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

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|-------------------------------------------------------------------------------------------|

| 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) |

| Title of Each Class  |   | Name of Each Exchange on Which Registered |
|----------------------|--------|-------------------------------------------|
|                 |   |                                      |
| Common Stock, No Par |   | NASDAQ Capital Market                     |

|                                               |         | Part of Form 10-K into Which |
|----------------------------------------------------|--------------|------------------------------|
| Document                                           |         | Document Is Incorporated     |
|                                               |         |                         |
| Sections of the registrant’s Proxy Statement |         | Part III                     |
| To be filed on or before April 30, 2011 for the    |         |                         |
| Annual Meeting of Stockholders                     |    |                         |

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| INDEX                      |
|----------------------------|
|                       |
| FORWARD LOOKING STATEMENTS |
|                       |
| Part I                     |
|                       |   |   |
| Item No. 1                 | Description of Business | 1 |
| Item No. 1B                | Unresolved Staff Comments | 14 |
| Item No. 2                 | Properties | 14 |
| Item No. 3                 | Legal Proceedings | 14 |
|                       |
| Part II                    |
|                       |   |   |
| Item No. 5                 | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 15 |
| Item No. 7                 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 |
| Item No. 7A                | Quantitative and Qualitative Disclosures Regarding Market Risk | 25 |
| Item No. 8                 | Financial Statements and Supplementary Data | 25 |
| Item No. 9                 | Changes in and Disagreements with Accountants |   |
|                       | on Accounting and Financial Disclosure | 25 |
| Item No. 9A                | Controls and Procedures | 26 |
| Item No. 9B                | Other Information | 27 |
|                       |   |   |
| Part III                   |   |   |
|                       |   |   |
| Item No. 10                | Directors and Executive Officers of the Registrant | 27 |
| Item No. 11                | Executive Compensation | 27 |
| Item No. 12                | Security Ownership of Certain Beneficial Owners and and Management and Related Stockholder Matters | 27 |
| Item No. 13                | Certain Relationships and Related Transactions | 27 |
| Item No. 14                | Principal Accounting Fees and Services | 27 |
|                       |   |   |
| Part IV                    |   |   |
|                       |   |   |
| Item No. 15                | Exhibits and Financial Statement Schedules | 28 |

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|   | · | Novelty Products, principally balloons, including foil balloons, latex balloons, punch balls and other inflatable toy items, |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

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|   | · | Flexible Containers for home and consumer use for the storage and preservation of food and personal items, |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | Flexible Films for food and other packaging and commercial applications, and, |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | Specialty Film Products of unique design for various applications including for medical uses. |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | Coating and laminating plastic film.  Generally, we adhere polyethylene film to another film such as nylon or polyester. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|---------------------------------------------------------|

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| · | Novelty Products    |   | 66.3% of revenues |
|--------|---------------------|--------|-------------------|
| · | Film Products       |   | 15.5% of revenues |
| · | Flexible Containers |   | 18.2% of revenues |

|   | · | Focus on our Core Assets and Expertise.  We have been engaged in the development, production and sale of film products for 35 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 on these core assets and areas of expertise – laminated films, printed films, pouches, specialty film products and film novelty products – to develop new products, to market and sell our products and to build our revenues. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | 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.  We seek to leverage our technology to develop innovative and proprietary products.  In the novelty line, our development work includes new designs, new character licenses and new product developments.  In our commercial line, over the past several years we have developed new pouch closure systems and valves and new film methods for packaging applications.  We have received eleven patents for these developments and have several patent applications pending.  Recently 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.  We have participated in the development of, and are now producing a new product for a medical application. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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 (“SC Johnson”). to manufacture and supply to SC Johnson certain home food management products to be sold under the SC Johnson ZipLoc® brand.  In February 2011, SC Johnson renewed this agreement for an additional two-year term commencing on July 1, 2011.  During 2009 and 2010, we developed new distributors and customers for our pouch and novelty products in Europe, Mexico, Latin America, Australia and New Zealand, expanding the scope and level of our international sales and activities.  During 2010, we established an office and warehouse in Germany to support the extension of our sales and fulfillment activities in Europe. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Enhance Our Productive Capacity.  We invest in new plant and equipment when appropriate to expand the range and volume of products we produce.  During 2008 and 2009, we acquired, installed and commenced operation of equipment which enables us to produce in the range of 60 million pouches annually.  During 2010, we designed, assembled and installed latex balloon production equipment which has enhanced our production capacity for latex balloons by approximately 70%. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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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. |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

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|             |   | United States |       |   | United Kingdom(UK) |   |      | Europe(Excluding UK) |   |   | Mexico  |   |   | Consolidated |      |
|----------------------------|--------|---------------|------------|--------|--------------------|--------|-----------|----------------------|--------|--------|---------|--------|--------|--------------|-----------|
| Year ended 12/31/10   |   |          |       |   |               |   |      |                 |   |   |    |   |   |         |      |
| Sales to outside customers |   | $             | 36,721,000 |   |               | $      | 2,387,000 |                 |   | $      | 108,000 |   |   | $            | 8,532,000 |   |   | $ | 47,748,000 |   |
| Total Assets               |   | $             | 24,711,000 |   |               | $      | 977,000   |                 |   | $      | 220,000 |   |   | $            | 6,953,000 |   |   | $ | 32,861,000 |   |

|                       |   | United States |       |   | United Kingdom(UK) |   |      | Europe(Excluding UK) |   |   | Mexico |   |   | Consolidated |      |
|----------------------------|--------|---------------|------------|--------|--------------------|--------|-----------|----------------------|--------|--------|--------|--------|--------|--------------|-----------|
| Year ended 12/31/09   |   |          |       |   |               |   |      |                 |   |   |   |   |   |         |      |
| Sales to outside customers |   | $             | 31,873,000 |   |               | $      | 1,971,000 |                 |   | $      | -      |   |   | $            | 7,451,000 |   |   | $ | 41,295,000 |   |
| Total Assets               |   | $             | 23,801,000 |   |               | $      | 733,000   |                 |   | $      | -      |   |   | $            | 5,861,000 |   |   | $ | 30,395,000 |   |

----

----

|                                 |   | High   |   |   | Low    |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------|
| January 1, 2009 to March 31, 2009    |   |   | 2.65   |   |   |   | 1.20 |   |
| April 1, 2009 to June 30, 2009       |   |   | 2.50   |   |   |   | 1.23 |   |
| July 1, 2009 to September 30, 2009   |   |   | 2.65   |   |   |   | 1.75 |   |
| October 1, 2009 to December 31, 2009 |   |   | 2.84   |   |   |   | 1.95 |   |
| January 1, 2010 to March 31, 2010    |   |   | 4.70   |   |   |   | 2.26 |   |
| April 1, 2010 to June 30, 2010       |   |   | 7.60   |   |   |   | 2.77 |   |
| July 1, 2010 to September 30, 2010   |   |   | 9.05   |   |   |   | 4.87 |   |
| October 1, 2010 to December 31, 2010 |   |   | 9.75   |   |   |   | 5.03 |   |

----

|                    |   | (000 Omitted) |   |
|-------------------------|--------|---------------|--------|
|               |   | $             |   |   | % of |   |   | $ |   |   | % of |   |
| Product Category   |   | 2010          |   |   | Net Sales |   |   | 2009 |   |   | Net Sales |   |
|                    |   |          |   |   |   |   |   |   |   |   |   |   |
| Metalized Balloons      |   |          | 21,915 |   |   |   | 45.9% |   |   |   | 19,824 |   |   |   | 48.0% |   |
|                    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Film Products      |   |          | 7,428  |   |   |   | 15.5% |   |   |   | 6,913 |   |   |   | 16.7% |   |
|                    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pouches            |   |          | 8,676  |   |   |   | 18.2% |   |   |   | 6,895 |   |   |   | 16.7% |   |
|                    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Latex Balloons     |   |          | 8,589  |   |   |   | 18.0% |   |   |   | 7,024 |   |   |   | 17.0% |   |
|                    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other              |   |          | 1,140  |   |   |   | 2.4% |   |   |   | 639 |   |   |   | 1.6% |   |
|                    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                   |   |          | 47,748 |   |   |   | 100.0% |   |   |   | 41,295 |   |   |   | 100.0% |   |

