UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________

FORM 10-Q/A
AMENDMENT NO. 2 TO FORM 10-Q
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2006
 
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the transition period from _________to_________
 
Commission File Number
000-23115
 
CTI INDUSTRIES CORPORATION
(Exact name of Registrant as specified in its charter)

Illinois
  
36-2848943
(State or other jurisdiction of
  
(I.R.S. Employer Identification Number)
incorporation or organization)
    

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

(847)382-1000
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o     Accelerated filer  o    Non-accelerated filer þ 
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

The number of shares outstanding of the Registrant’s common stock as of May 15, 2006 was 2,036,474 (excluding treasury shares).
 
QUARTERLY REPORT ON FORM 10-Q/A
For the quarterly period ended March 31, 2006
EXPLANATORY NOTE

This Form 10-Q/A is being filed by the Company solely to correct a technical error made by the filing software with respect to the Consolidated Statement of Cash Flows contained in the Form 10Q/A, Amendment No. 1 to the Form 10-Q of the Company for the quarterly period ended March 31, 2006, filed on August 22, 2006. The filing software deleted the following numbers from Cash flows from financing activities related to “Proceeds from issuance of long-germ debt and warrants” in the amounts of $2,423,634 for the three months ended March 31, 2006 and $33,296 for the three months ended March 31, 2005. This Amendment No. 2 contains only the corrected Consolidated Statements of Cash Flows which does incorporate those items properly.

This Amendment No.2 contains only the sections of the Report on Form 10-Q for the quarterly period ended March 31, 2006 that are being amended. The sections and exhibits to the Form 10-Q as originally filed, or as amended by Amendment No.1, are unchanged and continue in full force and effect as previously filed. This Amendment No.2 speaks as of the date of the original filings of the Form 10-Q and Form 10-Q/A Amendment No.1 and has not been updated to reflect events occurring subsequent to the original filing dates.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: September 5, 2006
CTI INDUSTRIES CORPORATION
 
 
By:  /s/ Howard W. Schwan
Howard W. Schwan, President
 
 
By:  /s/ Stephen M. Merrick
Stephen M. Merrick
Executive Vice President and Chief Financial Officer
 
CTI Industries Corporation and Subsidiaries
          
Consolidated Statements of Cash Flows
          
           
   
Three Months Ended
March 31,
  
   
2006
  
2005
  
   
Restated
  
Restated
  
Cash flows from operating activities:
          
Net income
  
$
219,768
  
$
84,486
  
Adjustment to reconcile net income to cash
              
(used in) provided by operating activities:
              
Depreciation and amortization
    
351,428
   
400,936
 
Amortization of debt discount
    
20,414
   
19,740
 
Minority interest in loss of subsidiary
    
(80
)
  
(95
)
Provision for losses on accounts receivable
    
45,000
   
20,000
 
Provision for losses on inventories
    
22,500
   
45,000
 
Deferred income taxes
    
38,188
   
(4,479
)
Increase (Decrease) in cash attributable to change
              
in operating assets and liabilities
              
Accounts receivable
    
(1,300,126
)
  
393,807
 
Inventories
    
(350,181
)
  
976,009
 
Prepaid exense and other assets
    
128,518
   
223,667
 
Trade Payables
    
(331,430
)
  
(108,063
)
Accrued liabilities
    
210,947
   
(367,186
)
Net cash (used in) provided by operating activities
    
(945,054
)
  
1,683,822
 
               
Cash flows from investing activity:
              
Purchases of property, plant and equipment
    
(61,219
)
  
(116,514
)
               
 Net cash used in investing activity
    
(61,219
)
  
(116,514
)
               
Cash flows from financing activities:
              
Checks written in excess of bank balance
    
(338,237
)
  
(46,067
)
Net change in revolving line of credit
    
(215,492
)
  
(1,139,328
)
Proceeds from issuance of long-term debt and warrants
              
(received from related party $1,000,000 in 2006)
    
2,423,634
   
33,296
 
Repayment of long-term debt (related parties $15,000 and $15,000)
    
(310,783
)
  
(541,162
)
Cash paid for deferred financing fees
    
(180,506
)
  
(19,195
)
Net cash provided by (used in) financing activities
    
1,378,616
   
(1,712,456
)
               
Effect of exchange rate changes on cash
    
5,887
   
(7,695
)
               
Net increase (decrease) in cash
    
378,230
   
(152,843
)
Cash and equivalents at beginning of period
    
261,982
   
526,469
 
Cash and equivalents at end of period
  
$
640,212
  
$
373,626
  
               
Supplemental disclosure of csh flow information:
              
Cash payment for interest
     303,979     192,381  
             
See accompanying notes to condensed consolidated unaudited statements