EXHIBIT 10.7

                  The securities represented by this Warrant have not been
                  registered under the Securities Act of 1933, and thus may not
                  be transferred unless registered under that Act or unless an
                  exemption from registration is available.

                                        Warrant dated July 17, 2001, to purchase
                                        33,334 Shares of Common Stock on or
                                        before July 17, 2006.

                             STOCK PURCHASE WARRANT
                           TO PURCHASE COMMON STOCK OF
                           CTI INDUSTRIES CORPORATION

      This certifies that, for value received, Stephen M. Merrick, or his
assigns, is entitled to subscribe for and purchase from CTI INDUSTRIES
CORPORATION, a Delaware corporation (hereinafter called the "Company"), at a
price of $1.78 per share (subject to adjustment as set forth in paragraph 3
below) and at any time after the date hereof to and including July 17, 2006,
33,334 (subject to adjustment as set forth in paragraph 3 below) fully paid and
non-assessable shares of the Company's common stock, par value $.195 per share
(hereinafter referred to as the "Common Stock").

      This Warrant is subject to the following provisions, terms and conditions:

      1. Exercise; Issuance of Certificates; Payment for Shares. The rights
represented by this Warrant may be exercised by the holder hereof at any time
within the period specified above, in whole or in part (but not as to a
fractional share of Common Stock), by the surrender of this Warrant (properly
endorsed if required) at the principal office of the Company (or such other
office of the Company as it may designate by notice in writing to the holder
hereof at the address of such holder appearing on the books of the Company) (a)
specifying the number of shares of Common Stock being purchased and (b)
accompanied by a check payable to the Company for the purchase price for such
shares. The Company agrees that the shares so purchased shall be deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Certificates for the shares so
purchased shall be delivered to the holder hereof within a reasonable time, not
exceeding ten days, after the rights represented by this Warrant shall have been
so exercised, and, unless this Warrant has expired, a new Warrant of like tenor,
representing the right to purchase the number of shares, if any, with respect to
which this Warrant shall not then have been exercised, shall also be delivered
to the holder hereof within such time.

<PAGE>

      2. Shares to be Fully Paid; Reservation of Shares. The Company covenants
and agrees:

            (a) that all shares of Common Stock which may be issued upon
      exercise of the rights represented by this Warrant will, upon issuance, be
      fully paid and nonassessable and free from all taxes, liens and charges
      with respect to the issue thereof;

            (b) without limiting the generality of the foregoing, that the
      Company will from time to time take all such action as may be required to
      assure that the par value, if any, per share of Common Stock is at all
      times equal to or less than the then effective Warrant Purchase Price (as
      hereinafter defined) per share of Common Stock issuable pursuant to this
      Warrant;

            (c) that, during the period within which the rights represented by
      this Warrant may be exercised, the Company will at all times have
      authorized, and reserved for the purpose of issue or transfer upon
      exercise of the rights evidenced by this Warrant, a sufficient number of
      shares of Common Stock to provide for the full exercise of the rights
      represented by this Warrant;

            (d) that the Company will take all such action as may be necessary
      to assure that the Common Stock issuable upon the exercise hereof may be
      so issued without violation of any applicable law or regulation; and

            (e) that the Company will not take any action which would result in
      any adjustment of the Warrant Purchase Price if (i) the total number of
      shares of Common Stock issuable after such action upon exercise of this
      Warrant, together with all shares of Common Stock then outstanding and all
      shares of Common Stock then issuable upon exercise of all Options (as
      hereinafter defined) and upon conversion of all Convertible Securities (as
      hereinafter defined) then outstanding, would exceed (ii) the total number
      of shares of Common Stock then authorized by the Company's Articles of
      Incorporation (all such issued and issuable Common Stock being called the
      "Potentially Outstanding Common Stock").

In the event any stock or securities of the Company other than Common Stock are
issuable upon the exercise hereof, the Company will take or refrain from taking
any action referred to in clauses (a) through (e) of this paragraph 2 as though
such clauses apply, equally, to such other stock or securities then issuable
upon the exercise hereof.

