SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB-A
                               AMENDMENT NO. 2 TO
                            ANNUAL REPORT PURSUANT TO
                      SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended October 31, 1997

Commission File Number
     000-23115




                           CTI INDUSTRIES CORPORATION
             (Exact name of Registrant as specified in its charter)


            Delaware                                  36-2848943
(State or other jurisdiction of         (I.R.S. EmployerIdentification Number)
 incorporation or organization)


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


                                 (847) 382-1000
               Registrant's telephone number, including area code




         Amendment to include  Part III  information.  Portions of  Registrant's
Proxy Statement will not be incorporated by reference into this Form 10KSB-A.





<PAGE>



PART III

Item No. 9        Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act


Directors and Executive Officers

         The Company's current directors and executive  officers and their ages,
as of January 15, 1998, are as follows:


           Name               Age             Position with Company
--------------------------   -----    -----------------------------------

John H. Schwan                 53     Chairman and Director
Stephen M. Merrick             55     Chief Executive Officer, Secretary,
                                      Chief Financial Officer and Director
Howard W. Schwan               43     President and Director
John C. Davis                  64     Executive Vice President and Director
Sharon Konny                   39     Manager of Finance and Administration
Brent Anderson                 31     Vice President of Manufacturing
Stanley M. Brown               51     Director



         All directors hold office until the annual meeting of stockholders next
following  their  election  and/or  until  their   successors  are  elected  and
qualified.  Officers are elected annually by the Board of Directors and serve at
the discretion of the Board. Information with respect to the business experience
and  affiliation  of the directors and the executive  officers of the Company is
set forth below.

         John H. Schwan,  Chairman.  Mr. Schwan has been an officer and director
of the Company  since  January,  1996.  Mr.  Schwan has been the  President  and
principal executive officer of Packaging Systems,  Inc. and affiliated companies
for over the last 10 years. Mr. Schwan devotes  approximately 20% of his time to
his position as Chairman of the Company and the balance of his time to Packaging
Systems, Inc. and affiliates. Mr. Schwan has over 20 years of general management
experience,  including manufacturing,  marketing and sales. Mr. Schwan served in
the U.S. Army Infantry in Vietnam from 1966 to 1969,  where he attained the rank
of First Lieutenant.

         Stephen M. Merrick, Chief Executive Officer and Secretary.  Mr. Merrick
was  President of the Company from  January,  1996 to June,  1997 when he became
Chief Executive Officer of the Company. Mr. Merrick devotes approximately 20% of
his time to his  position  as Chief  Executive  Officer of the  Company  and the
balance of his time is devoted to the  practice  of law.  He has been a director
and Secretary of the Company since inception.  Mr. Merrick is a principal of the
law firm of Fishman Merrick Miller Genelly  Springer Klimek & Anderson,  P.C. of
Chicago, Illinois and has



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<PAGE>



been  engaged  in the  practice  of law  for  more  than  30  years.  He is also
Secretary,   Director  and  a  member  of  the  Management  Committee  of  Reliv
International,  Inc. (NASDAQ), a manufacturer and direct marketer of nutritional
supplements and food products.

         Howard W. Schwan,  President.  Mr. Schwan has been  associated with the
Company  for 17  years  principally  in the  management  of the  production  and
engineering  operations  of the  Company.  Mr.  Schwan  was  appointed  as  Vice
President of  Manufacturing  in November,  1990,  was appointed as a director in
January,  1996, and was appointed as President in June, 1997. Mr. Schwan manages
administration,  production  and  engineering  functions  as well  as the  sales
function for latex balloons and custom and created films.

         John C.  Davis,  Executive  Vice  President-Sales.  Mr.  Davis has been
associated  with the Company  since 1975 and was President and a director of the
Company  from that time to January,  1996.  Mr. Davis has been active in a sales
and marketing capacity and, in January, 1996, became Executive Vice President of
Sales.

         Sharon Konny, Manager of Finance and Administration. Ms. Konny has been
Manager of Finance and  Administration at the Company since October,  1996. From
November of 1992 to 1996,  she was an Assistant  Vice President of First Chicago
Corporation,  initially  as Loan  Servicing  Manager  of the  Mortgage  Services
Division and in December,  1994,  achieving the position of Manager of Financial
Administration  for the First  Card  Division.  She  became a  Certified  Public
Accountant in 1992.

         Brent Anderson, Vice President of Manufacturing.  Mr. Anderson has been
employed  by  the  Company  since  January,  1989,  and  has  held a  number  of
engineering  positions  with the  Company  including  Plant  Engineer  and Plant
Manager.  In such  capacities Mr.  Anderson was  responsible  for the design and
manufacture of much of the Company's manufacturing  equipment.  Mr. Anderson was
appointed Vice President of Manufacturing in June, 1997.

