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                    U. S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                   FORM 10-KSB

    ANNUAL REPORT UNDER SECTION 13 OF 15(D) OF THE SECURITIES ACT OF 1934 FOR
                     THE FISCAL YEAR ENDED MARCH 31, 1999.

COMMISSION FILE NO. 0-21061.

                          LAMINATING TECHNOLOGIES, INC.
              (Exact name of small business issuer in its charter)

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<S>                                                                             <C>
Delaware                                                                        58-2044990
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(State or other jurisdiction of                                                 (I.R.S. Employer
incorporation or organization)                                                  identification No.)
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                     1160 Hightower Trail, Atlanta, GA 30350
                     ---------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (770) 518-6010
                                 --------------
                           (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:

Title of Class
Common Stock, $.01 par value.
Redeemable Class A Warrants
Redeemable Class B Warrants
Units consisting of Common Stock, $.01 par value, Redeemable Class A Warrants
and Redeemable Class B Warrants.

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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  X   No
    ___     ___

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

The issuer's revenues for the fiscal year ended March 31, 1999 were $1,877,703.

The aggregate market value of the voting stock (which consists solely of shares
of Common Stock) held by non-affiliates of the issuer as of April 30, 1999,
computed by reference to the price at which the registrant's Common Stock as
quoted by Nasdaq SmallCap Market ("Nasdaq") was sold on such date, was
approximately $987,546.

The number of shares of the issuer's Common Stock outstanding as of April 30,
1999 was 3,185,100.

Transitional Small Business Disclosure Format (check one)  Yes     No  X
                                                               ___    ___


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                                     PART I

                           FORWARD-LOOKING STATEMENTS


         This Annual Report on Form 10-KSB contains certain "forward-looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995, which provides a new "safe harbor" for these types of statements. To the
extent statements in this Annual Report involve, without limitation, product
development and introduction plans, the Company's expectations for growth,
estimates of future revenue, expenses, profit, cash flow, balance sheet items
sell-through or backlog, forecasts of demand or market trends for the Company's
various product categories and for the industries in which the Company operates
or any other guidance on future periods, these statements are forward-looking
statements. These risks and uncertainties include those identified by the
Company under the caption "Risk Factors" in Item 1, and other risks identified
from time to time in the Company's filings with the Securities and Exchange
Commission, press releases and other communications. The Company assumes no
obligation to update forward-looking statements.

ITEM 1. DESCRIPTION OF BUSINESS

PRELIMINARY NOTE

         As discussed in its definitive proxy statement filed on May 28, 1999,
with the Securities & Exchange Commission, Laminating Technologies, Inc. (the
"Company") intends to sell all of its operating assets to another corporation.
After this sale the Company will have no further operating business and the
Company's management and Board of Directors intend to concentrate their efforts
on exploring Business Combination opportunities. The description of the
Company's business set forth below provides a discussion of the Company's
business to date, but is not meant to imply that the Company will proceed with
such operations and strategy if the proposed sale is not approved by
stockholders and completed. In the event that the proposed sale is not approved
by stockholders or not completed for any reason, the Company will attempt to
find another buyer for the operating assets, seek a merger or similar
combination transaction, or find additional sources of financing to allow it to
continue operations. There can be no assurance that any of these alternatives
would be available to the Company on desirable terms, if at all.

OVERVIEW

         Laminating Technologies, Inc. was incorporated in Georgia, in March
1993, as New Cooler Corp., and subsequently changed its name to Laminating
Technologies, Inc. In April 1996, the Company was merged into Laminating Merger
Corporation, a Delaware corporation, which changed its name to Laminating
Technologies, Inc.

         The Company is a development stage company which has been organized to
research, develop, design and market value-added packaging and specialty display
products which are manufactured using the Company's proprietary processing
method ("LTI Processed(R)"). LTI Processed(R) is a patented process to laminate
polyester film onto single thickness paper (linerboard), to corrugate the
laminated paper and film, and to pre-print or post-print using multiple colors.
The result is a packaging material that will not delaminate over time and can
withstand baking and freezing.

         The LTI Processed(R) process can be utilized to produce a wide variety
of packaging products and specialty displays. To date, the Company has produced
a number of commercial products, including bakery dessert discs, pads and trays,
catering HOT `N COOLER(R) containers, frozen food shippers, point of purchase
displays, pizza delivery boxes and medical shippers. The Company believes that
these products, together with other potential LTI Processed(R) products, are
capable of improving upon existing packaging products by reducing or eliminating
certain limitations associated with such products. For example, LTI Processed(R)
products may be leakproof, resistant to a variety of solvent and petroleum-based



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chemicals, recyclable, stronger, and have higher bursting strength than
conventional corrugated products. The Company also believes that the LTI
Processed(R) method may permit higher quality printing and results in more
attractive packaging than corrugated materials printed with traditional printing
processes. Such aesthetic qualities have become more important in recent years
as retailers have significantly increased the extent to which they display and
sell products in the same packaging in which they were shipped.

         In addition, while LTI Processed(R) material is more costly to produce
than traditional corrugated board, it is generally less expensive than certain
other non-corrugated packaging products, including metal and plastic. Moreover,
because LTI Processed(R) containers often can be reused and can be collapsed in
the store pending reuse (thereby requiring less storage space than containers
made from materials such as styrofoam, metal and plastic), they may be more
cost-effective than other packaging materials, including traditional corrugated
materials. Based on these potential performance advantages and cost savings, the
Company believes that LTI Processed(R) packaging materials may be preferred to
many packaging products currently marketed by others.

PRODUCTS

         On April 17, 1997, the Company announced "BAKE 'N SHIP(TM)", a new
product line, which is available for sale to the baking industry. BAKE 'N
SHIP(TM) utilizes the Company's patented and proprietary process, resulting in a
new material which is ovenable and freezable with the strength and structure of
corrugated material. This is the Company's first commercial product. The new
product line can streamline the process by which bakery products are produced by
allowing the baker to bake, freeze, ship and display in one package. In
addition, certain versions of the product line provide an appealing presentation
media for baked goods.

         In February 1998, the Company introduced its new "HOT 'N COOLER(R)"
line of water-tight containers that keep food and beverages hot or cold,
depending upon the application. Research conducted by an independent laboratory
has proven that HOT 'N COOLER(R) cools down faster (cans and ice) than the
traditional hard plastic, soft bag or styrofoam coolers. Additionally, during
testing, HOT 'N COOLER(R) has proven to hold heat longer for food caterers of
beans, ribs, chicken, etc. HOT 'N COOLER(R) products are available through our
existing master distribution network.

STRATEGY

         The Company's strategy to date has focused on: (i) designing,
developing and marketing value-added, niche LTI Processed(R) products both
directly and indirectly to focused market segments, (ii) leveraging these
developed markets to and through vertically integrated forest product companies
creating strategic alliances, and (iii) obtaining license agreements and/or
royalty arrangements favorable to the Company expanding both the uses and volume
for LTI Processed(R) products.

               As discussed elsewhere in this annual report, after the
completion of the proposed sale, the Company will have no further operating
business and the Company's management and Board of Directors intend to
concentrate their efforts on exploring business combination opportunities. The
Board of Directors has determined at this time not to liquidate the Company or
otherwise distribute any of its remaining assets, including any of the proceeds
of the sale to the Company's stockholders through a liquidation, special
dividend, stock repurchase or similar device. Rather than dissolve the Company,
the Board has determined to maintain the Company as a public "shell" corporation
which will seek suitable business combination opportunities. The Board believes
that a business combination with an operating company has the potential to
create a greater value for the Company's stockholders than a liquidation or
similar distribution.

INDUSTRY BACKGROUND

         The corrugated packaging industry is divided into three basic groups:
integrated converters, non-integrated converters and sheet plants. Integrated
converters are the largest manufacturers, grow and



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harvest their own timber and process it for high volume into large, pre-sized
linerboard rolls in various basic grades. Linerboard produced for in-house
corrugation is then moved to corrugating lines where it is processed, cut and
printed if desired. Integrated converters are extremely competitive and focus
primarily on high speed, high volume manufacture of commodity-type paper and
packaging products with low profit margins. Accordingly, they generally avoid
production of value-added products which typically require costlier materials,
more manual labor, interruptions in production and have shorter manufacturing
runs. Integrated converters have the advantage of being largely self-sufficient
for supplies of raw materials and can guarantee continuity of production, thus
competing with value-added products largely by providing basic corrugated
packaging at low prices.

         Non-integrated corrugating converters do not produce their own
linerboard but purchase linerboard roll-stock and corrugate it into sheets from
which finished packaging and other products are produced, either by them or by
sheet plants. Non-integrated converters generally compete on a smaller scale,
are regional in scope, focus their operations on shorter runs and produce more
value-added products than integrated converters.

         Sheet plants do not produce or corrugate rolls of linerboard but rather
purchase finished corrugated sheets from converters and then design, cut,
customize and process these sheets into finished packaging, displays and other
specialty items, including post-corrugation laminated products such as
point-of-purchase displays. Sheet plants generally market to local or regional
end users who require higher cost, special design or value-added packaging and
have shorter run needs.

PRODUCT BACKGROUND

         Since the late 1960s, the corrugating industry has focused its
technological research and development largely on generating faster and more
efficient production of basic corrugated products through the use of high speed
corrugation, die-cutting and processing equipment designed to reduce labor
costs. Few advances have been made in the design or construction of the actual
corrugated packaging materials. The Company believes that there is a market for
products with physical properties such as insulation, improved strength,
resistance to chafing of the package surface, reduced abrasion of packaged
products, resistance to water and other liquids and improved graphics, print
resolution and gloss finishes. However, although film-on-film and film-on-paper
laminates exist for items such as snack-food bags and specialty products, the
Company believes that there currently exists no other film laminates that can
withstand the heat, pressure and stress of corrugation.

         There currently exist certain alternative methods for producing
value-added corrugated products. For example, wax and other chemical coatings
allow corrugated board to be water resistant and scuff and abrasion resistant.
However, wax and chemical coatings are often absorbed by the linerboard over
time, thereby affecting its structural integrity. Increased bursting strength
can be achieved by increasing the weight of the linerboard or through "double
wall" or "triple wall" construction in which two or three layers of corrugating
"flutes" are sandwiched between layers of linerboard, creating bulkier material
which is difficult to bend. To the extent that packaging is required which
exceeds the capabilities of traditional corrugated boards, other materials such
as styrofoam, metal and plastic can be used. However, in addition to limited
physical advantages, many currently available value-added corrugated products
are often not purchased by national end users because they are typically
manufactured by non-integrated converters whose focus is more regional.

         The most advanced printing method currently available for high volume
production of corrugated material is pre-printing on linerboard before
corrugating. Pre-printed linerboard is produced in roll form and then corrugated
into sheets. This type of printing has certain problems associated with it such
as chafing of the exposed printed surface and cracking along the "score line" (a
crease placed into a product to allow easy bending). Additionally, because the
process entails printing of a porous, exposed surface, it requires more ink to
be used and thus allows somewhat limited graphics quality and gloss
capabilities. Pre-printing on linerboard also requires that higher quality, and
therefore more expensive, linerboard be used.



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         An alternative printing method, litho-laminating, involves the
lamination of lithographically printed paper (lithographic printing produces a
higher quality image and is commonly referred to as offset printing) onto
already corrugated rigid sheets. Both the lithographic printing and the handling
of the rigid corrugated sheets are relatively slow and labor intensive and thus
more costly, but are generally required for items which demand the most advanced
graphics available such as point-of-purchase displays. Litho-laminated products
also suffer from the problems of chafing of the printed surface and cracking
along the score lines because the printed surface is exposed.

LTI PROCESSED(R)

         The Company believes that the application of the LTI Processed(R)
method, which is a patented and proprietary process involving the lamination of
polyester film onto linerboard before corrugation, results in a packaging and
display material that is physically superior, more attractive and potentially
more cost-effective than some traditional corrugated products and certain
non-corrugated packaging products, including metal and plastic. The LTI
Processed(R) material is laminated to the linerboard prior to corrugation.

