Illinois
|
CTI
INDUSTRIES CORPORATION
|
36-2848943
|
(State
or Other Jurisdiction of
|
(Name
of Registrant
|
(I.R.S.
Employer
|
Incorporation
or Organization)
|
in
Our Charter)
|
Identification
No.)
|
Stephen
M. Merrick
|
||
22160
North Pepper Road
|
|
22160
North Pepper Road
|
Barrington,
Illinois 60010
|
|
Barrington,
Illinois 60010
|
(847)
382-1000
|
3069
|
(847)
382-1000
|
(Address
and telephone
|
(Primary
Standard
|
(Name,
address and
|
number
of Principal
|
Industrial
|
telephone
number of
|
Executive
Offices and
|
Classification
|
agent
for service)
|
Principal
Place of Business)
|
Code
Number)
|
|
Clayton
E. Parker, Esq.
|
Matthew
Ogurick, Esq.
|
Kirkpatrick
& Lockhart Preston Gates Ellis LLP
|
Kirkpatrick
& Lockhart Preston Gates Ellis LLP
|
200
S. Biscayne Boulevard, Suite 3900
|
200
S. Biscayne Boulevard, Suite 3900
|
Miami,
Florida 33131
|
Miami,
Florida 33131
|
Telephone: (305)
539-3300
|
Telephone: (305)
539-3300
|
Telecopier: (305)
358-7095
|
Telecopier: (305)
358-7095
|
PROSPECTUS
SUMMARY
|
1
|
Introduction
|
1
|
Overview
|
1
|
Recent
Developments
|
2
|
About
Us
|
3
|
THE
OFFERING
|
4
|
Net
Cash To The Company
|
5
|
Number
Of Shares To Be Issued To Receive Gross Proceeds Of $5
Million
|
5
|
Selected
Financial Data
|
6
|
SUPPLEMENTARY
FINANCIAL INFORMATION
|
9
|
FORWARD-LOOKING
STATEMENTS
|
10
|
RISK
FACTORS
|
11
|
Industry
Risks
|
11
|
Company
Risks
|
12
|
Financial
Risks
|
14
|
Market
Risks and Risks Related to this Offering
|
15
|
DESCRIPTION
OF BUSINESS
|
18
|
Business
Overview
|
18
|
Business
Strategies
|
19
|
Products
|
20
|
Markets
|
21
|
Marketing,
Sales and Distribution
|
22
|
Production
and Operations
|
23
|
Raw
Materials
|
23
|
Information
Technology Systems
|
24
|
Competition
|
24
|
Patents,
Trademarks and Copyrights
|
24
|
Research
and Development
|
25
|
Employees
|
25
|
Regulatory
Matters
|
25
|
International
Operations
|
25
|
Products
|
26
|
Legal
Proceedings
|
27
|
SELLING
SHAREHOLDERS
|
28
|
Shares
Acquired In Financing Transactions With CTI
|
28
|
STANDBY
EQUITY DISTRIBUTION AGREEMENT
|
30
|
Summary
|
30
|
Standby
Equity Distribution Agreement Explained
|
30
|
Net
Cash To The Company
|
31
|
Number
Of Shares To Be Issued To Receive Gross Proceeds Of $5
Million
|
31
|
USE
OF PROCEEDS
|
33
|
DILUTION
|
34
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
36
|
Overview
|
36
|
Recent
Developments
|
36
|
Results
of Operations For the Three (3) Months Ended March 31, 2008 Compared
to
the Three (3) Months Ended March 31, 2007
|
37
|
Results
of Operations For the Year Ended December 31, 2007 Compared with
the Year
Ended December 31, 2006
|
39
|
Net
Sales
|
39
|
Cost
of Sales
|
39
|
General
and Administrative Expenses
|
40
|
Selling
|
40
|
Advertising
and Marketing
|
40
|
Other
Income or Expense
|
40
|
Net
Income or Loss
|
40
|
Income
Taxes
|
40
|
Results
of Operations For the Year Ended December 31, 2006 Compared to
Year Ended
December 31, 2005
|
41
|
Net
Sales
|
41
|
Cost
of Sales
|
41
|
General
and Administrative Expenses
|
41
|
Selling
|
41
|
Advertising
and Marketing
|
41
|
Other
Operating Expense (Income)
|
41
|
Other
Expense
|
42
|
Net
Income or Loss
|
42
|
Income
Taxes
|
42
|
Financial
Condition, Liquidity and Capital Resources
|
42
|
Seasonality
|
45
|
Critical
Accounting Policies
|
45
|
MANAGEMENT
|
49
|
EXECUTIVE
COMPENSATION
|
53
|
PRINCIPAL
SHAREHOLDERS
|
62
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
64
|
THE
2007 STOCK INCENTIVE PLAN
|
65
|
Description
of the Plan
|
65
|
Change
of Control.
|
65
|
Future
Amendments to the Plan.