      3. Warrant Purchase Price. The provisions set forth in paragraphs 1 and 2
above are, however, subject to the following:

            3.1 Adjustment of Warrant Purchase Price; Resulting Adjustment of
      Number of Purchasable Shares. The initial Warrant Purchase Price of $1.78
      per share of Common


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<PAGE>

      Stock shall be subject to adjustment from time to time as hereinafter
      provided (such price or such price as last adjusted pursuant to the terms
      hereof, as the case may be, is herein called the "Warrant Purchase
      Price"). Upon each adjustment of the Warrant Purchase Price, the holder of
      this Warrant shall thereafter be entitled to purchase, at the Warrant
      Purchase Price resulting from such adjustment, the number of shares of
      Common Stock obtained by multiplying the Warrant Purchase Price in effect
      immediately prior to such adjustment by the number of shares of Common
      Stock purchasable pursuant hereto immediately prior to such adjustment and
      dividing the product thereof by the Warrant Purchase Price resulting from
      such adjustment.

            3.2 Adjustment of Warrant Purchase Price Upon Issuance of Stock. If
      and whenever after the date hereof the Company shall issue or sell any
      shares of its Common Stock for a consideration per share less than the
      Warrant Purchase Price in effect immediately prior to the time of such
      issue or sale (except if such issue or sale shall be made pursuant to the
      exercise of Options or Convertible Securities, as defined below,
      outstanding on the date hereof), then, forthwith upon such issue or sale,
      the Warrant Purchase Price shall be reduced to the price, calculated to
      the nearest cent, determined by dividing (a) the sum of (i) the number of
      shares of Common Stock outstanding immediately prior to such issue or sale
      multiplied by the then existing Warrant Purchase Price and (ii) the
      consideration, if any, received by the Company upon such issue or sale, by
      (b) the total number of shares of Common Stock outstanding immediately
      after such issue or sale. No adjustment of the Warrant Purchase Price,
      however, shall be made in an amount less than $0.01 per share, but any
      such lesser adjustment shall be carried forward and shall be made at the
      time and together with the next subsequent adjustment which together with
      all adjustments so carried forward shall amount to $0.01 per share or
      more.

            For purposes of this paragraph 3.2, the following paragraphs 3.3 to
      3.15, inclusive, subject to the exception set forth above, shall also be
      applicable:

            3.3 Issuance of Rights or Options. In case at any time the Company
      shall in any manner grant (whether directly or by assumption in a merger
      or otherwise) any rights to subscribe for or to purchase, or any options
      for the purchase of, Common Stock or any stock or securities convertible
      into or exchangeable for Common Stock (such rights or options being herein
      called "Options" and such convertible or exchangeable stock or securities
      being herein called "Convertible Securities"), whether or not such Options
      or the right to convert or exchange any such Convertible Securities are
      immediately exercisable, and the price per share for which Common Stock is
      issuable upon the exercise of such Options or upon conversion or exchange
      of such Convertible Securities (determined as provided in the following
      sentence) shall be less than the Warrant Purchase Price in effect
      immediately prior to the time of granting of such Options, then the
      maximum number of shares of Common Stock issuable upon the exercise of all
      such Option or upon conversion or exchange of the total maximum amount of
      such Convertible Securities shall be deemed to have been issued for such
      price per share as of the date of the granting of such Options


                                       3
<PAGE>

      and thereafter shall be deemed to be outstanding. The price per share for
      which Common Stock is issuable, as referred to in the preceding sentence,
      shall be determined by dividing (a) the sum of (i) the total amount, if
      any, received or receivable by the Company as consideration for the
      granting of such Options, plus (ii) the minimum aggregate amount of
      additional consideration payable to the Company upon the exercise of all
      such Options, plus (iii) in the case of all such Options that relate to
      Convertible Securities, the minimum aggregate amount of additional
      consideration, if any, payable upon the issue or sale of all such
      Convertible Securities (to the extent not counted under the immediately
      preceding clause (ii) and upon the conversion or exchange of all such
      Convertible Securities into Common Stock, by (b) the total maximum number
      of shares of Common Stock issuable upon the exercise of such Options or
      upon the conversion or exchange of all such Convertible Securities. The
      consideration received or receivable by the Company shall in each case be
      determined in accordance with paragraph 3.7 below. Except a otherwise
      provided in paragraph 3.5 below, no adjustment of the Warrant Purchase
      Price shall be made upon the actual issue of such Common Stock or of such
      Convertible Securities upon exercise of such Options or upon the actual
      issue of such Common Stock upon conversion or exchange of such Convertible
      Securities.