----

| Customer                    |   | Product  |   | 2010 Sales |       |   | % of 2010Revenues |   |   | 2009 Sales |   |   | % of 2009Revenues |   |
|-----------------------------|--------|----------|--------|------------|------------|--------|-------------------|--------|--------|------------|--------|--------|-------------------|--------|
| Dollar Tree Stores          |   | Balloons |   | $          | 13,722,000 |   |              |   | 28.7%  |       |   | $      | 11,437,000        |   |   |   | 27.7% |   |
| Rapak L.L.C                 |   | Films    |   | $          | 6,766,000  |   |              |   | 14.2%  |       |   | $      | 6,360,000         |   |   |   | 15.4% |   |
| S.C. Johnson & Son, Inc |   | Pouches  |   | $          | 5,870,000  |   |              |   | 12.3%  |       |   | $      | 4,583,000         |   |   |   | 11.1% |   |

|                       |   | Year ended December 31, |   |
|----------------------------|--------|-------------------------|--------|
|                       |   | 2010                    |   |   | 2009 |   |
|                       |   |                    |   |   |   |   |
| Net sales                  |   |                    | 100.0% |   |   |   | 100.0% |   |
| Costs and expenses:        |   |                    |   |   |   |   |   |   |
| Cost of products sold      |   |                    | 77.8   |   |   |   | 77.7 |   |
| Operating Expenses         |   |                    | 15.8   |   |   |   | 16.9 |   |
|                       |   |                    |   |   |   |   |   |   |
| Income from operations     |   |                    | 6.4    |   |   |   | 5.4 |   |
| Interest expense           |   |                    | (2.0)  |   |   |   | (2.7) |   |
| Other income               |   |                    | 0.0    |   |   |   | 0.0 |   |
|                       |   |                    |   |   |   |   |   |   |
| Income before income taxes |   |                    | 4.4    |   |   |   | 2.7 |   |
| Provision for income taxes |   |                    | 0.7    |   |   |   | 0.3 |   |
|                       |   |                    |   |   |   |   |   |   |
| Net profit                 |   |                    | 3.7%   |   |   |   | 2.4% |   |

----

----

----

|   | · | Depreciation and amortization of $1,909,000 |
|--------|--------|---------------------------------------------|

|   | · | An increase in net inventory of $626,000 |
|--------|--------|------------------------------------------|

|   | · | An increase in accounts receivable of $1,093,000 |
|--------|--------|--------------------------------------------------|

|   | · | An increase in prepaid expenses and other assets of $336,000 |
|--------|--------|--------------------------------------------------------------|

|   | · | An increase in accrued liabilities of $280,000 |
|--------|--------|------------------------------------------------|

----

|   | · | 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 | 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 (plus Subordinated Debt) in excess of $7,100,000 plus 50% of cumulative net income of the Company after January 1, 2010; |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | We are required to maintain specified ratios of senior debt to EBITDA on an annual basis and determined quarterly; and, |
|--------|---|-------------------------------------------------------------------------------------------------------------------------|

|   | o | We are required to maintain a level of adjusted EBITDA to fixed charges on an annual basis determined quarterly of not less than 1.1 to 1.  Adjusted EBITDA is EBITDA minus (i) taxes paid, (ii) dividends paid, (iii) payments for the purchase or redemption of stock, and (iv) unfunded capital expenditures. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| When Senior Debt to EBITDA is:                                |   | The Premiumto the PrimeRate is: |   |
|---------------------------------------------------------------|--------|---------------------------------|--------|
| Greater than or equal to 3.25 to 1.00                         |   |                            | 1.25   | % |
| Greater than or equal to 2.25 to 1.00; Less than 3.25 to 1.00 |   |                            | 0.75   | % |
|  Less than or equal to 2.25 to 1.00                      |   |                            | 0.50   | % |

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|   | 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  |   | CTI Industries Corporation 2009 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, 2009)                                         |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.6  |   | 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) |
| 10.7  |   | 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)                                             |
| 10.8  |   | 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)                                         |
| 10.9  |   | 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)                                     |
| 10.10 |   | 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)                                             |
| 10.11 |   | 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)                                      |
| 10.12 |   | 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)                                                                       |
| 10.13 |   | 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)                                     |
| 10.14 |   | 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)                                     |
| 10.15 |   | 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)                                      |

----

| 10.16 |         | 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)                 |
|-------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.17 |         | 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)                  |
| 10.18 |         | 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) |
| 10.19 |         | Sixth Amendment to Loan Agreement between RBS Citizens, N.A. and the Company dated January 26, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 8-K dated January 29, 2010) |
| 10.20 |         | Credit Agreement between Harris N.A. and CTI Industries Corporation dated April 29, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 10-Q dated May 14, 2010)               |
| 10.21 |         | Mortgage and Security Agreement between Harris N.A. and the Company dated April 29, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 10-Q dated May 14, 2010)               |
| 10.22 |         | Security Agreement between Harris N.A. and the Company dated April 29, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 10-Q dated May 14, 2010)                            |
| 10.23 |         | Pledge Agreement between Harris N.A. and the Company dated April 29, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 10-Q dated May 14, 2010)                              |
| 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 Registered Public Accounting Firm, 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, 2011 |
| Howard W. Schwan       |   |                                                  |           |
|                   |   |                                                  |           |
| /s/ John H. Schwan     |   | Chairman and Director                                 | March 31, 2011 |
| John H. Schwan         |   |                                                  |           |
|                   |   |                                                  |           |
| /s/ Stephen M. Merrick |   | Executive Vice President,                             | March 31, 2011 |
| Stephen M. Merrick     |   | Secretary, Chief Financial Officer and Director  |           |
|                   |   |                                                  |           |
| /s/ Stanley M. Brown   |   | Director                                              | March 31, 2011 |
| Stanley M. Brown       |   |                                                  |           |
|                   |   |                                                  |           |
| /s/ Bret Tayne         |   | Director                                              | March 31, 2011 |
| Bret Tayne             |   |                                                  |           |
|                   |   |                                                  |           |
| /s/ John I. Collins    |   | Director                                              | March 31, 2011 |
| John I. Collins        |   |                                                  |           |
|                   |   |                                                  |           |
| /s/ Phil Roos          |   | Director                                              | March 31, 2011 |
| Phil Roos              |   |                                                  |           |

----

| 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    |   | CTI Industries Corporation 2009 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, 2009)                                                                              |
| 10.6    |   | 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)                                      |
| 10.7    |   | 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)                                                                                  |

----

| 10.8  |   | 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)     |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.9  |   | 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) |
| 10.10 |   | 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)         |
| 10.11 |   | 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)  |
| 10.12 |   | 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)                                   |
| 10.13 |   | 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) |
| 10.14 |   | 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) |
| 10.15 |   | 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)  |
| 10.16 |   | 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)                    |
| 10.17 |   | 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)                     |
| 10.18 |   | 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)    |
| 10.19 |   | Sixth Amendment to Loan Agreement between RBS Citizens, N.A. and the Company dated January 26, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 8-K dated January 29, 2010)    |

----

| 10.20 |         | Credit Agreement between Harris N.A. and CTI Industries Corporation dated April 29, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 10-Q dated May 14, 2010) |
|-------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.21 |         | Mortgage and Security Agreement between Harris N.A. and the Company dated April 29, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 10-Q dated May 14, 2010) |
| 10.22 |         | Security Agreement between Harris N.A. and the Company dated April 29, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 10-Q dated May 14, 2010)              |
| 10.23 |         | Pledge Agreement between Harris N.A. and the Company dated April 29, 2010 (Incorporated by reference to Exhibit contained in Registrant’s Report on Form 10-Q dated May 14, 2010)                |
| 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 Registered Public Accounting Firm, 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)                 |