|
66
|
Federal
Income Tax Information With Respect to the Plan
|
66
|
Incentive
Stock Options
|
66
|
Non-Statutory
Stock Options
|
66
|
Restricted
Stock Awards
|
67
|
Unrestricted
Stock Awards
|
67
|
Taxation
of the Company
|
67
|
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS
|
68
|
Market
Information.
|
68
|
Dividends
|
68
|
DESCRIPTION
OF SECURITIES
|
71
|
General
|
71
|
Common
Stock
|
71
|
Preferred
Stock
|
71
|
Warrants
|
71
|
Options
|
71
|
Limitation
Of Liability: Indemnification
|
71
|
Transfer
Agent
|
72
|
Anti-Takeover
Effects Of Provisions Of The Articles Of Incorporation
|
72
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
73
|
EXPERTS
|
74
|
LEGAL
MATTERS
|
75
|
HOW
TO GET MORE INFORMATION
|
76
|
INDEX
TO FINANCIAL STATEMENTS
|
i
|
PART
II INFORMATION NOT REQUIRED IN PROSPECTUS
|
1
|
SIGNATURES
|
8
|
·
|
Novelty
products,
principally balloons, including metalized balloons, latex balloons,
punch
balls and other inflatable toy items, and
|
·
|
Specialty
and printed films and flexible containers,
for food packaging, specialized consumer uses and various commercial
applications.
|
·
|
Coat
and laminate plastic film. Generally, we adhere polyethylene
film to
another film such as nylon or
polyester
|
·
|
Print
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.
|
·
|
Convert
printed plastic film to
balloons.
|
·
|
Convert
plastic film to flexible containers. These finished products
are used to
store and package food and for storage of a variety of personal
items.
|
·
|
Convert
latex to balloons and other novelty
items.
|
Assumed
Offering Price
|
75% of
Assumed
Offering Price
|
50% of
Assumed
Offering
Price
|
25% of
Assumed
Offering Price
|
||||||||||
Purchase
Price:
|
$
|
5.01
|
$
|
3.76
|
$
|
2.51
|
$
|
1.26
|
|||||
No. of
Shares(1):
|
76,376
|
76,376
|
76,376
|
76,376
|
|||||||||
Total
Outstanding(2):
|
2,861,476
|
2,861,476
|
2,861,476
|
2,861,476
|
|||||||||
Percent
Outstanding(3):
|
2.67
|
%
|
2.67
|
%
|
2.67
|
%
|
2.67
|
%
|
|||||
Gross
Cash to CTI:
|
$
|
382,644
|
$ |
287,174
|
$
|
191,704
|
$ |
96,234
|
|||||
Net
Cash to CTI(4):
|
$
|
203,512
|
$
|
112,815
|
$ |
22,119
|
$
|
(68,578
|
)
|
(1)
|
Represents
the number of shares of common stock registered pursuant to the
accompanying Registration Statement, which remain to be issued
to Cornell
Capital under the SEDA at the prices set forth in the table.
Does not
represent the 3,500 shares issued to Newbridge Securities pursuant
to the
Placement Agent Agreement in connection with the SEDA.
|
(2)
|
Represents
the total number of shares of common stock outstanding at May
30, 2008
(2,785,100) plus the issuance of 76,376 shares to Cornell Capital
under
the SEDA.
|
(3)
|
Represents
the shares of common stock to be issued as a percentage of the
total
number of shares outstanding at May 30, 2008
(2,785,100).
|
(4)
|
Net
cash equals the gross proceeds minus the five percent (5%)
underwriting discount and minus $160,000 in offering expenses.
|
|
Assumed
Offering
Price
|
75% of
Assumed
Offering
Price
|
50% of
Assumed
Offering
Price
|
25% of
Assumed
Offering
Price |
|||||||||
Purchase
Price:
|
$
|
5.01
|
$
|
3.76
|
$
|
2.51
|
$
|
1.26
|
|||||
No. of
Shares(1):
|
674,380
|
1,006,163
|
1,668,408
|
3,644,630
|
|||||||||
Total
Outstanding(4)(5):
|
3,459,480
|
(2)
|
3,791,263
|
(2)
|
4,453,508
|
(2)
|
6,429,730
|
(2)(3)
|
|||||
Percent
Outstanding(6):
|
19.49
|
%
|
26.54
|
%
|
37.47
|
%
|
56.68
|
%
|
|||||
Gross
Proceeds to CTI(7):
|
5,000,000
|
5,000,000
|
5,000,000
|
5,000,000
|
|||||||||
Net
Cash to CTI(8):
|
$
|
4,590,000
|
$
|
4,590,000
|
$
|
4,590,000
|
$
|
4,590,000
|
(1)
|
Represents
the total number of shares of common stock which would need to
be issued
at the stated purchase price to receive gross proceeds of $5,000,000,
minus the number of shares previously issued to Cornell Capital
since the
effectiveness of this offering. We registered 400,000 shares
of common
stock under this Prospectus pursuant to the SEDA, 76,376 of which
remain
available for issuance to Cornell Capital. We will need to register
additional shares of common stock to obtain the entire $5 million
available under the SEDA at these stated purchase
prices.