         The corrugating process entails using steam, heat and pressure to mold
paper into the interior flutes of the corrugated board and these flutes are then
sandwiched between two layers of linerboard using a starch bonding agent and the
further application of heat and pressure. The stress inherent in the corrugating
process can cause improperly laminated film to distort, shrink, melt, or
delaminate over time and can cause improper bonding agents to bubble or
crystallize. The Company believes that the LTI Processed(R) method avoids these
problems by utilizing a proprietary combination or combinations of film,
linerboard and polymer bonding agents and by laminating using proprietary
laminating techniques. The Company believes that independent companies
possessing the proper machinery can produce LTI Processed(R) products with
little or no modification of existing equipment and with only minor interruption
in production and thus with minimal added processing cost. The resulting
laminate can then be corrugated using traditional methods and virtually no
modification of existing machinery, thereby permitting high volume production of
LTI Processed(R) corrugated material.

         The Company believes that the LTI Processed(R) laminate provides a
protective barrier allowing corrugated board, in the right configuration, to be
leakproof and resistant to a variety of petroleum-based products and other
chemicals for extended periods of time. The laminate allows the board to have a
higher bursting strength (bursting strength refers to the ability of the board
surface to withstand pressure before tearing) than traditional corrugated board.
LTI Processed(R) materials may also be recyclable, a significant advantage over
styrofoam, which may pose certain environmental hazards and has been restricted
in certain areas.

         The Company believes that the LTI Processed(R) method can also
significantly improve on the ability to print corrugated board, especially for
high volume production orders. High volume printing of LTI Processed(R)
materials can be done in one of two ways, either by reverse-printing the
polyester film before laminating and corrugating or by printing onto linerboard
before laminating and corrugating. Both of these methods afford higher quality,
more durable graphics than is possible on traditional corrugated material while
maintaining the economies of scale not possible with litho-lamination.

         Reverse printing the polyester film ("reverse printing") before
laminating produces the highest quality image because the smooth surface of the
film allows extremely detailed, high resolution printing using minimal
quantities of ink. Laminating polyester film onto pre-printed linerboard
("pre-printing") also allows high quality, high resolution and more detailed
images because the layer of film protects the printed surface. Pre-printing is
used when the width of the product to be printed exceeds the width of film
printers, which are generally used for items such as snack-food bags and are
generally not designed for larger dimension printing. Both of these methods have
high gloss capabilities and eliminate the chafing and cracking problems
associated with traditional printing methods on corrugated material because the
printed surface is protected by the external layer of film. These processes may
reduce the cost of high quality printing on corrugated products by effectively
integrating printing into the corrugator's high-speed,



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high-volume production lines. Moreover, in either case, there is no need for the
corrugator to utilize quality linerboard as is the case with traditional
corrugated printing processes.


PRODUCT DEVELOPMENT

         The Company believes that the LTI Processed(R) method can be utilized
to produce a wide variety of packaging products and specialty displays. For
example, the Company believes that LTI Processed(R) may be utilized to produce
reusable containers for the large scale delivery of cold, frozen and fresh food
which is now frequently shipped in single-use cardboard boxes, as well as for
packaging of specialty and mail-order fresh foods, replacing bulky styrofoam and
plastic containers which are expensive to produce and ship. The Company believes
LTI Processed(R) products can be used as an alternative to styrofoam coolers and
it has produced waterproof, reusable, collapsible and printable beer, wine and
soft drink coolers and containers. The Company has also produced catering and
pizza delivery boxes and believes that LTI Processed(R) can produce improved
alternatives to corrugated products currently used in these industries. LTI
Processed(R) products may also have applications for the shipment of items with
delicate finishes and where the use of styrofoam has been curtailed (for
example, in the case of products shipped to the European Union). LTI
Processed(R) products may also be employed in the medical industry for packaging
difficult to handle and contaminated items and for containers for paints,
solvents and chemicals which are currently stored in metal cans.

         The Company had targeted the prepared dessert segment of the bakery
industry as an initial market and developed a line of LTI Processed(R) bakery
products for institutional baking of cakes, cheese cakes, brownies, cobblers and
strudel products, that are physically superior and more cost effective than
alternative products currently used in the industry. The Company continues to
design, develop and test alternative packaging designs and products targeted at
other industries. Because the exact specifications of the LTI Processed(R)
material can vary significantly depending on the use to which the product is
put, the Company must continually test sample products designed for specific end
use applications.

         During the last two fiscal years ending March 31, 1999 and 1998, the
Company has spent approximately $463,000 and $543,000, respectively, for
research and development expenses.

SALES AND MARKETING

         The Company's sales force currently consists of two salespersons and a
national master distributor. The Company has focused directly on large volume
users with its sales force and through brokers and distributors for products
better suited to fit these channels. The Company has also utilized the services
of independent sales representatives. See "--Employees". The sales force is
under the direction of J. Scott Stewart, Senior Vice President of
Marketing/Sales.

         The Company believes that much of the corrugated packaging industry is
characterized by long-standing business relationships and single source
purchasing (bundling) between manufacturers and end users. In addition,
potential customers currently utilizing non-corrugated packaging products must
be convinced of the relative advantages of LTI Processed(R) products. As a
result, the Company may encounter significant resistance in its marketing
efforts and expects that it will be required to some extent to educate the
market regarding LTI Processed(R) products. Moreover, the Company has spent
significantly on trade shows, sample kits and prototypes which activities have
had an adverse effect on the Company's results of operations. However, the
Company believes this kind of market development activity is a requirement to
help educate the market and in most cases a necessity prior to consummating a
sale.

MANUFACTURING

         The Company has not directly manufactured either LTI Processed(R)
roll-stock or finished products. Instead, the Company has contracted with
manufacturers to produce its products. LTI Processed(R) polyester film can be
laminated either on laminating machines which are currently used largely for
film-on-film lamination, or on coating machines which currently coat single-ply
cardboard



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with polyethylene and other coatings for finishes such as those on cereal boxes.
The Company believes that, with the proper direction by trained personnel,
independent companies possessing the proper laminating and coating machinery can
produce LTI Processed(R) material with little or no modification of existing
equipment and with only minor interruption in production and thus with minimal
added cost. The Company believes that there are a sufficient number of
laminators and coaters both locally and nationally to fill the Company's
production needs. The Company has entered into a formal arrangement with Ludlow
Corporation, a laminator and coater, to provide its products to Company
designated corrugators and converters. The Company has out-sourced the
corrugation of LTI Processed(R) roll-stock with Jet Corr, Inc., a corrugator, to
provide for the corrugation of LTI Processed(R) roll-stock and such production
is currently commercialized. Through the use of a laminator, a corrugator and a
converter, the Company is capable of manufacturing its products for the baking
industry (BAKE 'N SHIP(TM)) in commercially viable quantities.

COMPETITION

         Competition in the corrugated and packaging industries is intense and
based significantly on price. Moreover, certain aspects of the Company's
business, including printing, are characterized by rapidly evolving technology
that could result in the technological obsolescence of processes utilized by the
Company. The Company competes with many corrugating firms and manufacturers of
other packaging products, including those made of styrofoam, metal and plastic.
Most of the Company's competitors have substantially greater financial,
technical and human resources than the Company and may be better equipped to
develop, manufacture and market products. These companies also compete with the
Company in recruiting and retaining highly qualified personnel and consultants.

         Additionally, there are both corrugated and other packaging and display
materials available which can provide some or all of the physical
characteristics of LTI Processed(R) products as well as high quality aesthetics
and which directly compete with the Company's products. Major corrugating and
integrated converters produce large quantities of corrugated products with wax
and other coatings which are water resistant and can be used, for example, to
pack wet and frozen foods for extended periods and to reduce abrasion of items
with delicate finishes. The Company has faced intense competition from these
manufacturers to the extent that these products present viable alternatives to
LTI Processed(R) products. These products remain attractive to many end users as
they can be lower priced and end users will not have to incur the potential cost
of interrupting product lines and supply sources to accommodate different
packaging from a new company. Additionally, the Company has faced competition
for non-integrated converters who supply corrugated products that are laminated
with high quality, lithographically printed paper. While the Company believes
that these products do not have the physical properties of LTI Processed(R) and
offer little price advantage over LTI Processed(R), they effectively compete
with the Company's products in the market for quality printed products.

         Competition also exists with respect to markets for other forms of
value-added packaging, including products such as styrofoam, metal and plastic.
The physical properties and performance of these other materials have been long
established, end users of these products are accustomed to using these
materials, and manufacturers have massive national and international production
and marketing efforts as well as sophisticated and well developed product lines.

PATENTS AND PROPRIETARY RIGHTS

         The Company's control of the process will depend in part on its ability
to obtain patent protection for its products, both in the United States and
abroad. On December 9, 1988, Michael Olvey, Sr., the inventor of the LTI
Processed(R) method and a founder and former President of the Company, filed a
patent application with the U.S. Patent and Trademark Office (the "U.S. Patent
Office") covering the Company's LTI Processed(R) technology. On March 15, 1990,
the U.S. Patent Office rejected claims of the Company's patent application as
being too broad in light of prior art. On April 19, 1993, Mr. Olvey assigned the
rights to this patent application to the Company. The Company submitted further
modifications of its original application and was granted U.S. Patent No.
5,772,819 on June 30, 1998 for the LTI Processed(R) method. Additionally, U.S.
Patent No. 5,853,121 was granted to the Company on December 29, 1998 for



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the HOT'N COOLER(R) tent top design. The Company also submitted a patent
application for its tray erector on March 1, 1999 but has not yet received a
patent for this product.

         There can be no assurance that any patent applications filed by or on
behalf of the Company will result in patents being issued, that patents issued
to the Company will not be challenged, invalidated or circumvented, or that the
rights granted thereunder will provide any significant competitive advantage to
the Company. Furthermore, there can be no assurance that others have not
independently developed, or will not independently develop, similar products or
technologies or will not design around any of the Company's patents.

         The Company also relies on trade secret protection for its confidential
and proprietary information. However, trade secrets are difficult to protect and
there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology, or that
the Company can meaningfully protect its rights to patented and unpatented trade
secrets.

         The Company has protected its proprietary technology through the use of
non-disclosure agreements with the laminators, corrugators, converters and
printers and will do so with any suppliers with which it may establish strategic
alliances and production relationships. The Company also requires that certain
of its employees and consultants execute a confidentiality agreement upon the
commencement of an employment or consulting relationship with the Company. The
agreements generally provide that trade secrets and all inventions conceived by
the individual and all confidential information developed or made known to the
individual during the term of the relationship shall be the exclusive property
of the Company and shall be kept confidential and not disclosed to third parties
except in specified circumstances. There can be no assurance, however, that
these agreements will provide meaningful protection for the Company's
proprietary information in the event of unauthorized use or disclosure of such
information.

SUPPLIERS

         The Company is dependent on the suppliers of the raw materials used to
produce LTI Processed(R) products, including polyester film and linerboard. The
corrugating industry periodically suffers shortages of linerboard. These
shortages more seriously affect non-vertically integrated corrugating converters
(those who do not own their own timber and produce their own roll-stock) by
raising prices and forcing customers of corrugated board to purchase from
integrated converters. To the extent the Company intends to utilize
non-integrated converters for the production of LTI Processed(R) packaging, a
shortage-induced price increase could raise the price of such LTI Processed(R)
materials beyond the value margin, causing end users to seek integrated
suppliers which may not use the Company's products. The Company has relied upon
Ludlow Corporation as a principal supplier of linerboard. Additionally, the
Company has entered into contracts with Jet Corr, Inc. and Packaging-Atlanta
Corporation to corrugate and convert, respectively, the Company's integrated
products.

GOVERNMENT REGULATION

         To the extent that LTI Processed(R) is used in the food service and
packaging industries, the Company is required to ensure that its products meet
federal Food and Drug Administration (the "FDA") regulations regarding materials
used in contact with food. Polyester film used by the Company has received FDA
approval for contact with food. The Company believes that both polyester film
and the bonding agents used in LTI Processed(R) products are in compliance with
approved food additive regulations permitting the types of food contact use
contemplated by the Company. However, there can be no assurance that the
Company's use of the materials included in its products will not require
separate FDA approval. Obtaining FDA approval has historically been a costly and
time-consuming process. The Company may also need to seek regulatory approval
from foreign governments for the use of the LTI Processed(R) products shipped to
those countries. The failure to obtain any required regulatory approvals could
have a material adverse effect on the Company. To date the Company has not
incurred substantial expenses to comply with environmental laws.