            3.4 Issuance of Convertible Securities. In case the Company shall in
      any manner issue (whether directly or by assumption in a merger or
      otherwise) or sell any Convertible Securities, whether or not the rights
      to exchange or convert thereunder are immediately exercisable, and the
      price per share for which Common Stock is issuable upon such conversion or
      exchange (determined as provided in the following sentence) shall be less
      than the Warrant Purchase Price in effect immediately prior to the time of
      such issue or sale, then the total maximum number of shares of Common
      Stock issuable upon conversion or exchange of all such Convertible
      Securities shall be deemed to have been issued for such price per share as
      of the date of the issue or sale of such Convertible Securities and
      thereafter shall be deemed to be outstanding, provided that (a) except as
      otherwise provided in paragraph 3.5 below, no adjustment of the Warrant
      Purchase Price shall be made upon the actual issue of such Common Stock
      upon conversion or exchange of such Convertible Securities, and (b) if any
      such issue or sale of such Convertible Securities is made upon exercise of
      any Options for which adjustments of the Warrant Purchase Price have been
      or are to be made pursuant to other provisions of this paragraph 3, no
      further adjustment of the Warrant Purchase Price shall be made by reason
      of such issue or sale. The price per share for which Common Stock is
      issuable, as referred to in the preceding sentence, shall be determined by
      dividing (i) the sum of (A) the total amount received or receivable by the
      Company as consideration for the issue or sale of such Convertible
      Securities, plus (B) the minimum aggregate amount of additional
      consideration, if any, payable upon the conversion or exchange of such
      Convertible Securities into Common Stock, by (ii) the total maximum number
      of shares of Common Stock issuable upon the conversion or exchange of such
      Convertible Securities. The consideration received or receivable by the
      Company shall in each case be determined in accordance with paragraph 3.7
      below.


                                       4
<PAGE>

            3.5 Change in Option Price or Conversion Rate. Upon the happening of
      any of the following events, namely, if the purchase price provided for in
      any Option referred to in paragraph 3.3 above and still outstanding, the
      additional consideration, if any, payable upon the conversion or exchange
      of any Convertible Securities referred to in paragraph 3.3 or 3.4 above
      and still outstanding, or the rate at which any such Convertible
      Securities are convertible into or exchangeable for Common Stock shall
      change at any time (other than under or by reason of provisions designed
      to protect against dilution), the Warrant Purchase Price in effect at the
      time of such event shall forthwith be readjusted to the Warrant Purchase
      Price which would have been in effect at such time had such Options or
      Convertible Securities provided for such changed purchase price,
      additional consideration, or conversion rate, as the case may be, at the
      time initially granted, issued, or sold. On the expiration of any Option
      referred to in paragraph 3.3 above prior to the exercise thereof or the
      termination of any right to convert or exchange any Convertible Securities
      referred to in paragraph 3.3 or 3.4 above prior to the exercise of such
      right, the Warrant Purchase Price then in effect hereunder shall forthwith
      be increased to the Warrant Purchase Price which would have been in effect
      at the time of such expiration or termination had such Option or
      Convertible Securities, to the extent outstanding immediately prior to
      such expiration or termination, never been issued, and the Common Stock
      issuable thereunder shall no longer be deemed to be outstanding for the
      purposes of any calculation under paragraph 3.3 or 3.4 above.

            3.6 Determination of Consideration Upon Dividend or Other
      Distribution. In case the Company shall declare a dividend or make any
      other distribution upon any stock of the Company payable in Common Stock,
      Options or Convertible Securities, any Common Stock, Options or
      Convertible Securities, as the case may be, issuable in payment of such
      dividend or distribution shall be deemed to have been issued or sold
      without consideration.

            3.7 Consideration for Stock. In case any shares of Common Stock,
      Options or Convertible Securities shall be issued or sold for cash, the
      consideration received therefor shall be deemed to be the amount received
      by the Company therefor, without deduction therefrom of any expenses
      incurred or any reasonable underwriting commissions or concessions paid or
      allowed by the Company (or deducted from amounts received by the Company)
      in connection therewith. In case any shares of Common Stock, Options or
      Convertible Securities shall be issued or sold for a consideration other
      than cash, the amount of the consideration other than cash received by the
      Company shall be deemed to be the fair value of such consideration as
      determined reasonably and in good faith by the Board of Directors of the
      Company, without deduction of any expenses incurred or any reasonable
      underwriting commissions or concessions paid or allowed by the Company (or
      deducted from amounts received by the Company) in connection therewith.
      The amount of consideration deemed to be received by the Company pursuant
      to issuance and/or sale, pursuant to an established compensation plan of
      the Company, to directors, officers or employees of the Company or any
      subsidiary of the Company in connection with their