|
(2)
|
The
Company and Cornell Capital have agreed that the Company will not
sell to
Cornell Capital in excess of 400,000 shares unless the Company
shall have
obtained shareholder approval for such shares.
|
(3)
|
At
the stated purchase price and based on the limited number of available
authorized shares of common stock, CTI would need to obtain shareholder
approval to increase the authorized shares of common stock to obtain
the
entire $5 million available under the
SEDA.
|
(4)
|
Represents
the total number of shares of common stock outstanding at May
30, 2008
after the issuance of the shares to Cornell Capital under the
SEDA set
forth in footnote (1) above.
|
(5)
|
CTI’s
Certificate of Incorporation authorizes the issuance of 5,000,000
shares
of common stock.
|
(6)
|
Represents
the shares of common stock to be issued as a percentage of the
total
number shares outstanding at May 30, 2008.
|
(7)
|
If
CTI drew down on the entire $5 million available under the SEDA,
Cornell
Capital would receive an aggregate underwriting discount equal
to
$250,000. As of of the date of this Prospectus, the remaining
balance on
the $5 million available under the SEDA is $3.42 million which
is used in
the calculations in the chart above.
|
(8)
|
Net
cash equals the gross proceeds minus the five percent (5%)
underwriting discount and minus $160,000 in offering
expenses.
|
Common
Stock Remaining To Be Offered:
|
79,876
shares by the selling shareholders
|
|
|
Offering
Price
|
Market
price
|
|
|
Common
Stock Outstanding Before the Offering(1)
|
2,785,100
shares as of May 30, 2008
|
|
|
Use
of Proceeds
|
We
will not receive any proceeds of the shares offered by the selling
shareholders. Any proceeds we receive from the sale of common
stock under
the Standby Equity Distribution Agreement will be used for general
working
capital purposes at the discretion of CTI. See “Use of
Proceeds”.
|
|
|
Risk
Factors
|
The
securities offered hereby involve a high degree of risk and immediate
substantial dilution. See “Risk Factors” and
“Dilution”.
|
|
|
NASDAQ
Capital Market Symbol
|
CTIB
|
(1)
|
Excludes
up to 76,376 shares of common stock remaining to be issued pursuant
to the
SEDA.
|
|
Year ended December 31, (000 Omitted)
|
|||||||||||||||
|
2007
|
2006
|
2005
|
2004
|
2003
|
|||||||||||
Statement
of Operations Data:
|
||||||||||||||||
Net
Sales
|
$
|
36,510
|
$
|
35,428
|
$
|
29,190
|
$
|
37,193
|
$
|
36,260
|
||||||
Costs
of Sales
|
$
|
27,826
|
$
|
26,531
|
$
|
22,726
|
$
|
30,841
|
$
|
29,627
|
||||||
Gross
Profit
|
$
|
8,684
|
$
|
8,897
|
$
|
6,464
|
$
|
6,352
|
$
|
6,633
|
||||||
Operating
expenses
|
$
|
7,439
|
$
|
6,275
|
$
|
5,812
|
$
|
6,402
|
$
|
6,856
|
||||||
Income
(loss) from operations
|
$
|
1,245
|
$
|
2,622
|
$
|
652
|
$
|
(50
|
)
|
$
|
(223
|
)
|
||||
Interest
expense
|
$
|
1,286
|
$
|
1,691
|
$
|
1,231
|
$
|
1,350
|
$
|
1,103
|
||||||
Other
(income) expense
|
$
|
(174
|
)
|
$
|
(191
|
)
|
$
|
(45
|
)
|
$
|
(208
|
)
|
$
|
23
|
||
Income
(loss) before taxes and minority interest
|
$
|
133
|
$
|
1,122
|
$
|
(534
|
)
|
$
|
(1,192
|
)
|
$
|
(1,349
|
)
|
|||
Income
tax (benefit) expense
|
$
|
51
|
$
|
(774
|
)
|
$
|
(200
|
)
|
$
|
1,286
|
$
|
(782
|
)
|
|||
Minority
interest
|
$
|
-
|
$
|
1
|
$
|
-
|
$
|
1
|
$
|
-
|
||||||
Net
Income (loss)
|
$
|
82
|
$
|
1,895
|
$
|
(333
|
)
|
$
|
(2,479
|
)
|
$
|
(566
|
)
|
|||
Earnings
(loss) per common share
|
||||||||||||||||
Basic
|
$
|
0.03
|
$
|
0.91
|
$
|
(0.17
|
)
|
$
|
(1.28
|
)
|
$
|
(0.30
|
)
|
|||
Diluted
|
$
|
0.03
|
$
|
0.85
|
$
|
(0.17
|
)
|
$
|
(1.28
|
)
|
$
|
(0.30
|
)
|
|||
Other
Financial Data:
|
||||||||||||||||
Gross
margin percentage
|
23.79
|
%
|
25.11
|
%
|
22.14
|
%
|
17.08
|
%
|
18.29
|
%
|
||||||
Capital
Expenses
|
$
|
2,848
|
$
|
553
|
$
|
550
|
$
|
306
|
$
|
2,007
|
||||||
Depreciation
& Amortization
|
$
|
1,299
|
$
|
1,205
|
$
|
1,463
|
$
|
1,651
|
$
|
1,619
|
||||||
Balance
Sheet Data:
|
||||||||||||||||
Working
capital (Deficit)
|
$
|
1,318
|
$
|
1,848
|
$
|
(2,426
|
)
|
$
|
(2,790
|
)
|
$
|
(706
|
)
|
|||
Total
assets
|
$
|
29,256
|
$
|
26,645
|
$
|
23,536
|
$
|
27,888
|
$
|
30,270
|
||||||
Short-term
obligations (1)
|
$
|
9,767
|
$
|
9,422
|
$
|
8,618
|
$
|
9,962
|
$
|
6,692
|
||||||
Long-term
obligations
|
$
|
6,237
|
$
|
6,887
|
$
|
6,039
|
$
|
6,491
|
$
|
8,909
|
||||||
Stockholders’
Equity
|
$
|
6,591
|
$
|
5,102
|
$
|
2,726
|
$
|
2,951
|
$
|
5,212
|
(1)
|
Short
term obligations consist of primarily of borrowings under bank
line of
credit and current portion of long-term
debt.