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EMPLOYEES

         The Company currently has seven full-time employees and one part-time
employee. The Company also utilizes the services of independent sales
representatives. None of the Company's employees is represented by a labor union
and the Company believes its relations with its employees to be satisfactory. On
April 1, 1997, the Company placed its employees with Paradyme, a Professional
Employer Organization. Under terms of the arrangement with Paradyme, the
Company's employees became employees of Paradyme, entitling the employees to
obtain superior benefits that the Company previously could not offer to its
employees. While the Company must pay for the payroll cost of the employees, and
a fee for this service, it avoids the overhead and additional administrative
costs typically associated with these benefits.

ITEM 2. PROPERTIES

         The Company currently leases approximately 5,000 square feet of office
space in Atlanta, Georgia for its executive offices pursuant to a month-to-month
agreement (which commenced as a two-year lease on January 1, 1997) which
provides for a monthly rent of $4,792.

         The Company also currently leases approximately 28,000 square feet of
warehouse space in Canton, Georgia. This is also a month-to-month agreement
(which commenced as a one-year lease on January 1, 1998) which provides for a
monthly rent of $5,250.

ITEM 3. LEGAL PROCEEDINGS

         The Company is not involved in any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of shareholders during the fourth
quarter of the fiscal year ended March 31, 1999.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         A.       MARKET INFORMATION

               LTI's Common Stock, Class A Warrants and Class B Warrants are
traded on the OTC Bulletin Board under the symbols, "LAMT", "LAMTW" and "LAMTZ",
respectively. The Company's securities were previously traded on the Nasdaq
SmallCap Market under the same symbols prior to their delisting due to a failure
to meet certain Nasdaq listing requirements. The Company's securties were
delisted on the following dates: Common Stock -- December 17, 1998; Class A
Warrants -- December 17, 1998; and Class B Warrants -- August 12, 1998. LTI
decided to delist its Units, which were reported under the symbol "LAMTU" on the
Nasdaq SmallCap Market, on February 18, 1998.

               The following table sets forth the range of high and low bid
quotations or high and low sales prices for the Company's securities for each of
the periods indicated as reported by the OTC Bulletin Board and Nasdaq SmallCap
Market, as applicable. Bid quotations reflect interdealer prices without retail
markup, markdown or commission and may not necessarily represent actual
transactions. The Company's securities commenced trading on October 9, 1996.



                                       9
<PAGE>   10


<TABLE>
<CAPTION>
        Quarter Ended                                                            High          Low
        -------------                                                            ----          ---
        <S>                                                                    <C>          <C>
        Units      ("LAMTU")
        Commencing October 9, 1996 and ending December 31, 1996                $10.2500     $ 6.2500
        March 31, 1997                                                           9.6250       7.7500
        June 30, 1997                                                           11.5000       7.7500
        September 30, 1997                                                      14.0625      10.5000
        December 31, 1997                                                       13.5625       8.0000
        February 18, 1998                                                        9.2500       2.2500
</TABLE>

                  As discussed above, on February 18th, the Company's Units were
         delisted. The Company's Common Stock, Class A Warrants and Class B
         Warrants had previously traded separately and they continued to trade
         separately subsequently to the delisting of the Units.


<TABLE>
        <S>                                                                     <C>          <C>
        Common Stock         ("LAMT")
        Commencing October 9, 1996 and ending December 31, 1996                 $5.6250      $3.7500
        March 31, 1997                                                           5.6250       4.0000
        June 30, 1997                                                            6.3750       4.7500
        September 30, 1997                                                       7.0000       5.8750
        December 31, 1997                                                        6.6250       3.5000
        March 31, 1998                                                           4.2500        .6880
        June 30, 1998                                                            1.0000        .2500
        September 30, 1998                                                        .6870        .1875
        December 31, 1998                                                         .3437        .1875
        March 31, 1999                                                            .3125        .1875

        Class A Warrants        ("LAMTW")
        Commencing October 9, 1996 and ending December 31, 1996                 $2.7500      $2.0000
        March 31, 1997                                                           3.0000        .9375
        June 30, 1997                                                            3.0000        .9375
        September 30, 1997                                                       3.6250       2.3750
        December 31, 1997                                                        4.1875       2.0625
        March 31, 1998                                                           2.4380        .3440
        June 30, 1998                                                             .3450        .0310
        September 30, 1998                                                        .0620        .0310
        December 31, 1998                                                        .03125       .03125
        March 31, 1999                                                           .03125       .03125

        Class B Warrants        ("LAMTZ")
        Commencing October 9, 1996 and ending December 31, 1996                 $2.0000      $1.5000
        March 31, 1997                                                           1.3750       1.1250
        June 30, 1997                                                            2.3750       1.1250
        September 30, 1997                                                       2.8125       1.8125
        December 31, 1997                                                        2.8125       1.3125
        March 31, 1998                                                           1.4380        .1250
        June 30, 1998                                                             .1250       .03125
        September 30, 1998                                                       .03125       .03125
        December 31, 1998                                                        .03125       .03125
        March 31, 1999                                                           .03125       .03125
</TABLE>

         B.       HOLDERS

         The approximate number of record holders of shares of the Common Stock
of the Company outstanding as of May 24, 1999 was 46. Because many shares are
held by brokers and other institutions on behalf of shareholders, the Company is
unable to estimate the total number of shareholders represented by these record
holders.



                                       10
<PAGE>   11


         C.       DIVIDENDS

               The Company has never paid cash dividends on its Common Stock and
does not anticipate paying cash dividends in the foreseeable future. As
discussed above, the Company currently intends to retain the proceeds of the
Proposed Sale and will not pay out any dividend to stockholders in connection
therewith. The declaration and payment of future dividends, if any, will be at
the sole discretion of the Board of Directors and will depend upon factors
deemed relevant by the Board of Directors.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

GENERAL

         The Company is a development stage company organized to develop, design
and market value-added packaging and specialty display products. Since its
inception, the Company's efforts have been principally devoted to research,
development and design of products, marketing activities and raising capital.
The Company has had only limited sales and has incurred substantial operating
losses from these activities. The Company has only recently been experiencing
repeat orders from customers. Previously, the Company believed customers were
ordering primarily to evaluate the commercial potential of the Company's
products.

         As discussed elsewhere in this Annual Report and in the Company's
definitive proxy statement filed on May 28, 1999 with the Securities & Exchange
Commission, after the sale of its operating assets, the Company will have no
further operating business.

         The following discussion should be read in conjunction with the
Financial Statements and notes thereto included elsewhere in this Form 10-KSB.

RESULTS OF OPERATIONS

         Fiscal Years Ended March 31, 1998 and 1999. Net sales increased from
approximately $519,000 in the twelve months ended March 31, 1998 (fiscal 1998)
to $1,878,000 in the twelve months ended March 31, 1999 (fiscal 1999). In
addition to pursuing product sales, the Company continued to invest its
resources in developing its technology for commercialization during fiscal 1999.
Gross profit was approximately $118,000 in fiscal 1998 as compared to a gross
profit of $594,000 in fiscal 1999.

         Selling, general and administrative expenses increased by 15% from
approximately $1,154,000 in fiscal 1998 to approximately $1,335,000 in fiscal
1999. The increase is primarily attributable to additional costs in fiscal 1999
related to obtaining a patent and additional legal costs attributable to the
abandoned merger with Pen Interconnect, Inc.

         Research and development expense decreased by 15% from approximately
$543,000 in fiscal 1998 to approximately $463,000 in fiscal 1999. This decrease
is primarily due to much of the Company's product line moving from the research
and development stage in fiscal 1999 to the actual commercialization of the
products.

         Interest expense decreased by $1,000 from approximately $6,000 for
fiscal 1998 to approximately $5,000 for fiscal 1999. The decrease is due to the
reduction in the outstanding balance of a note payable.

         Investment income decreased from approximately $233,000 in fiscal 1998
to approximately $124,000 in fiscal 1999. This decrease is primarily due to the
amount of cash available for investing being greater in fiscal 1998 than in
fiscal 1999.

         Net loss decreased 28% from approximately $1,352,000, or $.49 per
share, in fiscal 1998 to approximately $967,000, or $.35 per share, in fiscal
1999, as a result of the foregoing factors.



                                       11
<PAGE>   12


LIQUIDITY AND CAPITAL RESOURCES

         Prior to the public stock offering, the Company funded its activities
through loans from principal stockholders and private placements of equity and
debt securities. On October 9, 1996, the Company sold 1,700,000 Units at $5 per
Unit in a public offering (See Notes to Consolidated Financial Statements). Each
Unit consists of one share of Common Stock, one Class A Warrant and one Class B
Warrant. On November 4, 1996 the underwriter exercised its over-allotment option
to purchase an additional 255,000 units at $5 per Unit. The initial public
offering resulted in total net proceeds to the Company of approximately
$7,988,000.

         The net proceeds were used to: (1) repay the bridge debt of $1,995,000
plus accrued interest, (2) pay the $150,000 accrued dividends on preferred
stock, (3) repay other existing debt and payables of approximately $320,000, and
(4) provide working capital for operations. Additional proceeds of the offering
have been used by the Company to implement its business plan, which has included
the development and testing of products utilizing the LTI Processed(R) method
and sales and marketing activities. At March 31, 1999, the Company had $1.9
million in cash and liquid investments. If the Company were to continue its
current operations, it would expect to continue to incur substantial research,
development and marketing costs in the future. In addition, if the Company were
to continue its current operations, it would also expect that general and
administrative costs necessary to support manufacturing and the expansion of a
marketing and sales organization will increase in the future. Accordingly, the
Company would expect to continue to incur operating losses for the foreseeable
future if it continued its current operations.

         Certain common stockholders have agreed to place 410,000 shares of
Common Stock of the Company into escrow ("Escrow Shares"). The Escrow Shares
will be released from escrow only if certain financial conditions or market
prices for the Common Stock have been met or achieved. As of the date of this
annual report, no Escrow Shares have been released from escrow. In the event of
the release of the Escrow Shares, the Company will recognize during the period
in which the earnings thresholds are probable of being met or such stock price
levels achieved, a substantial non-cash charge to earnings (not deductible for
income tax purposes) equal to the fair market value of such shares on the date
of their release, which would have the effect of significantly increasing the
Company's loss or reducing or eliminating earnings, if any, at such time. There
can be no assurance that the Company will attain the targets which would enable
the Escrow Shares to be released from escrow. The recognition of the potential
charges to income described above may have a depressive effect on the market
price of the Company's securities.

         At March 31, 1999 the Company had net operating loss carry-forwards for
Federal Income Tax purposes of approximately $ 8,353,000. The net operating loss
and credit carry-forwards expire from March, 2009 through March, 2019.
Additionally, the Company's ability to utilize its net operating loss
carry-forwards may be subject to annual limitations pursuant to Section 382 of
the Internal Revenue Code.

INFLATION

         The Company's financial statements are prepared in accordance with
historical accounting systems, and therefore, do not reflect the effect of
inflation. The impact of changing prices on the financial statements is not
considered significant.

YEAR 2000

         The Company believes that Year 2000 issues will not have a material
effect on its business. The Company uses packaged software for its accounting
and administrative functions. The Company has contacted its software vendors and
received assurances that the software is Year 2000 compliant.