----

| Consolidated Financial Statements:                                        |   |   |
|---------------------------------------------------------------------------|--------|--------|
| Report of Independent Registered Public Accounting Firm                   |   | F-1    |
| Consolidated Balance Sheets as of December 31, 2010 and 2009              |   | F-2    |
| Consolidated Statements of Operations for the years ended                 |   |   |
| December 31, 2010 and 2009                                                |   | F-3    |
| Consolidated Statements of Stockholders’ Equity and Comprehensive   |   |   |
| Income (Loss) for the years ended December 31, 2010 and 2009              |   | F-4    |
| Consolidated Statements of Cash Flows for the years ended                 |   |   |
| December 31, 2010 and 2009                                                |   | F-5    |
| Notes to Consolidated Financial Statements for the years ended            |   |   |
| December 31, 2010 and 2009                                                |   | F-6    |
|                                                                      |   |   |
| Financial Statement Schedule:                                             |   |   |
| Schedule II – Valuation and Qualifying Accounts for the years ended |   |   |
| December 31, 2010 and 2009                                                |   | F-31   |

----

----

|                                                                                                                                                             |   | December 31, 2010 |        |   | December 31, 2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-------------|--------|-------------------|--------|
| ASSETS                                                                                                                                                           |   |              |        |   |              |   |
| Current assets:                                                                                                                                                  |   |              |        |   |              |   |
| Cash and cash equivalents (VIE $38,000 and $0, respectively)                                                                                                     |   | $                 | 761,874     |   |              | $      | 870,446 |   |
| Accounts receivable, (less allowance for doubtful accounts of $59,000 and $57,000, respectively)                                                                 |   |              | 8,533,626   |   |              |   | 7,320,181 |   |
| Inventories, net                                                                                                                                                 |   |              | 10,368,037  |   |              |   | 9,643,914 |   |
| Net deferred income tax asset                                                                                                                                    |   |              | 750,485     |   |              |   | 706,754 |   |
| Prepaid expenses and other current assets                                                                                                                        |   |              | 1,012,067   |   |              |   | 607,127 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Total current assets                                                                                                                                             |   |              | 21,426,089  |   |              |   | 19,148,422 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Property, plant and equipment:                                                                                                                                   |   |              |        |   |              |   |   |   |
| Machinery and equipment                                                                                                                                          |   |              | 22,900,460  |   |              |   | 22,390,891 |   |
| Building                                                                                                                                                         |   |              | 3,260,201   |   |              |   | 3,183,795 |   |
| Office furniture and equipment                                                                                                                                   |   |              | 2,718,425   |   |              |   | 2,677,476 |   |
| Intellectual property                                                                                                                                            |   |              | 345,092     |   |              |   | 345,092 |   |
| Land                                                                                                                                                             |   |              | 250,000     |   |              |   | 250,000 |   |
| Leasehold improvements                                                                                                                                           |   |              | 443,630     |   |              |   | 428,864 |   |
| Fixtures and equipment at customer locations                                                                                                                     |   |              | 2,629,902   |   |              |   | 2,541,881 |   |
| Projects under construction (VIE $587,000 and $0, respectively)                                                                                                  |   |              | 1,601,682   |   |              |   | 270,131 |   |
|                                                                                                                                                             |   |              | 34,149,392  |   |              |   | 32,088,130 |   |
| Less : accumulated depreciation and amortization                                                                                                                 |   |              | (24,489,624 | )      |              |   | (22,554,719 | ) |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Total property, plant and equipment, net                                                                                                                         |   |              | 9,659,768   |   |              |   | 9,533,411 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Other assets:                                                                                                                                                    |   |              |        |   |              |   |   |   |
| Deferred financing costs, net                                                                                                                                    |   |              | 63,634      |   |              |   | 11,846 |   |
| Goodwill                                                                                                                                                         |   |              | 1,033,077   |   |              |   | 989,108 |   |
| Net deferred income tax asset                                                                                                                                    |   |              | 360,830     |   |              |   | 361,457 |   |
| Other assets (due from related party $213,000 and $79,000, respectively)                                                                                         |   |              | 317,990     |   |              |   | 351,065 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Total other assets                                                                                                                                               |   |              | 1,775,531   |   |              |   | 1,713,476 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| TOTAL ASSETS                                                                                                                                                     |   | $                 | 32,861,388  |   |              | $      | 30,395,309 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| LIABILITIES AND EQUITY                                                                                                                                           |   |              |        |   |              |   |   |   |
| Current liabilities:                                                                                                                                             |   |              |        |   |              |   |   |   |
| Checks written in excess of bank balance                                                                                                                         |   | $                 | 692,141     |   |              | $      | 735,257 |   |
| Trade payables (VIE $58,000 and $0, respectively)                                                                                                                |   |              | 4,307,358   |   |              |   | 3,236,607 |   |
| Line of credit (VIE $700,000 and $0, respectively)                                                                                                               |   |              | 8,225,900   |   |              |   | 7,598,671 |   |
| Notes payable - current portion                                                                                                                                  |   |              | 276,667     |   |              |   | 811,996 |   |
| Notes payable - officers, current portion, net of debt discount of $5,000 and $89,000                                                                            |   |              | 1,410,807   |   |              |   | 1,368,964 |   |
| Capital lease - current portion                                                                                                                                  |   |              | 5,117       |   |              |   | 299,311 |   |
| Notes Payable Affiliates - current portion                                                                                                                       |   |              | 6,754       |   |              |   | 5,793 |   |
| Accrued liabilities                                                                                                                                              |   |              | 3,027,298   |   |              |   | 2,683,714 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Total current liabilities                                                                                                                                        |   |              | 17,952,042  |   |              |   | 16,740,313 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Long-term liabilities:                                                                                                                                           |   |              |        |   |              |   |   |   |
| Notes Payable - Affiliates                                                                                                                                       |   |              | 155,648     |   |              |   | 120,503 |   |
| Notes payable, net of current portion                                                                                                                            |   |              | 2,611,127   |   |              |   | 2,375,435 |   |
| Capital Lease                                                                                                                                                    |   |              | 2,559       |   |              |   | 733,414 |   |
| Notes payable - officers, subordinated, net of debt discount of $0 and $7,000                                                                                    |   |              | 360,351     |   |              |   | 1,646,423 |   |
| Total long-term liabilities                                                                                                                                      |   |              | 3,129,685   |   |              |   | 4,875,775 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| 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, 3,209,475 and 2,808,720 shares issued and 3,137,348 and 2,738,063 outstanding, respectively |   |              | 13,394,940  |   |              |   | 11,771,839 |   |
| Paid-in-capital                                                                                                                                                  |   |              | 817,138     |   |              |   | 686,127 |   |
| Warrants issued in connection with subordinated debt and bank debt                                                                                               |   |              | -           |   |              |   | 443,313 |   |
| Dividends                                                                                                                                                        |   |              | (314,441    | )      |              |   | - |   |
| Accumulated deficit                                                                                                                                              |   |              | (379,210    | )      |              |   | (2,206,728 | ) |
| Accumulated other comprehensive loss                                                                                                                             |   |              | (1,592,798  | )      |              |   | (1,803,442 | ) |
| Less:  Treasury stock, 72,127 shares and 70,657 shares                                                                                                 |   |              | (141,289    | )      |              |   | (128,446 | ) |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Total CTI Industries Corporation stockholders' equity                                                                                                            |   |              | 11,784,340  |   |              |   | 8,762,663 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Noncontrolling interest                                                                                                                                          |   |              | (4,679      | )      |              |   | 16,558 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Total Equity                                                                                                                                                     |   |              | 11,779,661  |   |              |   | 8,779,221 |   |
|                                                                                                                                                             |   |              |        |   |              |   |   |   |
| TOTAL LIABILITIES AND EQUITY                                                                                                                                     |   | $                 | 32,861,388  |   |              | $      | 30,395,309 |   |