                                       5
<PAGE>

      employment of shares of Common stock, Options or Convertible Securities,
      shall be increased by the amount of any tax benefit realized by the
      Company as a result of such issuance and/or sale, the amount of such tax
      benefit being the amount by which the federal and/or state income or other
      tax liability of the Company shall be reduced by reason of any deduction
      or credit in respect of such issuance and/or sale. In case any Common
      Stock, Options or Convertible Securities shall be issued in connection
      with any merger or consolidation in which the Company is the surviving
      corporation (other than any consolidation or merger in which the
      previously outstanding shares of Common Stock of the Company shall be
      changed into or exchanged for the stock or other securities of another
      corporation), the amount of consideration received therefor shall be
      deemed to be the fair value as determined reasonably and in good faith by
      the Board of Directors of the Company of such portion of the assets and
      business of the non-surviving corporation as such Board may determined to
      be attributable to such shares of Common Stock, Options or Convertible
      Securities, as the case may be. In the event of any consolidation or
      merger of the Company in which the Company is not the surviving
      corporation or in which the previously outstanding shares of Common Stock
      of the Company shall be changed into or exchanged for the stock or other
      securities of another corporation, or in the event of any sale of all or
      substantially all of the assets of the Company for stock or other
      securities of any corporation, the Company shall be deemed to have issued
      a number of shares of its Common Stock computed on the basis of the actual
      exchange ratio on which the transaction was predicated and for a
      consideration equal to the fair market value on the date of such
      transaction of all such stock or securities of the other corporation, and
      if such calculation results in adjustment of the Warrant Purchase Price,
      the determination of the number of shares of Common Stock issuable upon
      exercise of the Warrants immediately prior to such merger, consolidation
      or sale, for purposes of paragraph 3.13 below, shall be made after giving
      effect to such adjustment of the Warrant Purchase Price. In case any
      shares of Common Stock shall be issued (or issuable) pursuant to any
      Options for the purchase of the same, the consideration deemed to be
      received (or receivable) therefor shall be deemed to be the total amount,
      if any, received (or total minimum amount receivable) by the Company as
      consideration for the granting of such Options, plus the aggregate amount
      of additional consideration paid (or minimum amount payable) to the
      Company upon the exercise of such Options. In case any shares of Common
      Stock shall be issued (or issuable) upon the conversion or exchange of any
      Convertible Securities, the consideration deemed to be received (or
      receivable) therefor shall be deemed to be the total amount received (or
      total minimum amount receivable) by the Company as consideration for the
      granting of any Options to subscribe to or purchase such Convertible
      Securities, plus the total amount of additional consideration paid (or
      minimum amount payable) to the Company as consideration for the issue or
      sale of such Convertible Securities, plus the total amount of additional
      consideration, if any, paid (or minimum amount payable) to the Company
      upon the conversion or exchange thereof.

            3.8 Record Date. In case the Company shall take a record of the
      holders of its Common Stock for the purpose of entitling them to receive a
      dividend or other


                                       6
<PAGE>

      distribution payable in Common Stock, Options or Convertible Securities,
      then such record date shall be deemed to be the date of the issue or sale
      of the shares of Common stock deemed to have been issued or sold upon the
      declaration of such dividend or the making of such other distribution.

            3.9 Treasury Shares. The number of shares of Common Stock
      outstanding at any given time shall not include shares owned or held by or
      for the account of the Company, and the disposition of any such shares
      shall be considered an issue or sale of Common stock for the purposes of
      this paragraph 3.

            3.10 Liquidating Dividends. The Company will not declare a dividend
      upon Common Stock payable otherwise than out of consolidated earnings or
      consolidated earned surplus, determined in accordance with generally
      accepted accounting principles, including the making of appropriate
      deductions for minority interests, if any, in subsidiaries, and otherwise
      than in Common Stock, unless the holder of this Warrant shall have
      consented to such dividend in writing.

            3.11 Subdivision or Combination of Stock. In case at any time the
      Company shall in any manner subdivide its outstanding shares of Common
      stock into a greater number of shares or combine such shares of Common
      Stock into a smaller number of shares, then the Warrant Purchase Price in
      effect immediately subsequent to such subdivision or combination shall be
      equal tot he product of (a) the Warrant Purchase Price in effect
      immediately prior to such subdivision or combination multiplied by (b) a
      fraction the numerator of which is the number of shares of Common Stock
      outstanding immediately prior to such subdivision or combination and the
      denominator of which is the number of shares of Common Stock outstanding
      immediately thereafter.