INFORMATION REQUIRED BY ITEM 701(F) OF REGULATION S-B

         Reference is made hereby to Form SR, which was filed by the Company on
         January 15, 1997. The following information is provided to update the
         information contained in said Form SR:



                                       12
<PAGE>   13


AMOUNT OF NET OFFERING PROCEEDS TO ISSUER USED FOR FOLLOWING PURPOSES:


<TABLE>
<CAPTION>
                                                      Direct or indirect payments to directors,       Direct or
                                                      officers, general partners of the issuer        indirect
                                                     or their associates; to persons owning ten      payments to
                                                       percent or more of any class of equity          others
                                                          securities of the issuer; and to
                                                              affiliates of the issuer
         <S>                                         <C>                                             <C>
         (01)     Construction of plant, building
                  and facilities

         (02)     Purchase and installation of                        $  5,897                       $  446,209
                  machinery and equipment

         (03)     Purchase of Real Estate

         (04)     Acquisition of other business(es)

         (05)     Repayment of Indebtedness                                                          $2,129,388

         (06)     Working Capital                                     $492,469                       $  835,083


         TEMPORARY INVESTMENT:

         (07)     Merrill Lynch                                                                      $1,874,855

         (08)     NationsBank Checking Account                                                       $   30,971

         (09)

         (10)


         OTHER PURPOSES:

         (11)     Preferred Stock Dividends                           $150,000

         (12)     Repayment of Trade Payable                          $ 96,770                       $   84,139
                  Outstanding at IPO Date

         (13)     Product Design and Development                      $125,813                       $  968,610

         (14)     Sales and Marketing                                 $250,708                       $  497,088
</TABLE>


         The use(s) of proceeds described above do not represent a material
         change in the use(s) of proceeds described in the applicable
         prospectus.

ITEM 7.  FINANCIAL STATEMENTS

         The Consolidated Financial Statements required by this Item are set
         forth at the pages indicated in Item 13(a) below.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         None




                                       13
<PAGE>   14


                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The names of the Directors and executive officers of the Company, their
ages and certain other information is set forth as follows:

<TABLE>
<CAPTION>
                    NAME                 AGE                              POSITION
                    ----                 ---                              --------
        <S>                              <C>      <C>
        Michael E. Noonan                 58      Chairman of the Board of Directors, President, Chief
                                                  Executive Officer and Director
        Robert L. Dover                   65      Senior Vice President - Marketing/Operations, Secretary
        J. Scott Stewart                  45      Senior Vice President - Marketing/Sales
        Donald L. Aldridge                41      Chief Financial Officer
        Ronald L. Christensen             61      Director
        Jerome I. Gellman                 72      Director
        William J. Warren                 60      Director
</TABLE>

         MICHAEL E. NOONAN was appointed Chairman of the Board, President and
Chief Executive Officer of the Company on February 1, 1996. From 1994 to
February 1, 1996, Mr. Noonan was self-employed as a business consultant. From
1989 to 1994, Mr. Noonan was the Chief Executive Officer, President and sole
shareholder of Winning Image, Inc., an apparel marketing and manufacturing firm
which was sold to Terry Manufacturing Company. From 1986 to 1989, Mr. Noonan was
a Senior Vice President of Domestic and North American Operations at the Mead
Packaging Division of Mead Corporation.

         ROBERT L. DOVER has been the Senior Vice President -
Marketing/Operations and Secretary of the Company since May 1996. Mr. Dover
served as Director of the Company from March 1996 to August 21, 1997. From May
1995 to May 1996, Mr. Dover was an independent consultant. From 1966 to April
1995, Mr. Dover was an executive of Mead Packaging Division of Mead Corporation
in Atlanta, Georgia working in the capacities of Director of Marketing and
Technological Planning, Environmental Technology, Marketing and Sales for the
Food Industry, Marketing for the Soft Drink Industry, Film Systems, Market
Research and Machinery Systems Development. Mr. Dover graduated with a Master's
of Science Degree in Industrial Management from the Georgia Institute of
Technology.

         J. SCOTT STEWART has been Senior Vice President - Marketing/Sales of
the Company since May 1996. From 1992 to 1996, Mr. Stewart was co-founder and a
sales representative for Simmons Survey, a company involved in leak detection
for underground fuel tanks. From 1981 to 1992, Mr. Stewart worked for the
Royston Division of AWH Corporation in Winston-Salem, North Carolina as a Vice
President of the Contract Business Division and of Corporate Marketing. Mr.
Stewart graduated with a Master's Degree in Business Administration from Emory
University in 1977, and with a Bachelor's of Science Degree in Industrial
Management from the Georgia Institute of Technology in 1975.

         DONALD L. ALDRIDGE has served as Chief Financial Officer of the Company
on a part-time basis since December of 1997, devoting approximately 40 percent
of his time to the Company. He is a Partner in Tatum CFO Partners, LLP, which
provides Chief Financial Officer expertise to both emerging growth companies and
larger corporations. Accordingly, Mr. Aldridge also serves as part-time Chief
Financial Officer for other clients. He has been a Partner with Tatum since
1993. Prior to Tatum, Mr. Aldridge served as the Chief Financial Officer of
Southern Services, Inc. from 1990 to 1992. Mr. Aldridge is a Certified Public
Accountant who practiced with Deloitte & Touche prior to his financial
experience in industry. Mr. Aldridge has a Master's Degree in Business
Administration from Virginia Tech and a Bachelor's of Science Degree in
Accounting from Bob Jones University.

         RONALD L. CHRISTENSEN has been a Director of the Company since March
1996. From 1993 to the present, Mr. Christensen has served as President and
Chief Executive Office of PrinTech Label Corporation, a printing and converting
firm. Since 1983 he has also served as President of Adrienne Associates, a
consulting services company to the printing and pressure sensitive materials
industry. Mr. Christensen graduated from Georgia Institute of Technology in 1960
with a Bachelor's Degree in Chemical Engineering.



                                       14
<PAGE>   15


         JEROME I. GELLMAN has been a Director of the Company since July 1996.
From 1988 to the present, Mr. Gellman has been counsel to the law firm of Cowan,
Liebowitz & Latman. Mr. Gellman has also served as a Director of Tyco Toys,
Inc., a publicly-traded toy company, from 1987 to 1997; Tyco Toys, Inc. merged
into Mattel, Inc. on March 31, 1997.

         WILLIAM J. WARREN has been a Director of the Company since March 1996.
Mr. Warren founded Mar-Lyn Container Corporation, a sheet converter, in 1967 and
was the President and majority shareholder of Mar-Lyn until the company was sold
in April 1997. Mr. Warren is now a management consultant for Lyn Marco. Mr.
Warren graduated from the University of California in 1961 with a Bachelor's
Degree in Industrial Management.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors and Executive Officers and the holders of ten
percent of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
equity securities of the Company. Based on the Company's review of copies of
such reports received by it, or written representations from reporting persons,
the Company believes that during the period from April 1, 1998 to March 31,
1999, its Officers and Directors filed all reports on a timely basis.


ITEM 10. EXECUTIVE COMPENSATION.

         The following table sets forth certain information covering the
compensation paid or accrued by the Company during the fiscal year indicated to
its President/Chief Executive Officer during the fiscal year ended March 31,
1999. No other executive officer received compensation, including salary and
bonus, in excess of $100,000 during the fiscal year ended March 31, 1999.


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                 ANNUAL          LONG TERM COMPENSATION
                                                              COMPENSATION               AWARDS
                                           FISCAL YEAR
                  NAME AND                    ENDED                               NUMBER OF SECURITIES
             PRINCIPAL POSITION              MARCH 31            SALARY            UNDERLYING OPTIONS
       <S>                                 <C>                <C>                <C>
       Michael E. Noonan                       1999             $144,000                    --
       Chairman of the Board,                  1998              144,000                91,319 (1)
       President, Chief Executive
       Officer and Director
</TABLE>

(1)      Consists of 91,319 shares issuable upon exercise of options granted to
         Mr. Noonan by Steve Gorlin.

         The following table sets forth the number of securities underlying
options, the exercise price and the expiration date for stock options granted to
the President/Chief Executive Officer during the fiscal year ended March 31,
1999.



                                       15
<PAGE>   16


                OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 1999
                                INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
                                      NUMBER OF           PERCENT OF TOTAL
                                     SECURITIES           OPTIONS GRANTED         EXERCISE
                                     UNDERLYING             TO EMPLOYEES           PRICE        EXPIRATION
                 NAME              OPTIONS GRANTED         IN FISCAL YEAR        ($/SHARE)         DATE
        <S>                        <C>                    <C>                    <C>            <C>
        Michael E. Noonan                --                      0%                  --             --
</TABLE>

         The following table sets forth the number of exercisable and
unexercisable options as of March 31, 1999, and the value of such options for
the President/Chief Executive Officer.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR END OPTIONS VALUES

<TABLE>
<CAPTION>
                                                             NUMBER OF SECURITIES           VALUE OF
                                                                  UNDERLYING               UNEXERCISED
                                                            UNEXERCISED OPTIONS AT        IN-THE-MONEY
                                                               FISCAL YEAR END          OPTIONS AT FY END
                                   SHARES
                                  ACQUIRED/     VALUE            EXERCISABLE/             EXERCISABLE/
                 NAME             EXERCISED    REALIZED         UNEXERCISABLE             UNEXERCISABLE
        <S>                       <C>          <C>          <C>                         <C>
        Michael E. Noonan            --           --              91,319/-0-                  $0/$0
</TABLE>


DIRECTOR'S COMPENSATION

         Non-employee Directors of the Company are entitled to compensation of
$500 for each Board of Directors meeting attended and are reimbursed for
expenses actually incurred in connection with such meeting. Directors are not
precluded from serving the Company in any other capacity and receiving
compensation therefor.

         In addition, Directors are entitled to receive Director Options
pursuant to the Company's 1996 Stock Option Plan (the "Plan"). The provisions of
the Plan provide for the automatic grant of non-qualified stock options to
purchase shares of Common Stock ("Director Options") to Directors of the Company
who are not employees or principal stockholders of the Company ("Eligible
Directors"). Eligible Directors of the Company were granted a Director Option to
purchase 10,000 shares of Common Stock on or about October 9, 1996 at a per
share exercise price equal to $5.00. Future Eligible Directors will be granted a
Director Option to purchase 10,000 shares of Common Stock on the date that such
person is first elected or appointed a Director. Further, commencing on the day
immediately following the date of the annual meeting of stockholders for the
Company's fiscal year ending March 31, 1997, each Eligible Director, other than
Directors who received an Initial Director Option since the last annual meeting,
will be granted a Director Option to purchase 1,000 shares of Common Stock
("Automatic Grant") on the day immediately following the date of each annual
meeting of stockholders, as long as such director is a member of the Board of
Directors. The exercise price for each share subject to a Director Option shall
be equal to the fair market value of the Common Stock on the date of grant,
except for Directors who receive incentive options and who own more than ten
percent of the voting power, in which case the exercise price shall be not less
than 110 percent of the fair market value on the date of grant. Director Options
are exercisable in four equal annual installments, commencing six months from
the date of grant. Director Options will expire the earlier of ten years after
the date of grant or ninety days after the termination of the Director's service
on the Board of Directors.

EMPLOYMENT AND CONSULTING AGREEMENTS

         In July 1996, the Company entered into a one-year employment agreement
with Michael E. Noonan, Chairman and Chief Executive Officer of the Company. The
agreement provides for an annual base salary of $144,000 per year and is
automatically renewable for successive one-year terms unless either party gives
six months' notice of termination to the other. The Company may terminate the
agreement without cause and, upon such termination, Mr. Noonan will be entitled
to receive his base salary for a period of one year (subject to a fifty percent
offset during the second six months for salary received from subsequent
employment). In addition, if the Company exercises its right not to renew the
agreement, Mr. Noonan



                                       16
<PAGE>   17


will be entitled to six months of severance pay. The agreement contains
confidentiality and non-competition provisions.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth, as of May 24, 1999, the number and
percentage of shares of Common Stock which, according to information available
to the Company, are beneficially owned by: (i) each person known by LTI to own
beneficially more than five percent of the outstanding Common Stock of LTI; (ii)
each director and named executive officer of LTI; and (iii) all executive
officers and directors of LTI as a group. Under rules adopted by the Securities
and Exchange Commission, a person is deemed to be a beneficial owner of common
stock with respect to which he has or shares voting power (which includes the
power to vote or to direct the voting of the security), or investment power
(which includes the power to dispose of, or to direct the disposition of, the
security). A person is also deemed to be the beneficial owner of shares with
respect to which he could obtain voting or investment power within 60 days of
May 24, 1999, such as upon the exercise of options or warrants.


