
3,179,909 | 3,035,250 | ||||||
Office
furniture and equipment
|
1,898,642 | 1,900,219 | ||||||
Intellectual
Property
|
345,092 | 305,017 | ||||||
Land
|
250,000 | 250,000 | ||||||
Leasehold
improvements
|
409,797 | 465,838 | ||||||
Fixtures
and equipment at customer locations
|
2,539,033 | 2,381,921 | ||||||
Projects
under construction
|
1,017,737 | 1,836,877 | ||||||
31,253,205 | 29,695,863 | |||||||
Less
: accumulated depreciation and amortization
|
(20,677,223 | ) | (19,599,708 | ) | ||||
Total
property,plant and equipment, net
|
10,575,982 | 10,096,155 | ||||||
Other
assets:
|
||||||||
Deferred
financing costs, net
|
123,229 | 113,209 | ||||||
Goodwill
|
989,108 | 989,108 | ||||||
Net
deferred income tax asset
|
341,714 | 133,756 | ||||||
Other
assets (due from related party $63,000 and $66,000,
respectively)
|
270,121 | 191,206 | ||||||
Total
other assets
|
1,724,172 | 1,427,279 | ||||||
TOTAL
ASSETS
|
29,988,191 | 29,324,135 | ||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Checks
written in excess of bank balance
|
680,348 | 616,583 | ||||||
Trade
payables
|
3,153,005 | 4,227,954 | ||||||
Line
of credit
|
7,960,765 | 6,746,213 | ||||||
Notes
payable - current portion
|
1,091,489 | 863,513 | ||||||
Notes
payable - officers, current portion, (net of debt discount of $89,000
and $90,000)
|
1,363,255 | 2,157,065 | ||||||
Accrued/Other
liabilities
|
1,973,318 | 1,871,781 | ||||||
Total
current liabilities
|
16,222,180 | 16,483,109 | ||||||
Long-term
liabilities:
|
||||||||
Notes
payable - affiliates
|
894,620 | 1,070,151 | ||||||
Notes
payable, net of current portion
|
4,220,071 | 4,351,743 | ||||||
Notes
payable - officers, subordinated, (net of debt discount of $96,000 and
$185,000)
|
903,964 | 815,296 | ||||||
Total
long-term liabilities
|
6,018,655 | 6,237,190 | ||||||
Minority
interest
|
12,756 | 12,534 | ||||||
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, 2,808,720
and 2,569,124 shares issued and 2,808,720 and 2,569,124 outstanding,
respectively
|
3,764,020 | 3,764,020 | ||||||
Paid-in-capital
|
8,703,265 | 6,754,077 | ||||||
Warrants
issued in connection with subordinated debt and bank debt
|
443,313 | 1,038,487 | ||||||
Accumulated
deficit
|
(3,209,868 | ) | (4,363,999 | ) | ||||
Accumulated
other comprehensive loss
|
(1,966,130 | ) | (601,283 | ) | ||||
Total
stockholders' equity
|
7,734,600 | 6,591,302 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 29,988,191 | $ | 29,324,135 |
CTI
Industries Corporation and Subsidiaries
|
Consolidated
Statements of Operations
|
For the Year Ended December
31,
|
||||||||
2008
|
2007
|
|||||||
Net
Sales
|
$ | 44,980,674 | $ | 36,509,710 | ||||
Cost
of Sales
|
34,658,271 | 27,825,493 | ||||||
Gross
profit
|
10,322,403 | 8,684,217 | ||||||
Operating
expenses:
|
||||||||
General
and administrative
|
5,375,526 | 5,211,470 | ||||||
Selling
|
886,391 | 753,571 | ||||||
Advertising
and marketing
|
1,677,900 | 1,474,289 | ||||||
Total
operating expenses
|
7,939,817 | 7,439,330 | ||||||
Income
from operations
|
2,382,586 | 1,244,887 | ||||||
Other
income (expense):
|
||||||||
Interest
expense
|
(1,037,136 | ) | (1,294,726 | ) | ||||
Interest
income
|
5,679 | 8,762 | ||||||
Foreign
currency gain
|
50,003 | 173,510 | ||||||
Total
other expense
|
(981,454 | ) | (1,112,454 | ) | ||||
Income
before income taxes and minority interest
|
1,401,132 | 132,433 | ||||||
Income
tax expense
|
246,779 | 50,673 | ||||||
Income
before minority interest
|
1,154,353 | 81,760 | ||||||
Minority
interest in loss (income) of subsidiary
|
222 | (138 | ) | |||||
Net
income
|
$ | 1,154,131 | $ | 81,898 | ||||
Other
Comprehensive Loss, net of taxes
|
||||||||
Unrealized
loss on derivative instruments
|
$ | (241,809 | ) | $ | (99,636 | ) | ||
Foreign
currency adjustment
|
$ | (1,123,038 | ) | $ | (204,157 | ) | ||
Comprehensive
loss
|
$ | (210,716 | ) | $ | (221,895 | ) | ||
Basic
income per common share
|
$ | 0.42 | $ | 0.03 | ||||
Diluted
income per common share
|
$ | 0.40 | $ | 0.03 | ||||
Weighted
average number of shares and equivalent shares of common stock
outstanding:
|
||||||||
Basic
|
2,763,017 | 2,346,126 | ||||||
Diluted
|
2,898,681 | 2,589,960 |
Value
of warrants
|
Accumulated
|
|
||||||||||||||||||||||||||||||||||
issued
in
|
Other
|
Less
|
||||||||||||||||||||||||||||||||||
Common
Stock
|
Paid-in
|
connection
with
|
Accumulated
|
Comprehensive
|
Treasury
Stock
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
subordinated
debt
|
Deficit
|
Loss
|
Shares
|
Amount
|
TOTAL
|
||||||||||||||||||||||||||||
Balance,
December 31, 2006
|
2,412,297 | $ | 3,764,020 | $ | 6,100,587 | $ | 1,038,487.0 | $ | (4,445,897 | ) | $ | (297,490 | ) | 270,200 | $ | (1,057,782 | ) | $ | 5,101,925 | |||||||||||||||||
Options
Exercised
|
93,576 | $ | - | $ | 228,467 | $ | 195,466 | |||||||||||||||||||||||||||||
Shares
issued under SEDA agreement (net of issuance costs)
|
323,625 | $ | - | $ | 1,354,824 | $ | 1,354,824 | |||||||||||||||||||||||||||||
Shares
issued under consulting agreement
|
17,000 | $ | 79,050 | $ | 79,050 | |||||||||||||||||||||||||||||||
Cancellation
of Treasury Shares
|
(270,200 | ) | $ | (1,057,782 | ) | (270,200 | ) | $ | 1,057,782 | $ | - | |||||||||||||||||||||||||
Compensation
relating to Option Issuance
|
$ | 14,000 |