         Stanley M. Brown,  Director.  Mr. Brown was  appointed as a director of
the Company in January,  1996. Mr. Brown has been President of Inn-Room Systems,
Inc.,  a  manufacturer  and lessor of in-room  vending  systems for hotels since
March, 1996 and, since 1990, has been President of Surface Preparation  Systems,
Inc., a company  engaged in the business of developing  and marketing  equipment
for the preparation, cleaning and profiling of concrete and other surfaces. From
1968 to 1989,  Mr.  Brown was with the United  States  Navy as a naval  aviator,
achieving the rank of Captain.
   
         John H. Schwan and Howard W. Schwan are brothers.


Section 16(a) Beneficial Ownership Reporting Compliance

         There were no late  filings  required by Section  16(a) during the most
recent fiscal year or prior years by any officer, director or 10% shareholder.




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<PAGE>



Item No. 10       Executive Compensation

Executive Compensation

     The  following  table sets forth  certain  information  with respect to the
compensation  paid or accrued by the Company to its President,  Chief  Executive
Officer and any other  officer who received  compensation  in excess of $100,000
("Named Executive Officers").



                           Summary Compensation Table
<TABLE>
<CAPTION>

                                                        Annual Compensation
                                   ------------------------------------------------------------ 
                                                                  Other Annual      All Other
        Name and                             Salary     Bonus     Compensation     Compensation
   Principal Position               Year       ($)       ($)           ($)              ($)
 -------------------------         ------   --------  ----------  -------------  -------------- 

<S>                                 <C>     <C>         <C>         <C>             <C>                    
Stephen M. Merrick                  1997    $ 63,750         --          --              --
Chief Executive Officer             1996    $ 45,000         --          --              --
                                    1995         --          --          --              --

Howard W. Schwan                    1997    $121,600         --     $  6,145(1)     $  1,115(3)
President                           1996    $108,500         --     $  6,957(1)     $  1,250(3)
                                    1995    $ 94,231         --     $  6,933(1)     $  1,242(3)

John C. Davis                       1997    $150,000         --     $  8,374(2)     $  1,666(3)
Executive Vice                      1996    $195,177         --     $ 11,438(2)     $  3,252(3)
President-Sales                     1995    $280,000    $248,000    $ 23,747(2)     $  5,150(3)


------------
<FN>

(1)      Perquisites include country club membership ($5,000).

(2)      Perquisites  include  country club  membership  ($5,000) and  allocated
         personal use of Company  vehicles  ($3,374 in 1997,  $5,158 in 1996 and
         $16,767 in 1995).

(3)      Company  contribution to  the  Company  401(k) Plan  as pre-tax  salary
         deferral.
</FN>
</TABLE>


         No Named  Executive  Officer  owns any  options or  warrants  issued in
connection  with their  employment.  Certain Named Executive  Officers  received
warrants  to  purchase  Common  Stock of the  Company in  connection  with their
guarantee of certain bank loans  secured by the Company and in  connection  with
their participation in a private offering of notes and warrants conducted by the
Company. See Item 12. No Named Executive Officer received or exercised any stock
options during the fiscal year ended October 31, 1997.




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<PAGE>



Employment Agreements

         In April,  1996, the Company entered into an employment  agreement with
John C. Davis as Executive  Vice  President-Sales,  which provided for an annual
salary of $150,000.  The term of the agreement was through  January 31, 1998. On
June 27, 1997, the agreement was amended to extend the term through  January 31,
2000,  and to provide for an annual  salary of $120,000 per year.  The agreement
contains  covenants  of  Mr.  Davis  not  to  use  the  Company's   confidential
information  while such  information  remains  confidential and establishing the
Company's  rights  to  inventions  created  by Mr.  Davis  during  the  term  of
employment. Mr. Davis' agreement does not contain a covenant not to compete.

         In June,  1997, the Company  entered into an Employment  Agreement with
Howard W. Schwan as President,  which  provides for an annual salary of not less
than $135,000. The term of the Agreement is through June 30, 2002. The Agreement
contains  covenants  of Mr.  Schwan  with  respect  to the use of the  Company's
confidential information,  establishes the Company's right to inventions created
by Mr.  Schwan  during the term of  employment,  and  includes a covenant of Mr.
Schwan not to compete  with the  Company  for a period of three  years after the
date of termination of the Agreement.


Director Compensation

         Directors are not  compensated  for their  services as directors.  John
Schwan was  compensated in the amount of $12,000 in fiscal 1997 for his services
as Chairman of the Board of Directors.