<TABLE>
NAME AND ADDRESS(1)                                                 NO. OF SHARES(1)     PERCENTAGE
-------------------                                                 ----------------     ----------
<S>                                                                 <C>                  <C>
Michael E. Noonan ...........................................          116,271(2)            3.6%
Robert L. Dover .............................................           50,666(3)            1.6
J. Scott Stewart ............................................           50,666(3)            1.6
Ronald L. Christensen .......................................            8,000(4)              *
Jerome I. Gellman ...........................................            8,000(4)              *
William J. Warren ...........................................            8,000(4)              *
J. Morton Davis .............................................          319,465(5)            9.7
Donald B. Sallee ............................................          318,614(6)           10.0
Steve Gorlin ................................................          302,000(7)            9.2
Westlake Acquisition Corporation ............................          290,100(8)            9.1
Ruki Renov ..................................................          277,440(9)            8.0
Esther Stahler ..............................................          277,440(10)           8.0
All executive officers and directors as a group (6 persons)..          241,603(11)           7.1
</TABLE>
----------
       * Less than 1 percent

     (1)  Except as otherwise indicated, each of the parties listed above has
          sole voting and investment power over the shares owned. Except as
          otherwise indicated, the address of each stockholder is c/o Laminating
          Technologies, Inc., 1160 Hightower Trail, Atlanta, Georgia 30350-2910.

     (2)  Includes 91,319 shares issuable upon exercise of immediately
          exercisable options granted to Mr. Noonan by Steve Gorlin.

     (3)  Represents 50,666 immediately exercisable options to purchase Common
          Stock. Does not include 5,334 shares issuable upon exercise of options
          that are not exercisable within sixty days.

     (4)  As to each Director, includes 8,000 immediately exercisable options to
          purchase Common Stock. Does not include 3,000 shares (per Director)
          issuable upon exercise of options that are not exercisable within
          sixty days.

     (5)  Represents 52,360 shares underlying a Unit Purchase Option ("UPO") to
          purchase 13,090 Units owned by Mr. Davis, 52,360 shares underlying a
          UPO to purchase 13,090 Units owned by D. H. Blair Investment Banking
          Corp. and 214,745 shares owned by D. H. Blair Capital Corp. Mr. Davis
          is the Chairman of the Board and sole stockholder of D. H. Blair
          Capital Corp. and D. H. Blair Investment Banking Corporation. Mr.
          Davis has sole power to vote or direct the vote, to dispose of or to
          direct the disposition of the shares owned by D. H. Blair Capital
          Corp. and D. H. Blair



                                       17
<PAGE>   18


          Investment Banking Corp. The address of Mr. Davis is 44 Wall Street,
          New York, New York 10005.

     (6)  Also includes 42,038 shares that are held in escrow. See "Market for
          Common Equity and Related Stockholder Matters -- Escrow Shares." The
          address of Mr. Sallee is 980 South Powers Court, N.W., Atlanta,
          Georgia 30327.

     (7)  Includes 91,319 shares subject to options granted by Mr. Gorlin to
          Michael E. Noonan. Also includes 67,338 shares that are held in
          escrow. See "Market for Common Equity and Related Stockholder Matters
          -- Escrow Shares." The address of Mr. Gorlin is 150 Gulf Shore Drive,
          Unit 601, Destin, Florida 32541. Mr. Gorlin may be deemed a "founder"
          of the Company, as such term is defined in the Securities Act of 1933.

     (8)  The address of Westlake Acquisition Corporation is #205-15225 Thrift
          Avenue, White Rock, BC, Canada V4B 2K9.

     (9)  Includes 209,440 shares underlying a UPO to purchase 52,360 Units
          owned directly by Mrs. Renov and 68,000 shares underlying a UPO to
          purchase 17,000 Units owned by D.H. Blair & Co., Inc. ("Blair & Co.").
          Each Unit consists of one share of LTI Common Stock, one Class A
          Common Stock Purchase Warrant ("Class A Warrant") and one Class B
          Common Stock Purchase Warrant ("Class B Warrant"). See "Market for
          Common Equity and Related LTI Stockholder Matters -- LTI Warrants."
          Mrs. Renov has sole voting power of and dispositive control over
          shares owned by her and shares voting power of and dispositive control
          over shares owned by Blair & Co. Mr. and Mrs. Renov, collectively, are
          principal shareholders of Blair & Co. The address of Mrs. Renov is 172
          Broadway, Lawrence, New York 11559.

     (10) Includes 209,440 shares underlying a UPO to purchase 52,360 Units
          owned directly by Mrs. Stahler and 68,000 shares underlying a UPO to
          purchase 17,000 Units owned by Blair & Co. Mrs. Stahler has sole
          voting power of and dispositive control over shares owned by her and
          shares voting power of and dispositive control over shares owned by
          Blair & Co. Mr. and Mrs. Stahler, collectively, are principal
          shareholders of Blair & Co. The address of Mrs. Stahler is 10 Lakeside
          Drive, Lawrence, New York 11559.

     (11) Includes 216,651 shares issuable upon exercise of options that are
          immediately exercisable. Does not include 19,668 shares issuable upon
          exercise of options that are not exercisable within sixty days.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Upon the conversion of the Series A Preferred Stock in connection with
the Company's initial public offering (the "1996 Offering") of 1,700,000 units
(the "IPO Units"), each IPO Unit consisting of one share of the Company's common
stock ("Common Stock"), one Class A Warrant and one Class B Warrant
(collectively, the "Warrants"), the Company paid to D. H. Blair Capital Corp.
approximately $150,000, representing the accumulated dividends on the Series A
Preferred Stock. The sole stockholder of D. H. Blair Corp. is J. Morton Davis,
who is also the sole stockholder of D. H. Blair Investment Banking Corp.
("Blair" or the "Underwriter"), the underwriter for the 1996 Offering. Blair
also acted as Placement Agent for certain bridge financing of the Company in
April and May 1996 for which it received a placement agent fee of $199,500 and a
non-accountable expense allowance of $59,850.

         Blair has the right to designate one individual for nomination to the
Company's Board of Directors for a period of five years after the completion of
the 1996 Offering, although it has not yet selected any such designee. Such
designee may be a director, officer, partner, employee or affiliate of Blair.
The Company has agreed to indemnify Blair against certain liabilities, including
liabilities under the Securities Act of 1933.



                                       18
<PAGE>   19


         During the five-year period after the date of the 1996 Offering, in the
event Blair originates a financing or a merger, acquisition or transaction to
which the Company is a party, Blair will be entitled to receive a finder's fee
in consideration for origination of such transaction. The fee is based on a
percentage of the consideration paid in the transaction ranging from 7 percent
of the first $1,000,000 to 2 1/2 percent of any consideration in the excess of
$9,000,000.

         The Company has agreed not to solicit Warrant exercises other than
through Blair, unless Blair declines to make such solicitation. Upon any
exercise of the Warrants after the one-year period after the 1996 Offering, the
Company will pay Blair a fee of 5 percent of the aggregate exercise price of the
Warrants, if (i) the market price of the Company's Common Stock on the date the
Warrants are exercised is greater than the then exercise price of the Warrants;
(ii) the exercise of the Warrants was solicited by a member of the NASD; (iii)
the warrant holder designates in writing that the exercise of the Warrant was
solicited by a member of the NASD and designates in writing the broker-dealer to
receive compensation for such exercise; (iv) the Warrants are not held in a
discretionary account; (v) disclosure of compensation arrangements was made both
at the time of the 1996 Offering and at the time of exercise of the Warrants;
and (vi) the solicitation of exercise of the Warrant was not in violation of
Regulation M.

         Blair acted as the underwriter of the IPO Units in the 1996 Offering
for which it received underwriting discounts and commissions of $909,075 and a
non-accountable expense allowance of $293,250. In addition, in connection with
the 1996 Offering, the Company agreed to sell to Blair and its designees, for
nominal consideration, the option to purchase up to 170,000 IPO Units (the
"Unit Purchase Option") substantially identical to the IPO Units offered in the
1996 Offering, except that the Class A Warrants and Class B Warrants included
therein are each subject to redemption by the Company, in accordance with the
terms of the Warrant Agreement, at any time after the Unit Purchase Options have
been exercised and the underlying warrants are outstanding.

         In April 1996, Steve Gorlin, a principal stockholder of the Company,
granted to Michael E. Noonan, Chairman, President and Chief Executive Officer of
the Company, options to purchase 91,319 shares of Common Stock owned by Mr.
Gorlin. The options are exercisable immediately at $0.68 per share and expire
ten years from the date of grant. The Company has granted Mr. Noonan demand and
piggyback registration rights with respect to the shares of Common Stock
issuable upon exercise of these options.

         In April 1996, pursuant to an agreement dated March 21, 1996,
TransMillennial Resource Corporation ("TRM") contributed to the capital of the
Company $307,457 of indebtedness owed by the Company to TMR for management
services, expenses and other indebtedness and converted the remaining $428,346
of Company indebtedness into 158,048 shares of Common Stock at a rate of one
share for every $2.7102 of indebtness. In April 1996, pursuant to additional
debt conversion agreements dated March 21, 1996 (the "Debt Conversion
Agreements") an aggregate of $550,210 of indebtness of the Company was converted
into 203,013 shares of Common Stock at a rate of one share for every $2.7102 of
indebtedness.

         In April 1996, Donald B. Sallee, a stockholder of the Company, and
other debtholders of the Company converted an aggregate of $495,000 principal
amount of indebtedness of the Company into an aggregate of $495,000 in principal
amount of notes and 247,500 warrants in connection with the Company's bridge
financing. The Company agreed to pay the accrued interest on the indebtedness in
cash. The principal amount of the bridge notes and interest thereon at a rate of
10 percent per annum were paid to the holders of the bridge notes upon the
closing of the 1996 Offering.

         TMR advanced funds to the Company and paid certain of its obligations,
resulting in a balance of $735,803 due to TMR at March 31, 1996. TMR agreed to
contribute $307,457 of such debt to the capital of the Company and to convert
the remaining balance of $428,346 into 158,048 shares of the Company's common
stock. This conversion was completed in April 1996. Two of the Company's former
officers are shareholders of TMR, and the Company was located in office space
which was leased by TMR. Rent on such space was included in the indebtedness
described above.



                                       19
<PAGE>   20


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.

         (a)      Financial Statements
                  See "Contents to Consolidated Financial Statements."

         (b)      Reports on Form 8-K and 8-K/A.
                   No reports on Form 8-K or 8-K/A were filed by the Company
                  during the fourth quarter of the fiscal year ended March 31,
                  1999.

         (c)      Exhibits
                  The following exhibits are filed as part of this report:


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.                                 DESCRIPTION
-----------                                 -----------
<S>               <C>      <C>
     1.1(1)       --       FORM OF UNDERWRITING AGREEMENT

     3.1(1)       --       RESTATED CERTIFICATE OF INCORPORATION OF THE
                           REGISTRANT

     3.2(1)       --       BY-LAWS OF THE REGISTRANT

     4.1(1)       --       FORM OF BRIDGE NOTE

     4.2(1)       --       FORM OF WARRANT AGREEMENT

     4.3(1)       --       FORM OF UNDERWRITER'S UNIT PURCHASE OPTION

    10.1(2)       --       EMPLOYMENT AGREEMENT BETWEEN THE REGISTRANT AND
                           MICHAEL E. NOONAN

    10.2(2)       --       REGISTRATION RIGHTS AGREEMENT BETWEEN THE REGISTRANT
                           AND MICHAEL E. NOONAN

    10.3(1)       --       ESCROW AGREEMENT BETWEEN THE REGISTRANT, AMERICAN
                           STOCK TRANSFER & TRUST COMPANY AND CERTAIN SECURITY
                           HOLDERS OF THE REGISTRANT

    10.3A(2)      --       AMENDMENT TO ESCROW AGREEMENT BETWEEN THE REGISTRANT,
                           AMERICAN STOCK TRANSFER & TRUST COMPANY AND CERTAIN
                           SECURITY HOLDERS OF THE REGISTRANT

    10.4(1)       --       FORM OF DEBT CONVERSION AGREEMENT BETWEEN THE
                           REGISTRANT AND THE CONVERSION INVESTORS

    10.5(1)       --       MEMORANDUM OF UNDERSTANDING DATED AUGUST 26, 1994,
                           BETWEEN THE REGISTRANT AND TMR, AS AMENDED.