            3.12 Reorganization, Reclassification, Consolidation, Merger or
      Sale. If any reorganization or reclassification of the capital stock of
      the Company, or any consolidation or merger of the Company with another
      corporation, or the sale of all or substantially all of the Company's
      assets to another corporation shall be effected in such a way that holders
      of Common Stock shall be entitled to receive stock, securities or assets
      with respect to or in exchange for Common Stock, then, as a condition of
      such reorganization, reclassification, consolidation, merger or sale,
      lawful and adequate provisions shall be made whereby the holder hereof
      shall thereafter have the right to purchase and receive, upon the basis
      and upon the terms and conditions specified in this Warrant and in lieu of
      the shares of Common Stock of the Company immediately theretofore
      purchasable and receivable upon the exercise of the rights represented
      hereby, such shares of stock, securities, or assets as may be issued or
      payable with respect to or in exchange for a number of outstanding shares
      of such stock equal to the number of shares of such stock immediately
      theretofore purchasable and receivable upon the exercise of the rights
      represented hereby had such reorganization, reclassification,
      consolidation, merger or sale not taken place, and in any such case
      appropriate provision shall be made with respect to


                                       7
<PAGE>

      the rights and interests of the holder of this Warrant to the end that the
      provisions hereof (including, without limitation, provisions for
      adjustment of the Warrant Purchase Price and of the number of shares
      purchasable and receivable upon the exercise of this Warrant) shall
      thereafter be applicable, as nearly as may be, in relation to any shares
      of stock, securities or assets thereafter deliverable upon the exercise of
      the rights represented hereby (including an immediate adjustment, by
      reason of such consolidation or merger, of the Warrant Purchase Price to
      the value for the Common Stock reflected by the terms of such
      consolidation or merger if the value so reflected is less than the Warrant
      Purchase Price in effect immediately prior to such consolidation or
      merger). In the event of a merger or consolidation of the Company with or
      into another corporation as a result of which the number of shares of
      common stock of the surviving corporation greater or lesser than the
      number of shares of Common Stock of the Company outstanding immediately
      prior to such merger or consolidation are issuable to holders of Common
      Stock of the Company, then the Warrant Purchase Price in effect
      immediately prior to such merger or consolidation shall be adjusted in the
      same manner as though there were a subdivision or combination of the
      outstanding shares of Common Stock of the Company. The Company shall not
      effect any such consolidation, merger, or sale, unless prior to the
      consummation thereof the successor corporation (if other than the Company)
      resulting from such consolidation or merger of the corporation into or for
      the securities of which the previously outstanding stock of the Company
      shall be exchanged in connection with such consolidation or merger, or the
      corporation purchasing such assets, as the case may be, shall assume, by
      written instrument executed and mailed or delivered to the holder hereof
      at the last address of such holder appearing on the books of the Company,
      the obligation to deliver to such holder such shares of stock, securities,
      or assets as, in accordance with the foregoing provisions, such holder may
      be entitled to purchase. If a purchase, tender, or exchange offer is made
      to and accepted by the holders of more than 50% of the outstanding shares
      of Common Stock of the Company, the Company shall not effect any
      consolidation, merger, or sale with the Person having made such offer or
      with any Affiliate of such Person unless, prior to the consummation of
      such consolidation, merger, or sale, the holder of this Warrant shall have
      been given a reasonable opportunity to then elect to receive either the
      stock, securities, or assets then issuable upon the exercise of this
      Warrant. As used herein, the term "Person" shall mean and include an
      individual, a partnership, a corporation, a trust, a joint venture, an
      unincorporated organization, and a government or any department or agency
      thereof, and an "Affiliate" of any controlling, controlled by, or under
      direct or indirect common control with, such other Person. A Person shall
      be deemed to control a corporation if such Person possesses, directly or
      indirectly, the power to direct or cause the direction of the management
      and policies of such corporation, whether through the ownership of voting
      securities, by contract, or otherwise. The provisions of this paragraph
      3.12 governing the substitution of another corporation for the Company
      shall similarly apply to successive instances in which the corporation
      then deemed to be the Company hereunder shall either sell all or
      substantially all of its properties and assets to any other corporation,
      shall consolidate with or merge into any other corporation, or shall be
      the surviving corporation of the merger


                                       8
<PAGE>

into it of any other corporation as a result of which the holders of any of its
stock or other securities shall be deemed to have become the holders of, or
shall become entitled to, the stock or other securities of any corporation other
than the corporation at the time deemed to be the Company hereunder.