----

| CTI Industries Corporation and Subsidiaries |   |   |   |   |
|---------------------------------------------|--------|--------|--------|--------|
| Consolidated Statements of Operations       |   |   |   |   |

|                                                                                                           |   | For the Year Ended December 31, |       |
|----------------------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                                                           |   | 2010                            |       |   | 2009 |   |
|                                                                                                           |   |                            |       |   |   |   |
| Net Sales                                                                                                      |   | $                               | 47,747,611 |   |   | $ | 41,295,152 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Cost of Sales                                                                                                  |   |                            | 37,145,439 |   |   |   | 32,081,779 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Gross profit                                                                                                   |   |                            | 10,602,172 |   |   |   | 9,213,373 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Operating expenses:                                                                                            |   |                            |       |   |   |   |   |   |
| General and administrative                                                                                     |   |                            | 4,921,457  |   |   |   | 4,539,494 |   |
| Selling                                                                                                        |   |                            | 914,698    |   |   |   | 871,258 |   |
| Advertising and marketing                                                                                      |   |                            | 1,719,509  |   |   |   | 1,576,225 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Total operating expenses                                                                                       |   |                            | 7,555,664  |   |   |   | 6,986,977 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Income from operations                                                                                         |   |                            | 3,046,508  |   |   |   | 2,226,396 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Other (expense) income:                                                                                        |   |                            |       |   |   |   |   |   |
| Interest expense                                                                                               |   |                            | (936,769   | ) |   |   | (1,102,662 | ) |
| Interest income                                                                                                |   |                            | 17,599     |   |   |   | 17,555 |   |
| Foreign currency loss                                                                                          |   |                            | (31,382    | ) |   |   | (19,956 | ) |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Total other expense, net                                                                                       |   |                            | (950,552   | ) |   |   | (1,105,063 | ) |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Income before taxes                                                                                            |   |                            | 2,095,956  |   |   |   | 1,121,333 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Income tax expense                                                                                             |   |                            | 342,688    |   |   |   | 114,391 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Net Income                                                                                                     |   |                            | 1,753,268  |   |   |   | 1,006,942 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Less: Net (loss) income attributable to noncontrolling interest                                                |   |                            | (74,250    | ) |   |   | 3,802 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Net income attributable to CTI Industries Corporation                                                          |   | $                               | 1,827,518  |   |   | $ | 1,003,140 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Other Comprehensive Income                                                                                     |   |                            |       |   |   |   |   |   |
| Adjustment to accumulated balance on swap termination (2010); unrealized gain on derivative instruments (2009) |   | $                               | 188,615    |   |   | $ | 152,830 |   |
| Foreign currency adjustment                                                                                    |   |                            | 22,029     |   |   |   | 9,858 |   |
| Comprehensive income attributable to CTI Industries Corporation                                                |   | $                               | 2,038,162  |   |   | $ | 1,165,828 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Basic income per common share                                                                                  |   | $                               | 0.61       |   |   | $ | 0.36 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Diluted income per common share                                                                                |   | $                               | 0.60       |   |   | $ | 0.36 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Weighted average number of shares and equivalent shares of common stock outstanding:                           |   |                            |       |   |   |   |   |   |
| Basic                                                                                                          |   |                            | 2,981,188  |   |   |   | 2,765,277 |   |
|                                                                                                           |   |                            |       |   |   |   |   |   |
| Diluted                                                                                                        |   |                            | 3,039,442  |   |   |   | 2,775,062 |   |

----

|                                                                     |   | CTI Industries Corporation |      |   |    |   |
|--------------------------------------------------------------------------|--------|--------------------------------------|-----------|--------|---------|--------|
|                                                                     |   |                                 |      |   |    |   |   |   |   |   | Value of warrants |   |   |   |   |   | Accumulated |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   | issued in |   |   |   |   |   | Other |   |   | Less |   |   |   |   |   |   |   |
|                                                                     |   | Common Stock                    |      |   | Paid-in |   |   | connection with |   |   | Accumulated |   |   | Comprehensive |   |   | Treasury Stock |   |   | Noncontrolling |   |   |   |   |
|                                                                     |   | Shares                               |      |   | Amount  |   |   | Capital |   |   | subordinated debt |   |   | Deficit |   |   | Loss |   |   | Shares |   |   | Amount |   |   | Interest |   |   | TOTAL |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008                                               |   |                                 | 2,808,720 |   |    | $      | 3,764,020 |   |   | $ | 8,703,265 |   |   | $ | 443,313 |   |   | $ | (3,209,868 | ) |   | $ | (1,966,130 | ) |   |   | - |   |   | $ | - |   |   | $ | 12,756 |   |   | $ | 7,747,356 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustment to stock issued for services in the prior year                |   |                                 |      |   |    |   |   |   |   | $ | (96,688 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (96,688 | ) |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation relating to Option Issuance                                 |   |                                 |      |   |    |   |   |   |   | $ | 87,369 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 87,369 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock Buybacks                                                           |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (70,657 | ) |   | $ | (128,446 | ) |   |   |   |   |   | $ | (128,446 | ) |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income                                                               |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   | $ | 1,003,140 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 3,802 |   |   | $ | 1,006,942 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income,  net of taxes                      |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gain on derivative instruments                                |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 152,830 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 152,830 |   |
| Foreign currency translation                                             |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 9,858 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 9,858 |   |
| Total comprehensive income                                               |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 1,169,630 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                                               |   |                                 | 2,808,720 |   |    | $      | 3,764,020 |   |   | $ | 8,693,946 |   |   | $ | 443,313 |   |   | $ | (2,206,728 | ) |   | $ | (1,803,442 | ) |   |   | (70,657 | ) |   | $ | (128,446 | ) |   | $ | 16,558 |   |   | $ | 8,779,221 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustment to Paid-in-Capital for no-par shares                          |   |                                 |      |   |    | $      | 8,007,819 |   |   | $ | (8,007,819 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | - |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation relating to Option Issuance                                 |   |                                 |      |   |    |   |   |   |   | $ | 71,992 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 71,992 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation relating to Stock Grants                                    |   |                                 | 14,250    |   |    |   |   |   |   | $ | 59,019 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 59,019 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options Exercised                                                        |   |                                 | 76,989    |   |    | $      | 215,526 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 215,526 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock exchanged for cashless exercise of options                         |   |                                 | (10,723   | )      |    | $      | (62,730 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,470 | ) |   | $ | (12,843 | ) |   |   |   |   |   | $ | (75,573 | ) |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warrants Exercised                                                       |   |                                 | 343,030   |   |    | $      | 1,191,999 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 1,191,999 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock exchanged for cashless exercise of warrants                        |   |                                 | (22,791   | )      |    | $      | (165,007 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (165,007 | ) |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reclass value of warrants exercised in connection with subordinated debt |   |                                 |      |   |    | $      | 443,313 |   |   |   |   |   |   | $ | (443,313 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | - |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends Declared                                                       |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   | $ | (314,441 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (314,441 | ) |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income                                                               |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   | $ | 1,827,518 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (74,250 | ) |   | $ | 1,753,268 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncontrolling interest in subsidiary                                    |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 53,013 |   |   | $ | 53,013 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income,  net of taxes                      |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustment to accumulated balance on swap termination                    |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 188,615 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 188,615 |   |
| Foreign currency translation                                             |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 22,029 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 22,029 |   |
| Total comprehensive income                                               |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 1,963,912 |   |
|                                                                     |   |                                 |      |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2010                                               |   |                                 | 3,209,475 |   |    | $      | 13,394,940 |   |   | $ | 817,138 |   |   | $ | - |   |   | $ | (693,651 | ) |   | $ | (1,592,798 | ) |   |   | (72,127 | ) |   | $ | (141,289 | ) |   | $ | (4,679 | ) |   | $ | 11,779,661 |   |