|
|
For the Year Ended December 31, 2007 (1)
|
||||||||||||
1st
|
2nd
|
3rd
|
4th
|
||||||||||
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||
Net
sales
|
$
|
8,279,000
|
$
|
9,259,000
|
$
|
8,673,000
|
$
|
10,299,000
|
|||||
Gross
profit
|
$
|
1,903,000
|
$
|
2,744,000
|
$
|
1,617,000
|
$
|
2,420,000
|
|||||
Net
(loss) income
|
$
|
(52,000
|
)
|
$
|
423,000
|
$
|
(414,000
|
)
|
$
|
125,000
|
|||
Earnings
per common share
|
|
|
|
|
|||||||||
Basic
|
$
|
(0.02
|
)
|
$
|
0.18
|
$
|
(0.18
|
)
|
$
|
0.05
|
|||
Diluted
|
$
|
(0.02
|
)
|
$
|
0.17
|
$
|
(0.18
|
)
|
$
|
0.05
|
(1) |
Earnings
per common share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly per common share
information may not equal the annual earnings per common
share
|
|
For the Year Ended December 31, 2006 (1)
|
||||||||||||
1st
|
2nd
|
3rd
|
4th
|
||||||||||
|
Quarter
|
Quarter
|
Quarter
|
Quarter
(2)
|
|||||||||
Net
sales
|
$
|
8,156,000
|
$
|
8,997,000
|
$
|
8,603,000
|
$
|
9,672,000
|
|||||
Gross
profit
|
$
|
1,953,000
|
$
|
2,197,000
|
$
|
2,253,000
|
$
|
2,494,000
|
|||||
Net
income
|
$
|
220,000
|
$
|
206,000
|
$
|
315,000
|
$
|
1,154,000
|
|||||
Earnings
per common share
|
|
|
|
|
|||||||||
Basic
|
$
|
0.11
|
$
|
0.10
|
$
|
0.15
|
$
|
0.54
|
|||||
Diluted
|
$
|
0.10
|
$
|
0.10
|
$
|
0.15
|
$
|
0.49
|
(2) |
During
the fourth quarter 2006, management of the Company conducted
an analysis
of the recoverability of the deferred tax asset based on results
of
operations during the fourth quarter of 2005 and for the full
year of
2006, expected continued achievement of and continuing improvement
in
operating results for the forseeable future and anticipated repatriations
of profits and services income to be generated from the Company's
foreign
subsidiaries. As a result of such analysis, management determined
that the
net recorded deferred tax asset in the amount of $1,127,000 is
more likely
than not to be realized.