            3.13 Duty to Make Fair Adjustments in Certain Cases. If any event
      occurs as to which, in the opinion of the Board of Directors of the
      Company, the other provisions of this paragraph 3 are not strictly
      applicable or, if strictly applicable, would not fairly protect the
      purchase rights of this Warrant in accordance with the essential intent
      and principles hereof, the Board of Directors shall make such adjustments
      in the Warrant Purchase Price as it deems necessary to protect such
      purchase rights as aforesaid, but in no event shall any such adjustment
      have the effect of increasing the Warrant Purchase Price as otherwise
      determined pursuant to this paragraph 3.

            3.14 Notice of Adjustment. The Company shall give to the holder of
      this Warrant prompt written notice of every adjustment of the Warrant
      Purchase Price, by first class mail, postage prepaid, addressed to the
      address of such holder as shown on the books of the Company, which notice
      shall state the Warrant Purchase Price resulting from such adjustment and
      the increase or decrease, if any, in the number of shares purchasable at
      such price upon the exercise of this Warrant, and shall set forth in
      reasonable detail the method of calculation and the facts upon which such
      calculation was based.

            3.15 Other Notices. In case at any time:

                  (a) the Company shall declare any cash dividend upon its
            Common Stock payable at a rate in excess of the rate of the last
            cash dividend theretofore paid;

                  (b) the Company shall declare any dividend upon its Common
            Stock payable in stock or make any special dividend or other
            distribution (other than regular cash dividends) to the holders of
            its Common Stock;

                  (c) the Company shall offer for subscription to the holders of
            any of its Common Stock any additional shares of stock of any class
            or other rights;

                  (d) there shall be any capital reorganization of the Company
            or any reclassification of its capital stock or any consolidation or
            merger of the Company with, or sale of all or substantially all of
            its assets to, another corporation; or

                  (e) there shall be a voluntary or involuntary dissolution,
            liquidation or winding up of the Company;


                                       9
<PAGE>

      then, in any one or more of such cases, the Company shall give, by first
      class mail, postage prepaid, addressed to the holder of this Warrant at
      the address of such holder as shown on the books of the Company, (i) at
      least 20 days' prior written notice of the date on which the books of the
      Company shall close or a record shall be taken for such dividend,
      distribution or subscription rights or for determining rights to vote in
      respect of any such reorganization, reclassification, consolidation,
      merger, sale, dissolution, liquidation or winding up, and (ii) in the case
      of any such reorganization, reclassification, consolidation, merger, sale,
      dissolution, liquidation or winding up, at least 20 days prior written
      notice of the date when the same shall take place. Any notice required by
      clause (i) shall also specify, in the case of any such dividend,
      distribution or subscription rights, the date on which the holders of
      Common Stock shall be entitled thereto, and any notice required by clause
      (ii) shall also specify the date on which the holders of Common Stock
      shall be entitled to exchange their Common Stock for securities or other
      property deliverable upon such reorganization, reclassification,
      consolidation, merger, sale, dissolution, liquidation or winding up, as
      the case may be.

      4. Issue Tax. The issuance of certificates for shares of Common Stock upon
the exercise of this Warrant shall be made without charge to the holder of this
Warrant for any issuance tax in respect thereof.

      5. Closing of Books. The Company will at no time close its transfer books
against the transfer of this Warrant or of any shares of Common Stock issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant.

      6. No Voting Rights. This Warrant shall not entitle the holder hereof to
any voting rights or other rights as a stockholder of the Company.

      7. Warrants Transferable. Subject to the restrictions referred to in the
legend set forth on the face of this Warrant, this Warrant and all rights
hereunder are transferable to any person, in whole or in part, without charge to
the holder hereof, at the office of the Company referred to in paragraph 1
above, by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant properly endorsed. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that this Warrant,
when endorsed in blank, shall be deemed negotiable, and that the holder hereof,
when this Warrant shall have been so endorsed, may be treated by the Company and
all other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding. Until such transfer on such books, however, the
Company may treat the registered holder hereof as the owner for all purposes.