----

|                                                                           |   | For the Year Ended December 31, |       |
|--------------------------------------------------------------------------------|--------|----------------------------------------------------------|------------|
|                                                                           |   | 2010                                                     |       |   | 2009 |   |
|                                                                           |   |                                                     |       |   |   |   |
| Cash flows from operating activities:                                          |   |                                                     |       |   |   |   |
| Net income                                                                     |   | $                                                        | 1,753,268  |   |   | $ | 1,006,942 |   |
| Adjustment to reconcile net income to cash provided by operating activities:   |   |                                                     |       |   |   |   |   |   |
| Depreciation and amortization                                                  |   |                                                     | 1,909,497  |   |   |   | 1,958,296 |   |
| Amortization of debt discount                                                  |   |                                                     | 90,994     |   |   |   | 88,668 |   |
| Stock based compensation                                                       |   |                                                     | 131,010    |   |   |   | 87,369 |   |
| Provision for losses on accounts receivable                                    |   |                                                     | 8,219      |   |   |   | 65,380 |   |
| Provision for losses on inventories                                            |   |                                                     | 41,742     |   |   |   | 25,126 |   |
| Deferred income taxes                                                          |   |                                                     | (43,104    | ) |   |   | (8,947 | ) |
| Change in assets and liabilities:                                              |   |                                                     |       |   |   |   |   |   |
| Accounts receivable                                                            |   |                                                     | (1,092,959 | ) |   |   | (1,411,267 | ) |
| Inventories                                                                    |   |                                                     | (626,056   | ) |   |   | 948,311 |   |
| Prepaid expenses and other assets                                              |   |                                                     | (336,137   | ) |   |   | (282,618 | ) |
| Trade payables                                                                 |   |                                                     | 1,099,336  |   |   |   | 47,880 |   |
| Accrued liabilities                                                            |   |                                                     | 279,854    |   |   |   | 587,648 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Net cash provided by operating activities                                      |   |                                                     | 3,215,664  |   |   |   | 3,112,788 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Cash used in investing activity - purchases of property, plant and equipment   |   |                                                     | (2,007,286 | ) |   |   | (731,596 | ) |
| Cash received from investment in subsidiary                                    |   |                                                     | 42,299     |   |   |   | - |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Net cash used in investing activity                                            |   |                                                     | (1,964,987 | ) |   |   | (731,596 | ) |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Cash flows from financing activities:                                          |   |                                                     |       |   |   |   |   |   |
| Change in checks written in excess of bank balance                             |   |                                                     | (44,012    | ) |   |   | 53,554 |   |
| Net change in revolving line of credit                                         |   |                                                     | (72,771    | ) |   |   | (362,095 | ) |
| Repayment of long-term debt (related parties $432,000 and  $140,000) |   |                                                     | (1,721,084 | ) |   |   | (1,250,520 | ) |
| Proceeds from issuance of debt                                                 |   |                                                     | 726,965    |   |   |   | - |   |
| Proceeds from exercise of stock options and warrants                           |   |                                                     | 139,947    |   |   |   | - |   |
| Dividends paid                                                                 |   |                                                     | (314,441   | ) |   |   | - |   |
| Cash paid for purchase of stock                                                |   |                                                     | -          |   |   |   | (128,446 | ) |
| Cash paid for deferred financing fees                                          |   |                                                     | (90,066    | ) |   |   | (40,556 | ) |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Net cash used in financing activities                                          |   |                                                     | (1,375,462 | ) |   |   | (1,728,063 | ) |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Effect of exchange rate changes on cash                                        |   |                                                     | 16,213     |   |   |   | 36,739 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                           |   |                                                     | (108,572   | ) |   |   | 689,868 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                               |   |                                                     | 870,446    |   |   |   | 180,578 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Cash and cash equivalents at end of period                                     |   | $                                                        | 761,874    |   |   | $ | 870,446 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Supplemental disclosure of cash flow information:                              |   |                                                     |       |   |   |   |   |   |
| Cash payments for interest                                                     |   | $                                                        | 855,738    |   |   | $ | 988,001 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Cash payments for taxes                                                        |   | $                                                        | 116,054    |   |   | $ | 148,095 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Supplemental Disclosure of non-cash investing and financing activity           |   |                                                     |       |   |   |   |   |   |
| Stock issued under consulting agreement                                        |   | $                                                        | -          |   |   | $ | 69,063 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Exercise of Warrants and payment of Subordinated Debt                          |   | $                                                        | 1,027,000  |   |   | $ | - |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Exercise of Options and Warrants by Surrender of Shares                        |   | $                                                        | 240,579    |   |   | $ | - |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Property, Plant & Equipment acquisitions funded by liabilities             |   | $                                                        | 35,020     |   |   | $ | 101,835 |   |
|                                                                           |   |                                                     |       |   |   |   |   |   |
| Inventory used as investment in subsidiary                                     |   | $                                                        | 101,400    |   |   | $ | - |   |

----

| 1.  | Nature of Business |
|----------|--------------------|

| 2.  | Summary of Significant Accounting Policies |
|----------|--------------------------------------------|

----

----

|                                                                |         |          |
|---------------------------------------------------------------------|--------------|---------------|
| Building                                                            |         | 25 - 30 years |
| Machinery and equipment                                             |         | 3 - 15 years  |
| Projects that prolong the life and increase efficiency of machinery |         | 3 - 5 years   |
| Light Machinery                                                     |         | 5 - 10 years  |
| Heavy Machinery                                                     |         | 10 - 15 years |
| Office furniture and equipment                                      |         | 5 - 8 years   |
| Leasehold improvements                                              |         | 5 - 8 years   |
| Furniture and equipment at customer locations                       |    | 1 - 3 years   |

----

----

----

| 3. | New Accounting Pronouncements |
|----|-------------------------------|

| 4.  | Fair Value Disclosures; Derivative Instruments |
|----------|------------------------------------------------|

----

|   | · | Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets are liabilities in active markets. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs are observable for the asset or liability, or unobservable but corroborated by market data, for substantially the full term of the financial instrument. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|                      |   | Amount as of |     |   |    |   |   |    |   |   |     |   |
|---------------------------|--------|--------------|----------|--------|---------|--------|--------|---------|--------|--------|----------|--------|
| Description               |   | 12/31/2009   |     |   | Level 1 |   |   | Level 2 |   |   | Level 3  |   |
| Interest Rate Swap 2006-1 |   | $            | (16,000  | )      |    |   |   |    |   | $      | (16,000  | )      |   |   |   |   |
| Interest Rate Swap 2006-2 |   |         | (81,000  | )      |    |   |   |    |   |   | (81,000  | )      |   |   |   |   |
| Interest Rate Swap 2008   |   |         | (92,000  | )      |    |   |   |    |   |   | (92,000  | )      |   |   |   |   |
|                      |   | $            | (189,000 | )      |    |   |   |    |   | $      | (189,000 | )      |   |   |   |   |

----

----

| 5.  | Other Comprehensive Income (Loss) |
|----------|-----------------------------------|

|                                      |   |       |    |   | Tax        |   |   |       |   |
|-------------------------------------------|--------|------------|---------|--------|------------|--------|--------|------------|--------|
|                                      |   | Before-Tax |    |   | (Expense)  |   |   | Net-of-Tax |   |
|                                      |   | Amount     |    |   | or Benefit |   |   | Amount     |   |
| 2010                                      |   |       |    |   |       |   |   |       |   |
| Foreign currency translation adjustments  |   | $          | 22,029  |   |       | $      | -      |       |   | $ | 22,029 |   |
| Unrealized gain on derivative instruments |   |       | 188,615 |   |       |   | -      |       |   |   | 188,615 |   |
| Other comprehensive income                |   | $          | 210,644 |   |       | $      | -      |       |   | $ | 210,644 |   |

|                                      |   |       |    |   | Tax        |   |   |       |   |
|-------------------------------------------|--------|------------|---------|--------|------------|--------|--------|------------|--------|
|                                      |   | Before-Tax |    |   | (Expense)  |   |   | Net-of-Tax |   |
|                                      |   | Amount     |    |   | or Benefit |   |   | Amount     |   |
| 2009                                      |   |       |    |   |       |   |   |       |   |
| Foreign currency translation adjustments  |   | $          | 9,858   |   |       | $      | -      |       |   | $ | 9,858 |   |
| Unrealized gain on derivative instruments |   |       | 152,830 |   |       |   | -      |       |   |   | 152,830 |   |
| Other comprehensive income                |   | $          | 162,688 |   |       | $      | -      |       |   | $ | 162,688 |   |

|                              |   |     |       |   |           |   |     | Accumulated   |   |
|-----------------------------------|--------|----------|------------|--------|----------------|--------|----------|---------------|--------|
|                              |   | Foreign  |       |   | Unrealized     |   |     | Other         |   |
|                              |   | Currency |       |   | Gain (Loss) on |   |     | Comprehensive |   |
|                              |   | Items    |       |   | Derivatives    |   |     | Income (Loss) |   |
| Beginning balance                 |   | $        | (1,614,827 | )      |           | $      | (188,615 | )             |   | $ | (1,803,442 | ) |
| Current period change, net of tax |   |     | 22,029     |   |           |   | 188,615  |          |   |   | 210,644 |   |
| Ending balance                    |   | $        | (1,592,798 | )      |           | $      | -        |          |   | $ | (1,592,798 | ) |

|                              |   |     |       |   |           |   |     | Accumulated   |   |
|-----------------------------------|--------|----------|------------|--------|----------------|--------|----------|---------------|--------|
|                              |   | Foreign  |       |   | Unrealized     |   |     | Other         |   |
|                              |   | Currency |       |   | Gain (Loss) on |   |     | Comprehensive |   |
|                              |   | Items    |       |   | Derivatives    |   |     | Income (Loss) |   |
| Beginning balance                 |   | $        | (1,624,685 | )      |           | $      | (341,445 | )             |   | $ | (1,966,130 | ) |
| Current period change, net of tax |   |     | 9,858      |   |           |   | 152,830  |          |   |   | 162,688 |   |
| Ending balance                    |   | $        | (1,614,827 | )      |           | $      | (188,615 | )             |   | $ | (1,803,442 | ) |