|
THREE (3) MONTHS ENDED (In Thousands – except per share information)
|
|||||||||||||||||||||||||||||||
|
Mar 31
|
Dec 31
|
Sep 30
|
June 30
|
Mar 31
|
Dec 31
|
Sep 30
|
June 30
|
Mar 31
|
Dec 31
|
|||||||||||||||||||||
|
2008
|
2007
|
2007
|
2007
|
2007
|
2006
|
2006
|
2006
|
2006
|
2005
|
|||||||||||||||||||||
Revenues
|
$
|
10,735,000
|
$
|
10,299,000
|
$
|
8,673,000
|
$
|
9,259,000
|
$
|
8,279,000
|
$
|
9,672,000
|
$
|
8,603,000
|
$
|
8,997,000
|
$
|
8,156,000
|
$
|
6,480,000
|
|||||||||||
Net
Income (loss)
|
$
|
279,000
|
$
|
125,000
|
$
|
(414,000
|
)
|
$
|
423,000
|
$ |
(52,000
|
)
|
$
|
1,154,000
|
$
|
315,000
|
$
|
206,000
|
$
|
220,000
|
$
|
52,000
|
|||||||||
Net
Income (loss) per share
|
|||||||||||||||||||||||||||||||
Basic
|
$
|
0.10
|
$
|
0.05
|
$
|
(0.18
|
)
|
$
|
0.18
|
$
|
(0.02
|
)
|
$
|
0.54
|
$
|
0.15
|
$
|
0.10
|
$
|
0.11
|
$
|
0.03
|
|||||||||
Diluted
|
$
|
0.10
|
$
|
0.05
|
$
|
(0.18
|
)
|
$
|
0.17
|
$
|
(0.02
|
)
|
$
|
0.49
|
$
|
0.15
|
$
|
0.10
|
$
|
0.10
|
$
|
0.02
|
|||||||||
Shares
used in computing per share amounts:
|
|||||||||||||||||||||||||||||||
Basic
|
2,662,267
|
2,346,126
|
2,339,467
|
2,303,371
|
2,156,783
|
2,087,145
|
2.055,553
|
2,053,311
|
2,036,474
|
1,977,235
|
|||||||||||||||||||||
Diluted
|
2,797,374
|
2,589,960
|
2,339,467
|
2,540,729
|
2,156,783
|
2,234,901
|
2,129,658
|
2,171,525
|
2,166,892
|
1,977,235
|
·
|
Economic
conditions
|
·
|
Competition
|
·
|
Production
efficiencies
|
·
|
Variability
in raw materials prices
|
·
|
Seasonality
|
·
|
Increase
our vulnerability to general adverse economic and industry
conditions
|
·
|
Require
us to dedicate a substantial portion of our cash flow from operations
to
payments on our debt, thereby limiting our ability to fund working
capital, capital expenditures and other general corporate
purposes;
|
·
|
Limit
our flexibility in planning for, or reacting to, changes in our
business
and the industry in which we
operate;
|
·
|
Place
us at a competitive disadvantage compared to our competitors
who may have
less debt and greater financial resources;
and
|
·
|
Limit,
among other things, our ability to borrow additional
funds.
|
·
|
Borrow
money;
|
·
|
Pay
dividends and make
distributions;
|
·
|
Issue
stock
|
·
|
Make
certain investments;
|
·
|
Use
assets as security in other
transactions;
|
·
|
Create
liens;
|
·
|
Enter
into affiliate transactions;
|
·
|
Merge
or consolidate; or
|
·
|
Transfer
and sell assets.
|
·
|
Novelty
products,
principally balloons, including metalized balloons, latex balloons,
punch
balls and other inflatable toy items, and
|
·
|
Specialty
and printed films and flexible containers,
for food packaging, specialized consumer uses and various commercial
applications.
|
·
|
Coat
and laminate plastic film.
Generally, we adhere polyethylene film to another film such as
nylon or
polyester
|
·
|
Print
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.
|
·
|
Convert
printed plastic film to balloons.
|
·
|
Convert
plastic film to flexible containers.
These finished products are used to store and package food and
for storage
of a variety of personal
items.
|
·
|
Convert
latex to balloons and other novelty items.
|
·
|
Focus
on our Core Assets and Expertise.
We have been engaged in the development, production and sale
of film
products for over 30 years and have developed assets, technology
and
expertise which, we believe, enable us to develop, manufacture,
market and
sell innovative products of high quality within our area of knowledge
and
expertise. We plan to focus our efforts in these areas which
are our core
assets and expertise – laminated films, printed films, pouches and film
novelty products – to develop new products, to market and sell our
products and to build our
revenues.
|
·
|
Maintain
a Focus on Margin Levels and Cost Controls in Order to Establish
and
Maintain Profitability.
We engage in constant review and effort to control our production,
and our
selling, general and administrative expenses, in order to establish
and
enhance profitability. Over the past three years, we have improved
our
gross margin levels from 22.1% in 2005 to 25.1% in 2006 and 23.8%
in 2007.
|
·
|
Develop
New Products, Product Improvements and Technologies.
We work constantly to develop new products, to improve existing
products
and to develop new technologies within our core product areas,
in order to
enhance our competitive position and our sales. In the novelty
line, our
development work includes new designs, new character licenses
and new
product developments. We also developed and introduced a device
to amplify
sound through a balloon so that voice and music can be played
and
amplified using our Balloon Jamz™ balloons. In our commercial line, over
the past several years we have developed new pouch closure systems
and
valves and new film methods for liquid packaging applications.