Item No. 11       Security Ownership of Certain Beneficial Owners and Management

Principal Stockholders

         The following table sets forth certain  information with respect to the
beneficial  ownership of the Company's  capital stock, as of January 15, 1998 by
(i) each  stockholder who is known by the Company to be the beneficial  owner of
more than 5% of the Company's  Common Stock or Class B Common  Stock,  (ii) each
director  and  executive  officer of the  Company  who owns any shares of Common
Stock or Class B Common Stock, and (iii) all executive officers and directors as
a group. Except as otherwise indicated, the Company believes that the beneficial
owners of the shares  listed  below have sole  investment  and voting power with
respect to such shares.







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<PAGE>


<TABLE>
<CAPTION>


                               Shares of Class B            Shares of Common
                                  Common Stock             Stock Beneficially         Percent of 
 Name and Address(1)         Beneficially Owned(2)(3)            Owned(2)           Common Stock(4)
----------------------       ------------------------     -------------------       --------------- 

<S>                                   <C>                       <C>                      <C>  
Stephen M. Merrick                    219,781                     318,807(5)             13.42
John H. Schwan                        329,670                     189,103(6)             12.89
Howard W. Schwan                      164,835                      92,949(7)              6.56
John C. Davis                             --                      464,281(8)             11.96
Sharon Konny                              --                       12,000(9)               *
Brent Anderson                            --                       12,000(9)               *
Stanley M. Brown                          --                        5,000(10)              *
747 Glenn Avenue
Wheeling, IIllinois
Frances Ann Rohlen                    274,725                         --                  7.17
c/o Cheshire Partners
1504 Wells
Chicago, Illinois 60610
Philip W. Colburn                     109,890                     118,267(11)             5.95
All directors and executive           714,286                   1,094,140                41.37
officers as a group (7 persons)

 
*less than one percent
 

<FN>

(1)      Except as otherwise  indicated,  the address of each stockholder listed
         above is c/o CTI  Industries  Corporation,  22160  North  Pepper  Road,
         Barrington, Illinois 60010.

(2)      A person is deemed to be the beneficial owner of securities that can be
         acquired  within  60 days  from the date set forth  above  through  the
         exercise  of any  option,  warrant  or right.  Shares  of Common  Stock
         subject to options,  warrants or rights that are currently  exercisable
         or exercisable  within 60 days are deemed  outstanding  for purposes of
         computing the percentage  ownership of the person holding such options,
         warrants  or rights,  but are not deemed  outstanding  for  purposes of
         computing the percentage ownership of any other person.

(3)      Figures  below   represent  all  Class  B  Common  Stock   outstanding.
         Beneficial  ownership  of  shares of Class B Common  Stock for  Messrs.
         Merrick,  John Schwan,  Howard Schwan and Ms. Rohlen  include  indirect
         ownership of such shares  through CTI  Investors,  L.L.C.  See "Certain
         Transactions."

(4)      Assumes conversion of all shares of Class B Common Stock into shares of
         Common Stock.



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<PAGE>



(5)      Includes  warrants to purchase up to 76,923  shares of Common  Stock at
         $.91 per share and warrants to purchase up to 100,961  shares of Common
         Stock at $3.12 per share.

(6)      Includes  warrants to purchase up to 76,923  shares of Common  Stock at
         $.91 per share and warrants to purchase up to 112,180  shares of Common
         Stock at $3.12 per share.

(7)      Includes  warrants to purchase up to 76,923  shares of Common  Stock at
         $.91 per share and  warrants to purchase up to 16,026  shares of Common
         Stock at $3.12 per share.

(8)      Includes  warrants to purchase up to 48,077  shares of Common  Stock at
         $3.12  per  share,  and  230,769  shares  of Common  Stock  subject  to
         redemption by the Company. See "Certain Transactions."

(9)      Includes  incentive  stock  options to purchase up to 12,000  shares of
         Common Stock at the initial  public  offering price per share of Common
         Stock.

(10)     Includes  non-qualified stock options to purchase up to 5,000 shares of
         Common Stock at the initial  public  offering price per share of Common
         Stock.

(11)     Includes shares held by immediate family members.
</FN>
</TABLE>



Item No. 12       Certain Relationships and Related Transactions

Certain Transactions

         In March 1996, the Company  entered into a Stock  Redemption  Agreement
with John C. Davis  which was  subsequently  amended  June 27,  1997.  Under the
amended Stock  Redemption  Agreement the Company was obligated to redeem 102,564
shares of Common Stock and has the right,  but not the obligation,  to redeem up
to an additional  230,769 shares of Common Stock owned by Mr. Davis at the price
of $1.95 per share at any time  through  January 31, 1998.  Commencing  March 1,
1998 through  February 28, 2000,  the Company is obligated to pay to Mr.  Davis,
for the redemption of shares at $1.95 per share (i) an amount equal to 2% of the
Company's  pretax profits each fiscal quarter  (beginning with the quarter ended
February 28, 1998) and (ii) an amount equal to 2% (but not to exceed  $8,000) of
the amount by which latex and mylar balloon  revenues exceed $1.3 million in any
month.  The Company's  obligations  terminate  once a total of 333,333 shares of
Common  Stock  have been  redeemed  under the Stock  Redemption  Agreement.  The
Company also has the right to redeem  additional shares of Common Stock from Mr.
Davis during this period at $1.95 per share,  provided  that the total number of
shares  subject to  redemption  under the Stock  Redemption  Agreement  does not
exceed 333,333.  As of the date of this Offering  102,564 shares of Common Stock
have been redeemed pursuant to the Stock Redemption Agreement.