----

| 6. | Major Customers |
|----|-----------------|

| 7.  | Inventories |
|----------|-------------|

|                            |   | December 31, |       |   | December 31, |   |
|---------------------------------|--------|--------------|------------|--------|--------------|--------|
|                            |   | 2010         |       |   | 2009         |   |
| Raw materials                   |   | $            | 2,588,000  |   |         | $      | 1,520,000 |   |
| Work in process                 |   |         | 685,000    |   |         |   | 442,000 |   |
| Finished goods                  |   |         | 7,471,000  |   |         |   | 8,024,000 |   |
| Allowance for excess quantities |   |         | (376,000   | )      |         |   | (342,000 | ) |
| Total inventories               |   | $            | 10,368,000 |   |         | $      | 9,644,000 |   |

----

| 8. | Notes Payable and Capital Leases |
|----|----------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Dec. 31, 2010 |       |   | Dec. 31, 2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|------------|--------|---------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |          |       |   |          |   |
| (2010) Term Loan with Harris, payable in monthly installments of $58,333 plus interest at prime (3.25%) plus a premium rate (based on loan covenants) of 0.50% (3.75%) at December 31, 2010 (amortized over 10 months), balance due January 31, 2011; (2009) Term Loan with RBS, payable in monthly installments of $58,333 plus interest at prime (3.25%) plus 0.75% (4.00%) at December 31, 2009 (amortized over 60 months) balance due January 31, 2011.    |   | $             | 117,000    |   |          | $      | 817,000 |   |
| (2010) Mortgage Loan with Harris, payable in monthly installments of $7,778 plus interest at prime (3.25%) plus a premuim rate (based on loan covenants) of 0.50% (3.75%) at December 31, 2010 (amortized over 25 years), balance due April 30, 2013; (2009) Mortgage Loan with RBS, payable in monthly installments of $9,333 plus interest at prime (3.25%) plus 0.75% (4.00%) at December 31, 2009 (amortized over 25 years), balance due January 31, 2011. |   |          | 2,271,000  |   |          |   | 2,371,000 |   |
| (2010) Equipment Loan with Harris, payable in monthly installments of $8,333 beginning May 2011 plus interest at prime (3.25%) plus a premuim rate (based on loan convenants) of 0.50% (3.75%) at December 31, 2010, (amortized over 60 months), balance due April 30, 2013; (2009) Capital Lease with RBS, payable in monthly installments of $29,628 (amortized over 5 years).                                                                               |   |          | 500,000    |   |          |   | 1,020,000 |   |
| Capital Lease with Yale Financial Services, payable in monthly installments of $574 (amortized over 5 years).                                                                                                                                                                                                                                                                                                                                                  |   |          | 8,000      |   |          |   | 13,000 |   |
| Subordinated Notes (Officers) due on demand, interest at 9%  (see Notes 10, 14).                                                                                                                                                                                                                                                                                                                                                                     |   |          | 33,000     |   |          |   | 638,000 |   |
| Subordinated Notes (Officers) due on demand, interest at 8% (see Notes 10, 14).                                                                                                                                                                                                                                                                                                                                                                                |   |          | 795,000    |   |          |   | 814,000 |   |
| Subordinated Notes (Officers) due on demand, interest at prime (3.25%) plus 2% (5.25%) at December 31, 2010 and 2009, net of debt discount of $5,000 and  $96,000 at December 31, 2010 and 2009, respectively.                                                                                                                                                                                                                                       |   |          | 592,000    |   |          |   | 904,000 |   |
| Subordinated Notes (Officers) due 2013, interest at 8.5% (see Note 10)                                                                                                                                                                                                                                                                                                                                                                                         |   |          | 351,000    |   |          |   | 659,000 |   |
| Notes Payable (Affiliates) due 2015, interest at prime (3.25%) plus 0.25% (3.50%) at December 31, 2010.                                                                                                                                                                                                                                                                                                                                                        |   |          | 28,000     |   |          |   | - |   |
| Notes Payable (Affiliates) due 2021, interest at 11.75%.                                                                                                                                                                                                                                                                                                                                                                                                       |   |          | 134,000    |   |          |   | 126,000 |   |
| Total long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |          | 4,829,000  |   |          |   | 7,362,000 |   |
| Less current portion                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |          | (1,692,000 | )      |          |   | (2,480,000 | ) |
| Total Long-term debt, net of current portion                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $             | 3,137,000  |   |          | $      | 4,882,000 |   |

----

|   | · | 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 | 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 (plus Subordinated Debt) in excess of $7,100,000 plus 50% of cumulative net income of the Company after January 1, 2010; |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | We are required to maintain specified ratios of senior debt to EBITDA on an annual basis and determined quarterly; and, |
|--------|---|-------------------------------------------------------------------------------------------------------------------------|

|   | o | We are required to maintain a level of adjusted EBITDA to fixed charges on an annual basis determined quarterly of not less than 1.1 to 1.  Adjusted EBITDA is EBITDA minus (i) taxes paid, (ii) dividends paid, (iii) payments for the purchase or redemption of stock, and (iv) unfunded capital expenditures. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 2011       |   | $      | 1,692,000 |   |
|------------|--------|--------|-----------|--------|
| 2012       |   |   | 190,000   |   |
| 2013       |   |   | 2,782,000 |   |
| 2014       |   |   | -         |   |
| 2015       |   |   | 32,000    |   |
| Thereafter |   |   | 133,000   |   |
| Total      |   | $      | 4,829,000 |   |

| 9. | Current Liabilities |
|----|---------------------|

| 10. | Subordinated Debt |
|-----|-------------------|

----

| 11. | Income Taxes |
|-----|--------------|

|                       |   | Dec. 31 2010 |    |   | Dec. 31 2009 |   |
|----------------------------|--------|--------------|---------|--------|--------------|--------|
| Current:                   |   |         |    |   |         |   |
| Federal                    |   | $            | -       |   |         | $      | - |   |
| State                      |   |         | -       |   |         |   | - |   |
| Foreign                    |   |         | 385,792 |   |         |   | 128,155 |   |
|                       |   | $            | 385,792 |   |         | $      | 128,155 |   |
|                       |   |         |    |   |         |   |   |   |
| Deferred                   |   |         |    |   |         |   |   |   |
| Federal                    |   | $            | (43,104 | )      |         | $      | (13,764 | ) |
| State                      |   |         | -       |   |         |   | - |   |
| Foreign                    |   |         | -       |   |         |   | - |   |
|                       |   |         | (43,104 | )      |         |   | (13,764 | ) |
| Total Income Tax Provision |   | $            | 342,688 |   |         | $      | 114,391 |   |