We have
received nine patents for these developments and have three patent
applications pending. During
2007, we introduced a line of resealable pouches with a valve
and pump
system for household storage and vacuum sealing of food
items.
|
·
|
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. In March 2006, we entered into a four-year agreement
with
Illinois Tool Works, Inc. (“ITW”) to manufacture certain pouches for them
and to provide film to them for their pouch production. In April
2006, we
entered into a license agreement with Rapak L.L.C. (“Rapak”) granting
Rapak a license under a patent related to textured film and pouches,
and
extending the term of an existing supply agreement with Rapak
to October
31, 2008. On February 1, 2008, we entered into a Supply and License
Agreement with S.C. Johnson & Son, Inc. to manufacture and supply to
SC Johnson certain home food management products to be sold under
the SC
Johnson ZipLoc® brand.
|
·
|
Superloons®
-
18" balloons in round or heart shape, generally made to be filled
with
helium and remain buoyant for long periods. This is the predominant
metalized balloon size.
|
·
|
Ultraloons®
-
31" balloons made to be filled with helium and remain buoyant.
|
·
|
Miniloons®-
9" balloons made to be air-filled and sold on holder-sticks or
for use in
decorations.
|
·
|
Card-B-Loons®(4
1/2") - air-filled balloons, often sold on a stick, used in floral
arrangements or with a container of candy.
|
·
|
Shape-A-Loons®
-
“18 to 48” shaped balloons made to be filled with helium.
|
·
|
Minishapes
– 11” to 16”small shaped balloons designed to be air filled and sold on
sticks as toys or inflated
characters.
|
·
|
Balloon
JamzTM–
20” to 40” round and shaped balloons which emit and amplify sound through
a speaker attached to the
balloon.
|
United States
|
United Kingdom
|
Mexico
|
Eliminations
|
Consolidated
|
||||||||||||
Year
ended 12/31/07
|
||||||||||||||||
Revenues
|
$
|
28,657,000
|
$
|
2,913,000
|
$
|
7,189,000
|
$
|
(2,249,000
|
)
|
$
|
36,510,000
|
|||||
Operating
income
|
$
|
810,000
|
$
|
215,000
|
$
|
345,000
|
$
|
(125,000
|
)
|
$
|
1,245,000
|
|||||
Net
(loss) income
|
$
|
(128,000
|
)
|
$
|
167,000
|
$
|
168,000
|
$
|
(125,000
|
)
|
$
|
82,000
|
||||
Total
Assets
|
$
|
27,854,000
|
$
|
2,948,000
|
$
|
5,780,000
|
$
|
(7,258,000
|
)
|
$
|
29,324,000
|
|||||
Year
ended 12/31/06
|
||||||||||||||||
Revenues
|
$
|
28,808,000
|
$
|
2,925,000
|
$
|
6,564,000
|
$
|
(2,869,000
|
)
|
$
|
35,428,000
|
|||||
Operating
income
|
$
|
2,116,000
|
$
|
64,000
|
$
|
578,000
|
$
|
(25,000
|
)
|
$
|
2,733,000
|
|||||
Net
income
|
$
|
1,544,000
|
$
|
93,000
|
$
|
284,000
|
$
|
(26,000
|
)
|
$
|
1,895,000
|
|||||
Total
Assets
|
$
|
25,245,000
|
$
|
2,627,000
|
$
|
5,050,000
|
$
|
(6,288,000
|
)
|
$
|
26,634,000
|
|||||
Year
ended 12/31/05
|
||||||||||||||||
Revenues
|
$
|
23,564,000
|
$
|
2,573,000
|
$
|
4,536,000
|
$
|
(1,483,000
|
)
|
$
|
29,190,000
|
|||||
Operating
income (loss)
|
$
|
602,000
|
$
|
290,000
|
$
|
(240,000
|
)
|
$
|
652,000
|
|||||||
Net
(loss) income
|
$
|
(342,000
|
)
|
$
|
220,000
|
$
|
(211,000
|
)
|
$
|
(333,000
|
)
|
|||||
Total
Assets
|
$
|
21,343,000
|
$
|
2,122,000
|
$
|
4,818,000
|
$
|
(4,747,000
|
)
|
$
|
23,536,000
|
Shares
Beneficially
Owned
Before
Offering
|
Percentage
Of
Outstanding
Shares
Beneficially
Owned
Before
Offering(1)
|
Shares To Be
Acquired
Under The
Standby
Equity
Distribution
Agreement
|
Percentage
Of
Outstanding
Shares To Be
Acquired
Under The
Standby
Equity
Distribution
Agreement
|
Shares To Be
Sold In The
Offering
|
Percentage
Of Shares
Beneficially
Owned After
Offering(1)
|
||||||||||||||
Shares Acquired in Financing Transactions with CTI
|
|||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||
Cornell
Capital Partners, LP (n/k/a YA Global Investments, L.P.)
|
0
|
*
|
76,376
|
15.74
|
%
|
76,376
|
(2)
|
0
|
%
|
||||||||||
|
|
|
|
|
|
|
|||||||||||||
Newbridge
Securities Corporation
|
3,500
|
(3)
|
*
|
0
|
0
|
%
|
3,500
|
0
|
%
|
||||||||||
|
|
|
|
|
|
|
|||||||||||||
Total
|
3,500
|
(3)
|
*
|
76,376
|
15.74
|
%
|
79,876
|
0
|
%
|
*
|
Less
than one percent (1%).
|
(1) |
Applicable
percentage of ownership is based on 2,785,100 shares of common
stock
outstanding as of May 30, 2008, together with securities exercisable
or
convertible into shares of common stock within sixty (60) days of May
30, 2008, for each shareholder. Beneficial ownership is determined
in
accordance with the rules of the SEC and generally includes voting
or
investment power with respect to securities. Shares of common stock
subject to securities exercisable or convertible into shares of
common
stock that are currently exercisable or exercisable within sixty (60)
days of May 30, 2008 are deemed to be beneficially owned by the
person
holding such securities for the purpose of computing the percentage
of
ownership of such person, but are not treated as outstanding for
the
purpose of computing the percentage ownership of any other person.