         In  March  and  May of  1996,  a group  of  investors  made  an  equity
investment  of  $1,000,000  in the  Company  in return for  1,098,901  shares of
Preferred Stock,  $.91 par value.  Each share of Preferred Stock was entitled to
an annual cumulative  dividend of 13% of the purchase price, and was convertible
into one share of Common Stock. The shares of Preferred Stock, voting separately





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<PAGE>



as a  class,  were  entitled  to  elect  four of the  Company's  directors.  CTI
Investors,  L.L.C., an Illinois limited liability company,  invested $900,000 in
the shares of Preferred Stock.  Members of CTI Investors,  L.L.C. include Howard
W. Schwan,  John H. Schwan and Stephen M. Merrick,  members of  management,  and
Frances Ann Rohlen.

         In  December,  1996,  Howard W.  Schwan,  John H. Schwan and Stephen M.
Merrick were each issued  warrants to purchase  76,923  shares of the  Company's
Common Stock at an exercise  price of $.91 per share in  consideration  of their
facilitating  and  guaranteeing a bank loan to the Company in the amount of $6.3
million. The warrants have a term of six years.

         In June,  1997, the Company issued in a private  placement notes in the
principal  amount of $865,000,  together with warrants to purchase up to 277,244
shares of the  Company's  Common Stock at an exercise  price of $3.12 per share.
The  warrants  have a term of five  years.  Howard W.  Schwan,  John H.  Schwan,
Stephen M. Merrick and John C. Davis, members of management,  purchased $50,000,
$350,000 and $315,000 and $150,000, respectively, of the notes and warrants. Mr.
John Schwan and Mr.  Merrick  applied  advances of  $200,000  each,  made to the
Company in January, 1997, toward the purchase of notes and warrants.

         Stephen  M.  Merrick,  Chief  Executive  Officer of the  Company,  is a
principal of the law firm of Fishman  Merrick Miller Genelly  Springer  Klimek &
Anderson,  P.C. which serves as general counsel of the Company. In addition, Mr.
Merrick owns 219,781  shares of Class B Common Stock,  140,923  shares of Common
Stock, warrants to purchase 76,923 shares of Common Stock at $.91 per share, and
warrants to purchase  100,961  shares of Common Stock at $3.12 per share.  Other
members  of the  firm of  Fishman  Merrick  Miller  Genelly  Springer  Klimek  &
Anderson,  P.C. own an aggregate of 53,561  shares of Common  Stock.  Legal fees
incurred  from the firm were  $123,872 and $236,071 for the years ended  October
31, 1996 and 1997, respectively.

         John H. Schwan is the president and  shareholder of Packaging  Systems,
Inc. and affiliated companies. The Company made purchases of packaging materials
from these  entities in the amount of  $1,106,649  and $233,842  during the year
ended October 31, 1996 and 1997, respectively.

         The Company believes that each of the transactions set forth above were
entered into, and any future related party transactions will be entered into, on
terms as fair as those  obtainable from independent  third parties.  All related
party transactions, including loans and forgiveness of debt, must be approved by
a majority of disinterested directors.




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<PAGE>


                                   SIGNATURES

         In  accordance  with  Section  13 or  15(d)  of the  Exchange  Act  the
Registrant  caused  this  report to be signed on its  behalf by the  undersigned
thereunto duly authorized on February 27, 1998.


                                       CTI INDUSTRIES CORPORATION



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


         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant in the  capacities and on
the dates indicated.


Signatures                    Title                           Date
----------                    -----                           ----

 /s/ Howard W. Schwan         President and Director          February 27, 1998
------------------------
Howard W. Schwan

 /s/ John H. Schwan           Chairman and Director           February 27, 1998
------------------------
John H. Schwan

 /s/ Stephen M. Merrick       Chief Executive Officer,        February 27, 1998
------------------------
Stephen M. Merrick            Secretary, Chief Financial
                              Officer and Director

 /s/ John C. Davis            Vice President and Director     February 27, 1998
------------------------
John C. Davis

 /s/ Stanley M. Brown         Director                        February 27, 1998
------------------------
Stanley M. Brown




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