|                                         |   | 2010   |      |   | 2009   |   |
|----------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Deferred tax assets:                         |   |   |      |   |   |   |
| Allowance for doubtful accounts              |   | $      | 13,748    |   |   | $      | 15,896 |   |
| Inventory allowances                         |   |   | 141,244   |   |   |   | 125,766 |   |
| Accrued liabilities                          |   |   | 92,095    |   |   |   | 66,473 |   |
| Unicap 263A adjustment                       |   |   | 145,035   |   |   |   | 140,257 |   |
| Net operating loss carryforwards             |   |   | 975,327   |   |   |   | 1,918,524 |   |
| Alternative minimum tax credit carryforwards |   |   | 351,619   |   |   |   | 351,619 |   |
| State investment tax credit carryforward     |   |   | 30,512    |   |   |   | 30,512 |   |
| Foreign tax credit carryforward              |   |   | 298,636   |   |   |   | 298,635 |   |
| Other foreign tax items                      |   |   | 247,035   |   |   |   | 43,582 |   |
| Foreign asset tax credit carryforward        |   |   | (80,368   | )      |   |   | (80,368 | ) |
| Total deferred tax assets                    |   |   | 2,214,883 |   |   |   | 2,910,896 |   |
| Deferred tax liabilities:                    |   |   |      |   |   |   |   |   |
| Book over tax basis of capital assets        |   |   | (943,582  | )      |   |   | (1,148,598 | ) |
| Other foreign tax items                      |   |   | (159,986  | )      |   |   | (165,099 | ) |
|                                         |   |   | 1,111,315 |   |   |   | 1,597,199 |   |
| Less: Valuation allowance                    |   |   | -         |   |   |   | (528,988 | ) |
| Net deferred tax assets                      |   | $      | 1,111,315 |   |   | $      | 1,068,211 |   |

----

|                                         |   | Years Ended December 31, |     |
|----------------------------------------------|--------|--------------------------|----------|
|                                         |   | 2010                     |     |   | 2009 |   |
| Taxes at statutory rate                      |   | $                        | 733,585  |   |   | $ | 392,466 |   |
| State income taxes                           |   |                     | 100,983  |   |   |   | 54,026 |   |
| Nondeductible expenses                       |   |                     | 55,871   |   |   |   | 17,827 |   |
| Decrease in deferred tax valuation allowance |   |                     | (528,988 | ) |   |   | (373,464 | ) |
| Foreign taxes and other                      |   |                     | (18,763  | ) |   |   | 23,536 |   |
| Income tax provision                         |   | $                        | 342,688  |   |   | $ | 114,391 |   |

| 12. | Notes Payable Affiliates |
|-----|--------------------------|

| 13. | Employee Benefit Plan |
|-----|-----------------------|

----

| 14. | Related Party Transactions |
|-----|----------------------------|

----

----

|                                       |   | Dec. 31, 2010 |      |
|--------------------------------------------|--------|---------------|-----------|
| Current Assets                             |   | $             | 132,576   |   |
| Property, plant and equipment, net         |   |          | 586,536   |   |
| Other noncurrent assets                    |   |          | 710,038   |   |
| Total assets                               |   | $             | 1,429,150 |   |
|                                       |   |          |      |   |
| Mortgages and other long-term debt payable |   |          | 1,434,852 |   |
| Total liabilities                          |   | $             | 1,434,852 |   |

| 16. | Goodwill |
|-----|----------|

| 17. | Commitments |
|-----|-------------|

----

| 2011       |   | $      | 344,000   |   |
|------------|--------|--------|-----------|--------|
| 2012       |   |   | 321,000   |   |
| 2013       |   |   | 303,000   |   |
| 2014       |   |   | 284,000   |   |
| 2015       |   |   | 284,000   |   |
| Thereafter |   |   | 205,000   |   |
| Total      |   | $      | 1,741,000 |   |

| 2011 |   | $ | 182,000 |   |
|------|--------|---|---------|--------|
| 2012 |   | $ | 84,000  |   |

----

----

| 2007 & 2009 Stock Incentive PlanVesting Schedule |   |
|------------------------------------------------------|--------|
| %                                                    |   | Years After Grant Date |   |
| 25                                                   |   | 0.5 |   |
| 50                                                   |   | 1 |   |
| 75                                                   |   | 2 |   |
| 100                                                  |   | 3 |   |

----

|              |   | 2010   |   |   | 2009      |   |
|-------------------|--------|--------|--------|--------|-----------|--------|
|              |   |   |   |   | Intrinsic |   |   |   |   |   | Intrinsic |   |
|              |   | Shares |   |   | Value     |   |   | Shares |   |   | Value |   |
|              |   |   |   |   |      |   |   |   |   |   |   |   |
| 1999 Plan Options |   |   | 25,786 |   |      | $      | 15,333 |   |   |   | - |   |   | $ | - |   |
|              |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |
| 2001 Plan Options |   |   | 11,953 |   |      | $      | 56,448 |   |   |   | - |   |   | $ | - |   |
|              |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |
| 2002 Plan Options |   |   | 1,000  |   |      | $      | 2,630 |   |   |   | - |   |   | $ | - |   |
|              |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |
| 2007 Plan Options |   |   | 38,250 |   |      | $      | 108,215 |   |   |   | - |   |   | $ | - |   |

|                             |   | December 31, 2010 |    |   | December 31, 2009 |   |
|----------------------------------|--------|-------------------|---------|--------|-------------------|--------|
|                             |   |              |    |   | Weighted Avg.     |   |   |   |   |   | Weighted Avg. |   |
|                             |   | Shares            |    |   | Exercise Price    |   |   | Shares |   |   | Exercise Price |   |
| Exercisable, beginning of period |   |              | 180,269 |   |              | $      | 3.03 |   |   |   | 159,252 |   |   | $ | 2.87 |   |
| Granted                          |   |              | -       |   |              |   | - |   |   |   | - |   |   |   | - |   |
| Vested                           |   |              | 33,000  |   |              |   | 3.42 |   |   |   | 53,625 |   |   |   | 3.03 |   |
| Exercised                        |   |              | (76,989 | )      |              |   | 2.80 |   |   |   | - |   |   |   | - |   |
| Cancelled                        |   |              | (25,655 | )      |              |   | 2.78 |   |   |   | (32,608 | ) |   |   | 2.26 |   |
| Exercisable at the end of period |   |              | 110,625 |   |              | $      | 3.36 |   |   |   | 180,269 |   |   | $ | 3.03 |   |

|                             |   | December 31, 2010 |    |   | December 31, 2009 |   |
|----------------------------------|--------|-------------------|---------|--------|-------------------|--------|
|                             |   |              |    |   | Weighted Avg.     |   |   |   |   |   | Weighted Avg. |   |
|                             |   | Shares            |    |   | Exercise Price    |   |   | Shares |   |   | Exercise Price |   |
| Outstanding, beginning of period |   |              | 232,644 |   |              | $      | 3.04 |   |   |   | 272,502 |   |   | $ | 2.95 |   |
| Granted                          |   |              | 114,000 |   |              |   | 6.19 |   |   |   | - |   |   |   | - |   |
| Exercised                        |   |              | (76,989 | )      |              |   | 2.80 |   |   |   | - |   |   |   | - |   |
| Cancelled                        |   |              | (26,905 | )      |              |   | 2.87 |   |   |   | (39,858 | ) |   |   | 2.42 |   |
| Outstanding at the end of period |   |              | 242,750 |   |              | $      | 4.61 |   |   |   | 232,644 |   |   | $ | 3.04 |   |

| Options by |   | Options Outstanding |    |   | Options Vested |   |
|------------|--------|---------------------|---------|--------|----------------|--------|
| Grant Date |   | Shares              |    |   | Wtd Avg        |   |   | Remain. Life |   |   | Intrinsic Val |   |   | Shares |   |   | Wtd Avg |   |   | Remain. Life |   |   | Intrinsic Val |   |
| Dec 2005   |   |                | 35,000  |   |           | $      | 2.88 |   |   |   | 5.0 |   |   | $ | 109,200 |   |   |   | 35,000 |   |   | $ | 2.88 |   |   |   | 5.0 |   |   | $ | 109,200 |   |
| Oct 2007   |   |                | 41,000  |   |           | $      | 4.70 |   |   |   | 0.8 |   |   | $ | 53,129 |   |   |   | 41,000 |   |   | $ | 4.70 |   |   |   | 0.8 |   |   | $ | 53,129 |   |
| Aug 2008   |   |                | 3,750   |   |           | $      | 6.14 |   |   |   | 1.6 |   |   | $ | - |   |   |   | 2,250 |   |   | $ | 6.14 |   |   |   | 1.6 |   |   | $ | - |   |
| Oct 2008   |   |                | 2,500   |   |           | $      | 4.97 |   |   |   | 1.8 |   |   | $ | 2,575 |   |   |   | 1,875 |   |   | $ | 4.97 |   |   |   | 1.8 |   |   | $ | 1,931 |   |
| Nov 2008   |   |                | 46,500  |   |           | $      | 1.82 |   |   |   | 1.9 |   |   | $ | 194,256 |   |   |   | 30,500 |   |   | $ | 1.81 |   |   |   | 1.9 |   |   | $ | 127,692 |   |
| Dec 2010   |   |                | 114,000 |   |           | $      | 6.19 |   |   |   | 4.0 |   |   | $ | 2,160 |   |   |   | - |   |   | $ | - |   |   |   | - |   |   | $ | - |   |
| TOTAL      |   |                | 242,750 |   |           | $      | 4.61 |   |   |   | 3.1 |   |   | $ | 361,320 |   |   |   | 110,625 |   |   | $ | 3.36 |   |   |   | 2.4 |   |   | $ | 291,952 |   |