                                       10
<PAGE>

      8. Transfer to Comply With the Securities Act of 1933.

            (a) All securities issued or issuable upon exercise of this Warrant,
      may not be offered, sold or transferred, in whole or in part, except in
      compliance with the Securities Act of 1933, as amended (the "Act"), and
      except in compliance with all applicable state securities statutes.

            (b) The Company may cause the following legend, or its equivalent,
      to be set forth on each certificate representing any security issued or
      issuable upon exercise of this Warrant to the extent such Common Stock has
      not been registered for sale by the Company.

            "The shares represented by this Certificate have not been registered
            under the Securities Act of 1933 ("the Act") and are 'restricted
            securities' as that term is defined in Rule 144 under the Act. The
            shares may not be offered for sale, sold or otherwise transferred
            except pursuant to an effective registration statement under the Act
            or pursuant to an exemption from registration under the Act, the
            availability of which is to be established to the satisfaction of
            the Company."

      9. Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon its surrender by the holder hereof at the office of the
Company referred to in paragraph 1 above, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of Shares which may be subscribed for and purchased hereunder, each of such new
Warrants to represent the right to subscribe for and purchase such number of
shares as shall be designated by said holder hereof at the time of such
surrender.

      10. Descriptive Headings and Governing Law. The descriptive headings of
the several paragraphs of this Warrant are inserted for convenience of reference
only and do not constitute a part of this Warrant. This Warrant is being
delivered and is intended to be performed in the State of Illinois and shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of such State.

      11. Certain Covenants of the Company. So long as this Warrant remains
outstanding, in whole or in part, the Company will, unless the holder of this
Warrant otherwise consents in writing:

            (a) within 60 days after the end of each of the first three
      quarterly fiscal periods in each fiscal year of the Company, deliver to
      the holder of this Warrant (i) a consolidated balance sheet of the Company
      and its subsidiaries, if any, as at the end of such period, and (ii)
      consolidated statements of income and of surplus of the Company and its
      subsidiaries, if any, for such period and (in the case of the second and
      third such quarterly periods) for the period from the beginning of the
      current fiscal year to the end of


                                       11
<PAGE>

      such quarterly period, setting forth in each case in comparative form the
      consolidated figures for the corresponding periods of the previous fiscal
      year, all in reasonable detail and certified as prepared in accordance
      with generally accepted accounting principles consistently applied,
      subject to exchanges resulting from year-end audit adjustments, by the
      principal financial officer of the Company; and

            (b) within 90 days after the end of each fiscal year of the Company,
      deliver to the holder of this Warrant (i) a consolidated balance sheet of
      the Company and its subsidiaries, if any, as at the end of such year, and
      (ii) consolidated statements of income and of surplus of the Company and
      its subsidiaries, if any, for such year, setting forth in each case in
      comparative form the consolidated figures for the previous fiscal year,
      all in reasonable detail and accompanied by an opinion thereon of
      independent public accountants, which opinion shall state that such
      financial statements have been prepared in accordance with generally
      accepted accounting principles consistently applied and that the audit by
      such accountants in connection with such financial statements has been
      made in accordance with generally accepted auditing standards; and

            (c) as soon as practicable, notify the holder of this Warrant in
      writing of any potentially material adverse development concerning the
      Company; and permit such holder of his representative to examine the books
      and records of the company at any time during regular business hours and
      make copies of any portions thereof desired to be copied by such holder or
      his representative.

      IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers under its corporate seal and this Warrant to be
dated this 17th day of July, 2001

                                        CTI INDUSTRIES CORPORATION


                                        By: /s/ Howard W. Schwan
                                            ------------------------------------
                                                 President

(CORPORATE SEAL)

Attest:


/s/ Stephen M. Merrick
-----------------------------
Secretary


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<PAGE>

                             SUBSCRIPTION AGREEMENT

                                        Dated: ______________, 200_

To:   CTI Industries Corporation
      22160 N. Pepper Road
      Barrington, Illinois

      The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase shares of the Common Stock
covered by such Warrant, and makes payment herewith in full therefor at the
price per share provided by such Warrant.


                                        Signature_______________________________

                                        Address_________________________________

                                        ________________________________________


                                       13
<PAGE>

                                   ASSIGNMENT

      FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common stock set forth below, unto:

Name of Assignee                Address                 Number of Shares
----------------                -------                 ----------------

Dated: __________________, 200_


                                        Signature_______________________________

                                        Witness_________________________________


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