Note
that affiliates are subject to Rule 144 and Insider trading regulations
-
percentage computation is for form purposes
only.
|
(2) |
Includes
the 76,376 shares that may be acquired by Cornell Capital under
the
SEDA.
|
(3) |
Includes
3,500 Shares issued in connection with the
SEDA.
|
·
|
Standby
Equity Distribution Agreement.
On
June 6, 2006 (the “Closing Date”), the Company entered into a Standby
Equity Distribution Agreement (also referred to herein as the “SEDA”) with
Cornell Capital pursuant to which the Company may, at its discretion,
periodically sell to Cornell Capital shares of its common stock,
no par
value per share for a total purchase price of up to Five Million
Dollars
($5,000,000). For each share of common stock purchased under the
SEDA, Cornell Capital will pay to the Company one hundred percent
(100%)
of the lowest volume weighted average price (as quoted by Bloomberg,
LP)
of the Company’s common stock on the principal market (whichever is
at such time the principal trading exchange or market for the common
stock) during the five (5) consecutive trading days after the Advance
Notice Date (as such term is defined in the SEDA). However, the
Company
and Cornell Capital have agreed that the Company will not sell
to Cornell
Capital in excess of 400,000 shares unless and until the Company
shall
have obtained shareholder approval for such sales.
|
Assumed
Offering Price
|
75% of
Assumed
Offering Price
|
50% of
Assumed
Offering
Price
|
25% of
Assumed
Offering Price
|
||||||||||
Purchase
Price:
|
$
|
5.01
|
$
|
3.76
|
$
|
2.51
|
$
|
1.26
|
|||||
No. of
Shares(1):
|
76,376
|
76,376
|
76,376
|
76,376
|
|||||||||
Total
Outstanding(2):
|
2,861,476
|
2,861,476
|
2,861,476
|
2,861,476
|
|||||||||
Percent
Outstanding(3):
|
2.67
|
%
|
2.67
|
%
|
2.67
|
%
|
2.67
|
%
|
|||||
Gross
Cash to CTI:
|
$
|
382,644
|
$ |
287,174
|
$ |
191,704
|
$
|
96,234
|
|||||
Net
Cash to CTI(4):
|
$
|
203,512
|
$
|
112,815
|
$ |
22,119
|
$ |
(68,578
|
)
|
(1) |
Represents
the number of shares of common stock registered pursuant to the
accompanying Registration Statement, which remain to be issued
to Cornell
Capital under the SEDA at the prices set forth in the table. Does
not
represent the 3,500 shares issued to Newbridge Securities pursuant
to the
Placement Agent Agreement in connection with the
SEDA.
|
(2) |
Represents
the total number of shares of common stock outstanding at May 30,
2008
(2,785,100) plus the issuance of 76,376 shares to Cornell Capital
under
the SEDA.
|
(3) |
Represents
the shares of common stock to be issued as a percentage of the
total
number of shares outstanding at May 30, 2008
(2,785,100).
|
(4) |
Net
cash equals the gross proceeds minus the five percent (5%)
underwriting discount and minus $160,000 in offering expenses.
|
|
Assumed
Offering
Price
|
75% of
Assumed
Offering
Price
|
50% of
Assumed
Offering
Price
|
25% of
Assumed
Offering
Price
|
|||||||||
Purchase
Price:
|
$
|
5.01
|
$
|
3.76
|
$
|
2.51
|
$
|
1.26
|
|||||
No. of
Shares(1):
|
674,380
|
1,006,163
|
1,668,408
|
3,644,630
|
|||||||||
Total
Outstanding(4)(5):
|
3,459,480
|
(2)
|
3,791,263
|
(2)
|
4,453,508
|
(2)
|
6,429,730
|
(2)(3)
|
|||||
Percent
Outstanding(6):
|
19.49
|
%
|
26.54
|
%
|
37.47
|
%
|
56.68
|
%
|
|||||
Gross
Proceeds to CTI(7):
|
5,000,000
|
5,000,000
|
5,000,000
|
5,000,000
|
|||||||||
Net
Cash to CTI(8):
|
$
|
4,590,000
|
$
|
4,590,000
|
$
|
4,590,000
|
$
|
4,590,000
|
(1) |
Represents
the total number of shares of common stock which would need to
be issued
at the stated purchase price to receive gross proceeds of $5,000,000,
minus the number of shares previously issued to Cornell Capital
since the
effectiveness of this offering. We registered 400,000 shares of
common
stock under this Prospectus pursuant to the SEDA, 76,376 of which
remain
available for issuance to Cornell Capital. We will need to register
additional shares of common stock to obtain the entire $5 million
available under the SEDA at these stated purchase
prices.