    10.6(1)       --       OUTSOURCING AGREEMENT DATED SEPTEMBER 1, 1994,
                           BETWEEN THE REGISTRANT AND TMR

    10.7(1)       --       AMENDED AND RESTATED 1996 STOCK OPTION PLAN

    10.8(1)       --       FORM OF INDEMNIFICATION AGREEMENT

    27.1          --       FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY)
</TABLE>

(1)      INCORPORATED BY REFERENCE TO THE COMPANY'S REGISTRATION STATEMENT ON
         FORM SB-2 (FILE NO. 333-6711) FILED WITH THE COMMISSION ON JUNE 24,
         1996.



                                       20
<PAGE>   21


(2)      INCORPORATED BY REFERENCE TO AMENDMENT NO. 1 TO THE COMPANY'S
         REGISTRATION STATEMENT ON FORM SB-2 (FILE NO. 333-6711) FILED WITH THE
         COMMISSION ON JULY 31, 1996.



                                   SIGNATURES

         PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE EXCHANGE
ACT, THE REGISTRANT HAS CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

<TABLE>
<CAPTION>
         SIGNATURE                                   TITLE                                   DATE
         ---------                                   -----                                   ----
<S>                                         <C>                                         <C>
LAMINATING TECHNOLOGIES, INC.

BY: /S/  MICHAEL E. NOONAN                  CHAIRMAN, PRESIDENT & CEO                   JUNE 23, 1999
    --------------------------------
         MICHAEL E. NOONAN

BY: /S/  DONALD L. ALDRIDGE                 CHIEF FINANCIAL OFFICER                     JUNE 23, 1999
    --------------------------------
         DONALD L. ALDRIDGE

BY: /S/  SHIRLEY A. PIGG                    CONTROLLER                                  JUNE 23, 1999
    --------------------------------
         SHIRLEY A. PIGG
</TABLE>


         IN ACCORDANCE WITH THE EXCHANGE ACT, THIS REPORT HAS BEEN SIGNED BELOW
BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND
ON THE DATES SPECIFIED.


<TABLE>
<CAPTION>
         SIGNATURE                                  TITLE                                 DATE
<S>                                          <C>                                     <C>
/S/      MICHAEL E. NOONAN                   CHAIRMAN, PRESIDENT & CEO               JUNE 23, 1999
------------------------------------
         MICHAEL E. NOONAN

/S/      RONALD L. CHRISTENSEN               DIRECTOR                                JUNE 23, 1999
------------------------------------
         RONALD L. CHRISTENSEN

/S/      JEROME I. GELLMAN                   DIRECTOR                                JUNE 23, 1999
------------------------------------
         JEROME I. GELLMAN

/S/      WILLIAM J. WARREN                   DIRECTOR                                JUNE 23, 1999
------------------------------------
         WILLIAM J. WARREN
</TABLE>




                                       21
<PAGE>   22

                       FINANCIAL STATEMENTS AND REPORT OF
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                         LAMINATING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY
                            MARCH 31, 1999 AND 1998

                                       F-1
<PAGE>   23

                                    CONTENTS


<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS..........   F-3
CONSOLIDATED FINANCIAL STATEMENTS
  CONSOLIDATED BALANCE SHEETS...............................   F-4
  CONSOLIDATED STATEMENTS OF OPERATIONS.....................   F-5
  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
     EQUITY.................................................   F-6
  CONSOLIDATED STATEMENTS OF CASH FLOWS.....................   F-8
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................  F-10
</TABLE>


                                       F-2
<PAGE>   24

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Laminating Technologies, Inc.
Atlanta, Georgia

     We have audited the accompanying consolidated balance sheets of Laminating
Technologies, Inc. and subsidiary (a development stage company) as of March 31,
1999 and 1998, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the years then ended and for the period
from April 19, 1993 (inception), to March 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. The cumulative statements of operations and cash
flows for the period April 19, 1993 (inception) to March 31, 1999 include
amounts for the period April 19, 1993 through March 31, 1997 which were audited
by other auditors whose report dated June 4, 1997 expressed an unqualified
opinion on those statements. Our opinion, insofar as it relates to the amounts
included for the period April 19, 1993 through March 31, 1997, is based solely
on the report of the other auditors.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

     In our opinion, based on our audits and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Laminating Technologies, Inc.
and subsidiary as of March 31, 1999 and 1998, and the consolidated results of
their operations, and their consolidated cash flows for the years then ended,
and from April 19, 1993 (inception), to March 31, 1999, in conformity with
generally accepted accounting principles.


GRANT THORNTON, LLP

Atlanta, Georgia
May 6, 1999

                                       F-3
<PAGE>   25

                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                      MARCH 31,
                                                              -------------------------
                                                                 1999          1998
                                                              -----------   -----------
<S>                                                           <C>           <C>
                                        ASSETS
Current Assets
  Cash......................................................  $   210,271   $   738,933
  Investments (Note A-2)....................................    1,670,299     2,459,011
  Accounts receivable, net of an allowance for doubtful
     accounts of $33,210....................................      197,733        68,923
  Inventories (Notes A-3 and B).............................      400,812       398,304
  Prepaid expenses..........................................       59,972       152,041
  Other current assets......................................        1,544         1,544
                                                              -----------   -----------
          Total current assets..............................    2,540,631     3,818,756
Property and Equipment, Net
  (Notes A-4 and C).........................................      261,234       180,634
                                                              -----------   -----------
                                                              $ 2,801,865   $ 3,999,390
                                                              ===========   ===========

                     LIABILITIES AND STOCKHOLDERS' EQUITY (NOTE E)
Current Liabilities
  Current maturity of note payable..........................  $    39,840   $    44,441
  Accounts payable -- trade.................................       50,148       186,559
  Accrued expenses..........................................      100,080       124,200
                                                              -----------   -----------
          Total current liabilities.........................      190,068       355,200
Note Payable, Net of Current Maturities.....................           --        39,840
Commitments and Other Matters (Note F)......................           --            --
Stockholders' Equity
  Series A convertible preferred stock, par value $.01,
     5,000,000 shares authorized, none issued...............           --            --
  Common stock, par value $.01, 20,000,000 shares
     authorized, 3,185,100 shares issued and outstanding....       31,851        31,851
  Additional paid-in capital................................   11,709,254    11,709,254
  Deficit accumulated during the development stage..........   (9,103,931)   (8,136,755)
  Other comprehensive earnings (loss) (Note A-2)............      (25,377)           --
                                                              -----------   -----------
          Total stockholders' equity........................    2,611,797     3,604,350
                                                              -----------   -----------
                                                              $ 2,801,865   $ 3,999,390
                                                              ===========   ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-4
<PAGE>   26

                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                    APRIL 19, 1993
                                                                                    (COMMENCEMENT
                                                          YEARS ENDED MARCH 31,     OF OPERATIONS)
                                                        -------------------------      THROUGH
                                                           1999          1998       MARCH 31, 1999
                                                        -----------   -----------   --------------
<S>                                                     <C>           <C>           <C>
Net sales.............................................  $ 1,877,703   $   519,069    $ 2,762,475
Cost of goods sold....................................    1,283,642       401,119      2,717,285
                                                        -----------   -----------    -----------
  Gross profit........................................      594,061       117,950         45,190
Selling, general and administrative expenses..........    1,334,862     1,154,309      7,178,225
Research and development expense......................      463,182       543,220      1,399,732
                                                        -----------   -----------    -----------
  Operating loss......................................   (1,203,983)   (1,579,579)    (8,532,767)
Interest expense......................................       (5,136)       (5,867)      (966,786)
Investment income.....................................      124,421       232,762        466,716
Cancellation of debt..................................      117,522           612        289,042
Loss on abandonment of fixed assets...................           --            --       (104,184)
                                                        -----------   -----------    -----------
  Net loss............................................  $  (967,176)  $(1,352,072)   $(8,847,979)
                                                        ===========   ===========    ===========
Net loss per common share
  Basic...............................................  $     (0.35)  $     (0.49)
                                                        ===========   ===========
  Diluted.............................................  $     (0.35)  $     (0.49)
                                                        ===========   ===========
Weighted average number of common shares
  outstanding.........................................    2,775,100     2,775,095
                                                        ===========   ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-5
<PAGE>   27

                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                                                        DEFICIT
                                       PREFERRED STOCK      COMMON STOCK                                              ACCUMULATED
                                        PAR VALUE $.01     PAR VALUE $.01        STOCK       ADDITIONAL               DURING THE
                                       ----------------   -----------------   SUBSCRIPTION    PAID-IN     TREASURY    DEVELOPMENT
                                       SHARES    AMOUNT    SHARES    AMOUNT    RECEIVABLE     CAPITAL       STOCK        STAGE
                                       -------   ------   --------   ------   ------------   ----------   ---------   -----------
<S>                                    <C>       <C>      <C>        <C>      <C>            <C>          <C>         <C>
Common stock issued in connection
  with the acquisition of the assets
  of Cool-R Enterprises, Inc. in
  April 1993.........................       --   $  --     168,114   $1,681     $    --      $   (1,681)  $      --   $  (255,952)
Common stock issued in connection
  with obtaining rights to developed
  technology in April 1993...........       --      --     150,126    1,501          --          (1,501)         --            --
Issuance of common stock for cash and
  settlement of debt in April 1993...       --      --     235,221    2,352          --         635,148          --            --
Cash contributed by stockholder......       --      --          --       --          --          12,500          --            --
Issuance of convertible preferred
  stock for cash in September 1993...  250,000   2,500          --       --          --         497,500          --            --
Common stock issued to an officer in
  connection with the signing of an
  employment agreement in October
  1993...............................       --      --      46,122      461      (1,250)        124,539          --            --
Net loss for the period April 19,
  1993 (commencement of operations)
  through March 31, 1994.............       --      --          --       --          --              --          --    (1,361,215)
                                       -------   ------   --------   ------     -------      ----------   ---------   -----------
Balance, March 31, 1994..............  250,000   2,500     599,583    5,995      (1,250)      1,266,505          --    (1,617,167)
Issuance of common stock for cash in
  May 1994...........................       --      --       3,690       37          --          19,963          --            --
Common stock issued as consideration
  for compensation in August 1994....       --      --      50,662      507          --         136,799          --            --
Services contributed by
  stockholder........................       --      --          --       --          --          30,000          --            --
Net loss for the year ended March 31,
  1995...............................       --      --          --       --          --              --          --    (1,530,061)
                                       -------   ------   --------   ------     -------      ----------   ---------   -----------
Balance, March 31, 1995..............  250,000   2,500     653,935    6,539      (1,250)      1,453,267          --    (3,147,228)
Issuance of common stock as
  settlement of notes payable to a
  stockholder in June 1995...........       --      --      33,208      332          --          89,668          --            --
Collection of stock subscription.....       --      --          --       --       1,250              --          --            --
Common stock purchased for
  treasury...........................       --      --    (126,114)      --          --              --    (150,000)           --
Common stock issued from treasury....       --      --     126,114       --          --              --     150,000            --

<CAPTION>

                                           OTHER
                                       COMPREHENSIVE
                                         EARNINGS
                                          (LOSS)          TOTAL
                                       -------------   -----------
<S>                                    <C>             <C>
Common stock issued in connection
  with the acquisition of the assets
  of Cool-R Enterprises, Inc. in
  April 1993.........................       $--        $  (255,952)
Common stock issued in connection
  with obtaining rights to developed
  technology in April 1993...........       --                  --
Issuance of common stock for cash and
  settlement of debt in April 1993...       --             637,500
Cash contributed by stockholder......       --              12,500
Issuance of convertible preferred
  stock for cash in September 1993...       --             500,000
Common stock issued to an officer in
  connection with the signing of an
  employment agreement in October
  1993...............................       --             123,750
Net loss for the period April 19,
  1993 (commencement of operations)
  through March 31, 1994.............       --          (1,361,215)
                                            --         -----------
Balance, March 31, 1994..............       --            (343,417)
Issuance of common stock for cash in
  May 1994...........................       --              20,000
Common stock issued as consideration
  for compensation in August 1994....       --             137,306
Services contributed by
  stockholder........................       --              30,000
Net loss for the year ended March 31,
  1995...............................       --          (1,530,061)
                                            --         -----------
Balance, March 31, 1995..............       --          (1,686,172)
Issuance of common stock as
  settlement of notes payable to a
  stockholder in June 1995...........       --              90,000
Collection of stock subscription.....       --               1,250
Common stock purchased for
  treasury...........................       --            (150,000)
Common stock issued from treasury....       --             150,000
</TABLE>