----

|                                             |   |     |     |   | Avg.     |   |   |     |   |   | Avg.     |   |
|--------------------------------------------------|--------|----------|----------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                             |   | Dec. 31, |     |   | Exercise |   |   | Dec. 31, |   |   | Exercise |   |
|                                             |   | 2010     |     |   | Price    |   |   | 2009     |   |   | Price    |   |
| Outstanding and Exercisable, beginning of period |   |     | 343,030  |   |     | $      | 3.47   |     |   |   | 343,030  |   |   | $ | 3.47 |   |
| Granted                                          |   |     | -        |   |     |   | -      |     |   |   | -        |   |   |   | - |   |
| Exercised                                        |   |     | (343,030 | )      |     |   | 3.47   |     |   |   | -        |   |   |   | - |   |
| Cancelled                                        |   |     | -        |   |     |   | -      |     |   |   | -        |   |   |   | - |   |
| Outstanding and Exercisable at the end of period |   |     | -        |   |     | $      | -      |     |   |   | 343,030  |   |   | $ | 3.47 |   |

----

|                                                                              |   | Year Ended December 31, |      |
|-----------------------------------------------------------------------------------|--------|-------------------------|-----------|
|                                                                              |   | 2010                    |      |   | 2009 |   |
| Basic                                                                             |   |                    |      |   |   |   |
| Average shares outstanding:                                                       |   |                    |      |   |   |   |
| Weighted average number of shares outstanding during the period                   |   |                    | 2,981,188 |   |   |   | 2,765,277 |   |
|                                                                              |   |                    |      |   |   |   |   |   |
| Earnings:                                                                         |   |                    |      |   |   |   |   |   |
| Net income attributable to CTI Industries Corporation                             |   | $                       | 1,827,518 |   |   | $ | 1,003,140 |   |
|                                                                              |   |                    |      |   |   |   |   |   |
| Amount for per share Computation                                                  |   | $                       | 1,827,518 |   |   | $ | 1,003,140 |   |
|                                                                              |   |                    |      |   |   |   |   |   |
| Net earnings applicable to Common Shares                                          |   | $                       | 0.61      |   |   | $ | 0.36 |   |
|                                                                              |   |                    |      |   |   |   |   |   |
| Diluted                                                                           |   |                    |      |   |   |   |   |   |
| Average shares outstanding:                                                       |   |                    | 2,981,188 |   |   |   | 2,765,277 |   |
| Weighted averages shares Outstanding Common stock equivalents (options, warrants) |   |                    | 58,254    |   |   |   | 9,785 |   |
|                                                                              |   |                    |      |   |   |   |   |   |
| Weighted average number of shares outstanding during the period                   |   |                    | 3,039,442 |   |   |   | 2,775,062 |   |
|                                                                              |   |                    |      |   |   |   |   |   |
| Earnings:                                                                         |   |                    |      |   |   |   |   |   |
| Net income attributable to CTI Industries Corporation                             |   | $                       | 1,827,518 |   |   | $ | 1,003,140 |   |
|                                                                              |   |                    |      |   |   |   |   |   |
| Amount for per share computation                                                  |   | $                       | 1,827,518 |   |   | $ | 1,003,140 |   |
|                                                                              |   |                    |      |   |   |   |   |   |
| Net income applicable to Common Shares                                            |   | $                       | 0.60      |   |   | $ | 0.36 |   |

----

| 20. | Geographic Segment Data |
|-----|-------------------------|

|                       |   | United States |       |   | United Kingdom(UK) |   |      | Europe(Excluding UK) |   |   | Mexico  |   |   | Consolidated |      |
|----------------------------|--------|---------------|------------|--------|--------------------|--------|-----------|----------------------|--------|--------|---------|--------|--------|--------------|-----------|
| Year ended 12/31/10        |   |          |       |   |               |   |      |                 |   |   |    |   |   |         |      |
| Sales to outside customers |   | $             | 36,721,000 |   |               | $      | 2,387,000 |                 |   | $      | 108,000 |   |   | $            | 8,532,000 |   |   | $ | 47,748,000 |   |
| Total Assets               |   | $             | 24,711,000 |   |               | $      | 977,000   |                 |   | $      | 220,000 |   |   | $            | 6,953,000 |   |   | $ | 32,861,000 |   |
|                       |   |          |       |   |               |   |      |                 |   |   |    |   |   |         |      |   |   |   |   |   |
|                  |   | United States |       |   | United Kingdom(UK) |   |      | Europe(Excluding UK) |   |   | Mexico  |   |   | Consolidated |      |
| Year ended 12/31/09        |   |          |       |   |               |   |      |                 |   |   |    |   |   |         |      |   |   |   |   |   |
| Sales to outside customers |   | $             | 31,873,000 |   |               | $      | 1,971,000 |                 |   | $      | -       |   |   | $            | 7,451,000 |   |   | $ | 41,295,000 |   |
| Total Assets               |   | $             | 23,801,000 |   |               | $      | 733,000   |                 |   | $      | -       |   |   | $            | 5,861,000 |   |   | $ | 30,395,000 |   |

----

|                               |   | 2010   |   |   | 2009   |   |
|------------------------------------|--------|--------|--------|--------|--------|--------|
| Balance at beginning of year       |   | $      | 57,000 |   |   | $      | 39,000 |   |
| Charged to expenses                |   |   | 8,000  |   |   |   | 65,000 |   |
| Uncollectible accounts written off |   |   | (6,000 | )      |   |   | (47,000 | ) |
| Balance at end of year             |   | $      | 59,000 |   |   | $      | 57,000 |   |

|                           |   | 2010   |    |   | 2009   |   |
|--------------------------------|--------|--------|---------|--------|--------|--------|
| Balance at beginning of year   |   | $      | 342,000 |   |   | $      | 429,000 |   |
| Charged to expenses            |   |   | 42,000  |   |   |   | 25,000 |   |
| Obsolete inventory written off |   |   | (8,000  | )      |   |   | (112,000 | ) |
| Balance at end of year         |   | $      | 376,000 |   |   | $      | 342,000 |   |

|                         |   | 2010   |       |   | 2009   |   |
|------------------------------|--------|--------|------------|--------|--------|--------|
| Cost Basis                   |   |   |       |   |   |   |
| Balance at beginning of year |   | $      | 32,088,000 |   |   | $      | 31,253,000 |   |
| Additions                    |   |   | 2,061,000  |   |   |   | 835,000 |   |
| Disposals                    |   |   | -          |   |   |   | - |   |
| Balance at end of year       |   | $      | 34,149,000 |   |   | $      | 32,088,000 |   |
|                         |   |   |       |   |   |   |   |   |
| Accumulated depreciation     |   |   |       |   |   |   |   |   |
| Balance at beginning of year |   | $      | 22,555,000 |   |   | $      | 20,677,000 |   |
| Depreciation                 |   |   | 1,935,000  |   |   |   | 1,878,000 |   |
| Disposals                    |   |   | -          |   |   |   | - |   |
| Balance at end of year       |   | $      | 24,490,000 |   |   | $      | 22,555,000 |   |

----