|
(2) |
The
Company and Cornell Capital have agreed that the Company will not
sell to
Cornell Capital in excess of 400,000 shares unless the Company shall
have
obtained shareholder approval for such
shares.
|
(3) |
At
the stated purchase price and based on the limited number of available
authorized shares of common stock, CTI would need to obtain shareholder
approval to increase the authorized shares of common stock to obtain
the
entire $5 million available under the
SEDA.
|
(4) |
Represents
the total number of shares of common stock outstanding at May 30,
2008
after the issuance of the shares to Cornell Capital under the SEDA
set
forth in footnote (1) above.
|
(5) |
CTI’s
Certificate of Incorporation authorizes the issuance of 5,000,000
shares
of common stock.
|
(6) |
Represents
the shares of common stock to be issued as a percentage of the
total
number shares outstanding at May 30,
2008.
|
(7) |
If
CTI drew down on the entire $5 million available under the SEDA,
Cornell
Capital would receive an aggregate underwriting discount equal
to
$250,000. As of of the date of this Prospectus, the remaining balance
on
the $5 million available under the SEDA is $3.42 million which
is used in
the calculations in the chart
above.
|
(8) |
Net
cash equals the gross proceeds minus the five percent (5%)
underwriting discount and minus $160,000 in offering
expenses.
|
$
|
382,644
|
$
|
2,000,000
|
3,508,000
|
(1)
|
|||||
Net
proceeds(2)
|
$
|
203,512
|
$
|
1,659,200
|
$
|
3,172,600
|
||||
Number
of shares to be issued pursuant to the SEDA at a price of $5.01
per share
(recent price at May 30 ,2008)
|
76,376
|
(3)
|
399,202
|
(4)
|
700,200
|
(4)
|
USE
OF PROCEEDS: (NET)
|
AMOUNT
|
AMOUNT
|
AMOUNT
|
|||||||
General
Working Capital
|
$ |
$
|
1,059,200
|
$
|
1,672,600
|
|||||
Capital
Investments
|
$
|
203,512
|
$
|
600,000
|
$
|
1,500,000
|
||||
Total
|
$
|
203,512
|
$
|
1,659,200
|
$
|
3,172,600
|
(1) |
This
figure represents the remaining gross proceeds available under
the SEDA as
of the date of this Prospectus. CTI would need to register 598,004
additional shares of common stock to access this amount of gross
proceeds
under the Standby Equity Distribution Agreement at an assumed offering
price of $5.01.
|
(2) |
Net
proceeds equals gross proceeds minus the five percent (5%) underwriting
discount and minus $160,000 in offering
expenses.
|
(3) |
Represents
the balance of shares registered hereunder that have not yet been
issued
to Cornell Capital.
|
(4) |
The
Company would need to register additional shares to receive the
stated
gross proceeds listed hereunder at a recent price of $5.01 per
share.
|
$
|
5.01
|
||||||
Net
tangible book value per share before this offering
|
$
|
1.50
|
|
||||
Increase
attributable to new investors
|
$
|
1.59
|
|
||||
Net
tangible book value per share after this offering
|
|
$
|
3.09
|
||||
Dilution
per share to new shareholders
|
|
$
|
1.92
|
ASSUMED
OFFERING
PRICE
|
NO.
OF SHARES
TO
BE ISSUED(1)
|
DILUTION
PER
SHARE
TO
NEW
INVESTORS
|
||||||
$
|
5.01
|
76,376
|
$
|
1.92
|
||||
$
|
3.76
|
76,376
|
$
|
0.66
|
||||
$
|
2.51
|
76,376
|
$
|
(0.59
|
)
|
|||
$
|
1.26
|
76,376
|
$
|
(1.84
|
)
|
(1) |
This
represents the maximum number of shares of common stock that are
being
registered pursuant to the Standby Equity Distribution Agreement
at this
time.
|
Three Months Ended
|
|||||||||||||
March 31, 2008
|
March 31, 2007
|
||||||||||||
$
|
% of
|
$
|
% of
|
||||||||||
Product Category
|
(000) Omitted
|
Net Sales
|
(000) Omitted
|
Net Sales
|
|||||||||
Metalized
Balloons
|
4,599
|
43
|
%
|
3,999
|
48
|
%
|
|||||||
Films
|
1,943
|
18
|
%
|
1,826
|
22
|
%
|
|||||||
Pouches
|
2,447
|
23
|
%
|
665
|
8
|
%
|
|||||||
Latex
Balloons
|
1,502
|
14
|
%
|
1,516
|
19
|
%
|
|||||||
Helium/Other
|
244
|
2
|
%
|
273
|
3
|
%
|
Three Months Ended
|
|||||||
% of Net Sales
|
|||||||
March 31, 2008
|
March 31,2007
|
||||||
Top
3 customers
|
44.1
|
%
|
35.9
|
%
|
|||
Top
10 Customers
|
73.0
|
%
|
64.1
|
%
|
Year ended December 31,
|
||||||||||