                                       F-6
<PAGE>   28

                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

    CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY --(CONTINUED)
<TABLE>
<CAPTION>
                                                                                                                         DEFICIT
                                     PREFERRED STOCK       COMMON STOCK                                                ACCUMULATED
                                     PAR VALUE $.01       PAR VALUE $.01         STOCK       ADDITIONAL                DURING THE
                                    -----------------   -------------------   SUBSCRIPTION     PAID-IN     TREASURY    DEVELOPMENT
                                     SHARES    AMOUNT    SHARES     AMOUNT     RECEIVABLE      CAPITAL       STOCK        STAGE
                                    --------   ------   ---------   -------   ------------   -----------   ---------   -----------
<S>                                 <C>        <C>      <C>         <C>       <C>            <C>           <C>         <C>
Common stock contributed to
  treasury and cancelled..........        --      --       (7,379)      (74)         --               74          --            --
Contribution to capital (Note
  I)..............................        --      --           --        --          --          307,457          --            --
Net loss for the year ended March
  31, 1996........................        --      --           --        --          --               --          --    (1,228,745)
                                    --------   ------   ---------   -------     -------      -----------   ---------   -----------
Balance, March 31, 1996...........   250,000   2,500      679,764     6,797          --        1,850,466          --    (4,375,973)
Warrants issued in connection with
  bridge notes....................        --      --           --        --          --          665,000          --            --
Conversion of debt to common
  stock...........................        --      --      361,061     3,611          --          974,961          --            --
Common stock issued as
  consideration for
  compensation....................        --      --        4,689        47          --           12,660          --            --
Stock options issued by
  stockholders to an officer as
  compensation....................        --      --           --        --          --          386,000          --            --
Payment of cumulative dividends on
  Series A preferred stock........        --      --           --        --          --         (150,000)         --            --
Preferred stock conversion........  (250,000)  (2,500)    184,486     1,845          --              655          --            --
Sale of 1,955,000 shares of common
  stock (net of offering costs)...        --      --    1,955,000    19,550          --        7,968,863          --            --
Net loss for the year ended March
  31, 1997........................        --      --           --        --          --               --          --    (2,408,710)
                                    --------   ------   ---------   -------     -------      -----------   ---------   -----------
Balance, March 31, 1997...........        --      --    3,185,000    31,850          --       11,708,605          --    (6,784,683)
Exercise of 100 class A
  warrants........................        --      --          100         1          --              649          --            --
Net loss for the year ended March
  31, 1998........................        --      --           --        --          --               --          --    (1,352,072)
                                    --------   ------   ---------   -------     -------      -----------   ---------   -----------
Balance, March 31, 1998...........        --      --    3,185,100    31,851          --       11,709,254          --    (8,136,755)
Net loss for the year ended year
  ended March 31, 1999............        --      --           --        --          --               --          --      (967,176)
Other comprehensive earnings
  (loss) unrealized net losses on
  marketable securities...........        --      --           --        --          --               --          --            --
                                    --------   ------   ---------   -------     -------      -----------   ---------   -----------
Comprehensive earnings (loss).....        --      --           --        --          --               --          --            --
Balance, March 31, 1999...........        --   $  --    3,185,100   $31,851     $    --      $11,709,254   $      --   $(9,103,931)
                                    ========   ======   =========   =======     =======      ===========   =========   ===========

<CAPTION>

                                        OTHER
                                    COMPREHENSIVE
                                      EARNINGS
                                       (LOSS)          TOTAL
                                    -------------   -----------
<S>                                 <C>             <C>
Common stock contributed to
  treasury and cancelled..........          --               --
Contribution to capital (Note
  I)..............................          --          307,457
Net loss for the year ended March
  31, 1996........................          --       (1,228,745)
                                      --------      -----------
Balance, March 31, 1996...........          --       (2,516,210)
Warrants issued in connection with
  bridge notes....................          --          665,000
Conversion of debt to common
  stock...........................          --          978,572
Common stock issued as
  consideration for
  compensation....................          --           12,707
Stock options issued by
  stockholders to an officer as
  compensation....................          --          386,000
Payment of cumulative dividends on
  Series A preferred stock........          --         (150,000)
Preferred stock conversion........          --               --
Sale of 1,955,000 shares of common
  stock (net of offering costs)...          --        7,988,413
Net loss for the year ended March
  31, 1997........................          --       (2,408,710)
                                      --------      -----------
Balance, March 31, 1997...........          --        4,955,772
Exercise of 100 class A
  warrants........................                          650
Net loss for the year ended March
  31, 1998........................          --       (1,352,072)
                                      --------      -----------
Balance, March 31, 1998...........          --        3,604,350
Net loss for the year ended year
  ended March 31, 1999............          --         (967,176)
Other comprehensive earnings
  (loss) unrealized net losses on
  marketable securities...........     (25,377)         (25,377)
                                      --------      -----------
Comprehensive earnings (loss).....          --         (992,553)
                                                    -----------
Balance, March 31, 1999...........    $(25,377)     $ 2,611,797
                                      ========      ===========
</TABLE>

         The accompanying notes are an integral part of this statement.

                                       F-7
<PAGE>   29

                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  APRIL 19, 1993
                                                                                  (COMMENCEMENT
                                                        YEARS ENDED MARCH 31,     OF OPERATIONS)
                                                      -------------------------      THROUGH
                                                         1999          1998       MARCH 31, 1999
                                                      -----------   -----------   --------------
<S>                                                   <C>           <C>           <C>
Cash flows from operating activities:
  Net loss.........................................   $  (967,176)  $(1,352,072)   $(8,847,979)
  Adjustments to reconcile net loss to net cash
     used in operating activities:
     Provision for doubtful accounts...............         8,210        25,000         53,210
     Depreciation and amortization.................        93,006        88,551        381,013
     Compensation recorded for fair value of common
       shares issued in excess of price paid by
       employee....................................            --            --        273,763
     Compensation recorded for stock options issued
       by stockholders to an officer...............            --            --        386,000
     Services contributed by stockholder...........            --            --         30,000
     Noncash finance charge........................            --            --        684,551
     Loss on disposal of fixed assets..............            --            --        122,375
     Changes in operating assets and liabilities:
       Increase in accounts receivable.............      (137,021)      (85,151)      (238,514)
       Increase in inventories.....................        (2,508)     (294,978)      (341,111)
       Increase in other assets and prepaid
          expenses.................................        92,069      (112,018)       (45,499)
       Increase in due to related party............            --            --        790,082
       Decrease in accounts payable and accrued
          expenses.................................      (160,531)      (36,475)        21,523
                                                      -----------   -----------    -----------
          Net cash used in operating activities....    (1,073,951)   (1,767,143)    (6,730,586)
                                                      -----------   -----------    -----------
Cash flows from investing activities:
  Acquisitions of fixed assets.....................      (173,606)      (59,961)      (721,546)
  Sale (purchase) of investments...................       763,336     1,573,256     (1,695,675)
                                                      -----------   -----------    -----------
          Net cash provided by (used in) investing
            activities.............................       589,730     1,513,295     (2,417,221)
                                                      -----------   -----------    -----------
Cash flows from financing activities:
  Proceeds of notes payable........................        44,441       112,000      2,625,309
  Repayment of notes payable.......................            --       (27,719)    (2,611,676)
  Proceeds of notes payable -- stockholders........            --            --        458,700
  Repayment of notes payable -- stockholders.......            --            --        (49,736)
  Advances from stockholders.......................            --            --         11,485
  Repayment of capital leases payable..............            --            --        (41,367)
  Proceeds from sale of common stock...............            --            --      8,600,913
  Proceeds from sale of preferred stock............            --            --        500,000
  Proceeds from stock subscription receivable......            --            --          1,250
  Cash contributed by stockholder..................            --            --         12,500
  Proceeds from exercise of warrants...............                         650            650
  Payment of dividends on preferred stock..........            --            --       (150,000)
                                                      -----------   -----------    -----------
          Net cash provided by financing
            activities.............................        44,441        84,931      9,358,078
                                                      -----------   -----------    -----------
Net (decrease) increase in cash....................   $  (528,662)  $  (168,917)   $   210,271
Cash at beginning of period........................       738,933       907,850             --
                                                      -----------   -----------    -----------
Cash at end of period..............................   $   210,271   $   738,933    $   210,271
                                                      ===========   ===========    ===========
</TABLE>

                                       F-8
<PAGE>   30

<TABLE>
<CAPTION>
                                                                                  APRIL 19, 1993
                                                                                  (COMMENCEMENT
                                                        YEARS ENDED MARCH 31,     OF OPERATIONS)
                                                      -------------------------      THROUGH
                                                         1999          1998       MARCH 31, 1999
                                                      -----------   -----------   --------------
<S>                                                   <C>           <C>           <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for interest.........   $     5,136   $     5,867    $   684,776
  Noncash transactions:
     Common stock subscribed.......................            --            --          1,256
     Common stock issued for developed
       technology..................................            --            --        406,875
     Conversion of debt to equity..................            --            --        978,572
     Common stock issued as settlement of note
       payable to stockholder......................            --            --         90,000
     Due to stockholder for shares purchased for
       Treasury....................................            --            --         19,551
     Cancellation of debt obligation in exchange
       for fixed assets............................            --            --         54,279
     Settlement of related party debt by capital
       contribution................................            --            --        307,457
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-9
<PAGE>   31

                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            MARCH 31, 1999 AND 1998

NOTE A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Laminating Technologies, Inc. and subsidiary, (the "Company"), formerly New
Cooler Corp., is a development stage company formed to research, develop, design
and market packaging and specialty display products using the Company's
proprietary processing method. Certain process development has been completed
and management believes several product lines have obtained commercial status.
The Company was incorporated on March 29, 1993 and in April 1993 acquired
substantially all of the assets and assumed substantially all of the liabilities
of Cool-R Enterprises, Inc. ("Cool-R"), obtaining the rights to developed
technology.

     On December 17, 1998 the Company's stock and warrants were delisted. This
event occurred as a result of the Company's inability to maintain a certain bid
price and market capitalization requirements. The Company's stock is currently
traded on the NASD Supplemental Market under the symbol "LAMT".

1. PRINCIPLES OF CONSOLIDATION

     The accompanying financial statements have been prepared on a consolidated
basis. They include the accounts of the Company and its wholly owned subsidiary,
Revenue Process Development, Inc. All intercompany transactions and balances
have been eliminated in consolidation.

2. INVESTMENTS

     Investments consist primarily of commercial paper. These investments are
accounted for as available for sale securities and are stated at fair value,
which approximates cost. Unrealized gains or losses on these investments are
included in other comprehensive earnings (loss).

3. INVENTORY

     Inventory is recorded at lower of cost or market, using the first-in,
first-out (FIFO) cost flow method.

4. PROPERTY AND EQUIPMENT

     Machinery, furniture and equipment, including property under capital lease
arrangements, are carried at cost. Depreciation is provided using the double
declining balance method over the estimated useful lives of the assets as
follows:

<TABLE>
<S>                                                           <C>
Machinery and equipment.....................................  3-10 years
Furniture and fixtures......................................     5 years
</TABLE>

5. ADVERTISING EXPENSE

     All advertising costs are expensed in the period incurred. Advertising
expense for the years ended March 31, 1999, and March 31, 1998 was approximately
$136,000 and $130,000, respectively.

6. STOCK BASED COMPENSATION

     The Company's stock option plans are accounted for under the intrinsic
value method in which compensation expense is recognized for the amount, if any,
that the fair value of the underlying common stock exceeds the exercise price at
the date of grant.

                                      F-10
<PAGE>   32
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            MARCH 31, 1999 AND 1998


                                  (CONTINUED)


7. INCOME TAXES

     The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates applied to taxable income. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. A valuation allowance is provided for deferred
tax assets when it is more likely than not that the asset will not be realized.

8. LOSS PER SHARE

     Basic net loss per common share is based upon the weighted average number
of common shares outstanding during the period. Diluted net loss per common
share is based upon the weighted average number of common shares outstanding
less contingently returnable shares plus dilutive potential common shares,
including options and warrants outstanding during the period.

9. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company's financial instruments recorded on the balance sheet include
cash, investments, accounts receivable, accounts payable and debt. Because of
their short maturities, the carrying amount of cash, investments, accounts
receivable and accounts payable approximates fair market value. The fair value
of the Company's long-term debt approximates carrying value based on quoted
market prices of similar issues or on the current rates offered to the Company
for debt of similar terms.

NOTE B.  INVENTORY

     Inventories at March 31, 1999 and 1998 are summarized as follows:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Raw materials...............................................  $108,904   $161,522
Work-in-process.............................................    45,488     49,709
Finished goods..............................................   246,420    187,073
                                                              --------   --------
                                                              $400,812   $398,304
                                                              ========   ========
</TABLE>

                                      F-11
<PAGE>   33
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            MARCH 31, 1999 AND 1998


                                  (CONTINUED)


NOTE C.  PROPERTY AND EQUIPMENT

     Fixed assets at March 31, 1999 and 1998 are summarized as follows:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Machinery and equipment.....................................  $353,623   $190,734
Furniture and fixtures......................................   118,246    107,529
Leasehold improvements......................................        --     15,371
                                                              --------   --------
                                                               471,869    313,634
Less accumulated depreciation...............................   210,635    133,000
                                                              --------   --------
                                                              $261,234   $180,634
                                                              ========   ========
</TABLE>

NOTE D.  NOTE PAYABLE

     During fiscal year ending March 31, 1998, the Company borrowed $112,000.
This note bears interest at 8% and is payable in equal monthly installments
through January, 2000. The amount due on this note at March 31, 1999 is $39,840.

     Future maturities of the note payable as of March 31, 1999 are as follows:

<TABLE>
<CAPTION>
                       YEARS ENDING:
                       -------------
<S>                                                           <C>
2000........................................................  $39,840
                                                              =======
</TABLE>

NOTE E.  STOCKHOLDERS' EQUITY

1. COMMON STOCK

     Upon incorporation, the Company authorized 10,000,000 shares of its $.01
par value common stock. The shares of common stock have unlimited voting rights.
In March 1996, the Company increased the number of authorized common shares to
20,000,000.

2. CONVERTIBLE PREFERRED STOCK

     In September 1993, the Company authorized and issued 250,000 shares of its
$.01 par value Series A convertible preferred stock (the "Preferred") for
$500,000. In August 1994, the Company increased the number of authorized shares
of Preferred to 2,500,000. In March 1996, the Company increased the number of
authorized shares of the Preferred to 5,000,000.

     The Preferred has no voting rights. The holders of the Preferred were
entitled to cumulative quarterly dividends of $.05 per share due upon the
redemption of the shares. The liquidation value of each share of Preferred is
equal to $2.00 plus cumulative dividends.

     Concurrent with the public offering in October 1996, the entire 250,000
shares of the Preferred then outstanding were converted into 184,486 shares of
common stock.

3. INITIAL PUBLIC OFFERING

     In October and November 1996, the Company completed its initial public
offering and issued 1,955,000 units at a price of $5.00 per unit. Each unit
consists of one share of common stock, one Class A warrant and one Class B
warrant. Each Class A warrant entitles the holder to purchase one share of
common stock and one

                                      F-12
<PAGE>   34
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            MARCH 31, 1999 AND 1998


                                  (CONTINUED)


Class B warrant at an exercise price of $6.50. Each Class B warrant entitles the
holder to purchase one share of common stock at an exercise price of $8.75. The
warrants are redeemable by the Company, under certain conditions, at any time
after October 9, 1997. As a result of the offering, the Company received net
proceeds of approximately $7,988,000.

     In connection with the offering, the underwriter required, as a condition
of the offering, that an aggregate of 410,000 shares of the Company's common
stock be designated as forfeitable shares ("forfeitable shares") and placed in
escrow. The forfeitable shares are not assignable nor transferable until certain
earnings or market criteria have been met. If the conditions are not met by
March 31, 2000, all shares remaining in escrow will be returned to the Company
as treasury shares for cancellation thereof as a contribution to capital. The
forfeitable shares will be released, to the stockholders, in the event specified
levels of pretax income of the Company for the years ending December 31, 1997 to
December 31, 1999 are achieved or the market price of the Company's common stock
attains specified targets during the 36 month period commencing October 9, 1996.
There will be a charge to earnings for the fair value of these shares upon their
release. Such charge will not be deductible for income tax purposes.

4. BRIDGE FINANCING

     In April and May 1996, the Company completed a private placement for an
aggregate of $1,500,000 (net proceeds of approximately $1,185,000) principal
amount of Bridge Notes bearing interest at an annual rate of 10% and warrants to
purchase an aggregate of 997,500 shares of common stock. The warrants
automatically converted into Class A warrants concurrent with the Company's
public offering. Additionally $495,000 of previously existing debt and $55,210
of interest accrued thereon was converted into Bridge Notes. The Company valued
the Bridge loan warrants at an aggregate of $665,000, which was accounted for as
a debt discount. The unamortized balance of the debt discount was charged to
expense upon the close of the offering.

5. STOCK OPTIONS AND WARRANTS

     In connection with the Company's initial public offering, the Company
granted to the underwriter an option to purchase 170,000 units at $6.00 per unit
exercisable for a three-year period commencing October 9, 1998.

     The Company has outstanding 2,952,400 Class A warrants and 1,955,100 Class
B warrants exercisable for a five year period commencing October 9, 1996.

6. SHARES RESERVED FOR ISSUANCE


     The Company has 8,789,900 shares of common stock for issuance as follows:



<TABLE>
<S>                                                           <C>
Class A warrants............................................  2,952,400
Class B warrants............................................  4,907,500
Underwriter's Unit Purchase Option..........................    680,000
1996 Stock Option Plan......................................    250,000
                                                              ---------
                                                              8,789,900
                                                              =========
</TABLE>


                                      F-13
<PAGE>   35
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            MARCH 31, 1999 AND 1998


                                  (CONTINUED)


NOTE F.  COMMITMENTS AND OTHER MATTERS

1. EMPLOYMENT CONTRACT

     Effective June 1, 1996, the Company entered into a one-year employment
agreement with the Chairman and Chief Executive Officer of the Company. The
agreement provides for an annual base salary of $144,000 per year and is
automatically renewable for successive one-year terms unless either party gives
six months notice to the other. The Company may terminate the agreement without
cause and, upon such termination, the Officer will be entitled to receive his
base salary for a period of one year (subject to a 50% offset during the second
six months for salary received from subsequent employment). In addition, if the
Company exercises its right not to renew the agreement, the Officer will be
entitled to six months of severance pay. The agreement contains confidentiality
and noncompetition provisions.

2. OPERATING LEASE

     The Company entered into operating leases for its office facility and a
warehouse facility. Total rental expense under operating lease arrangements was
approximately $123,519 and $90,000 for the years ended March 31, 1999 and March
31, 1998, respectively. During the year ended March 31, 1999, the lease
terminated and the Company began leasing the facility on a month to month basis.

NOTE G.  NET LOSS PER COMMON SHARE

     The following table sets forth the computation of basic and diluted loss
per share.

<TABLE>
<CAPTION>
                                                              MARCH 31,    MARCH 31,
                                                                1999         1998
                                                              ---------   -----------
<S>                                                           <C>         <C>
Numerator for basic and diluted net loss per common
  share -- loss attributable to common stockholders.........  $(967,176)  $(1,352,072)
                                                              =========   ===========
</TABLE>

     The following table sets forth the computation of basic and diluted loss
per share.

<TABLE>
<CAPTION>
                                                              MARCH 31,    MARCH 31,
                                                                 1999         1998
                                                              ----------   ----------
<S>                                                           <C>          <C>
Denominator for basic net loss per common share -- weighted
  average shares outstanding................................   2,775,100    2,775,095
Effect of dilutive options and warrants.....................          --           --
                                                              ----------   ----------
Denominator for diluted net loss per common share --adjusted
  weighted average shares outstanding.......................   2,775,100    2,775,095
                                                              ==========   ==========
Basic net loss per share....................................  $     (.35)  $    (0.49)
                                                              ==========   ==========
Diluted net loss per share..................................  $     (.35)  $    (0.49)
                                                              ==========   ==========
</TABLE>

                                      F-14
<PAGE>   36
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            MARCH 31, 1999 AND 1998


                                  (CONTINUED)


NOTE H.  INCOME TAXES

     The Company's temporary differences result in a net deferred income tax
asset which is reduced to zero by a related valuation allowance summarized as
follows:

<TABLE>
<CAPTION>
                                                               MARCH 31,     MARCH 31,
                                                                 1999          1998
                                                              -----------   -----------
<S>                                                           <C>           <C>
Deferred income tax assets
  Net operating loss carryforward...........................  $ 3,220,000   $ 2,850,000
  Other.....................................................       20,000       124,000
          Gross deferred tax assets.........................    3,240,000     2,974,000
Deferred tax asset valuation allowance......................   (3,240,000)   (2,974,000)
                                                              -----------   -----------
          Net deferred tax asset............................           --            --
                                                              ===========   ===========
</TABLE>

     The net increase of the deferred tax asset valuation allowance for the year
ended March 31, 1998 and 1998 was $266,000 and $374,000, respectively.

     At March 31, 1999, the Company had net operating loss carryforwards of
approximately $8,353,000 available to reduce future taxable income which expire
as follows:

<TABLE>
<CAPTION>
                                                                 NET
FISCAL                                                        OPERATING
YEAR                                                             LOSS
------                                                        ----------
<S>                                                           <C>
2009........................................................  $1,289,000
2010........................................................   1,439,000
2011........................................................   1,303,000
2012........................................................   2,084,000
2013........................................................   1,287,000
2019........................................................     951,000
                                                              ----------
                                                              $8,353,000
                                                              ==========
</TABLE>

     Under Section 382 of the Internal Revenue Code, the Company is subject to
an annual limitation of approximately $350,000 on utilization of its net
operating loss carryforwards because an ownership change of more than 50% has
occurred.

     Reconciliations of statutory Federal tax rates to the effective tax rate
for the years ended March 31, 1999 and March 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                                              MARCH 31,   MARCH 31,
                                                                1999        1998
                                                              ---------   ---------
<S>                                                           <C>         <C>
Income tax benefit at 34%...................................     (34)%       (34)%
State taxes, net of Federal income tax effect...............      (4)         (4)
Tax benefit of losses not recognized........................      38          38
                                                                 ---         ---
  Effective tax rate........................................      --%         --%
                                                                 ===         ===
</TABLE>

NOTE I.  STOCK OPTION PLAN

     In 1996, the Board of Directors adopted and the Company's stockholders
approved the Amended and Restated 1996 Stock Option Plan (the "Plan"). Pursuant
to the Plan, as amended, incentive stock options and

                                      F-15
<PAGE>   37
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            MARCH 31, 1999 AND 1998


                                  (CONTINUED)


nonqualified stock options may be granted to purchase up to 250,000 shares of
the Company's common stock through March 2006. Incentive stock options are to be
granted at a price not less than the fair market value of the Company's common
stock at the date of grant. If a stockholder owns 10% or more of the Company's
outstanding stock, the exercise price may not be less than 110% of the fair
market value of the Company's common stock at the date of grant and its term
must not exceeds five years. Options may be granted to employees, consultants,
and directors of the Company and must be exercised within a ten-year period
after the date granted. Nonqualified stock options are exercisable at a price to
be determined by the Board of Directors for a period of ten years after the
grant date.

     Additionally, the provisions of the Plan provide for the automatic grant of
nonqualified stock options to purchase shares of common stock ("Director
Options") to directors of the Company who are not employees or principal
stockholders of the Company ("Eligible Directors"). Each of the four Eligible
Directors of the Company were granted Director Options to purchase 10,000 share
of common stock on July 15, 1996 at $5.00 per share. Future Eligible Directors
are to be granted a Director Option to purchase 10,000 shares of common stock on
the date of election or appointment. Further, commencing on the day immediately
following the date of the annual meeting of stockholders for the Company's
fiscal year ending March 31, 1997, each Eligible Director, other than directors
who received an Initial Director Option since the last annual meeting, are to be
granted a Director Option to purchase 1,000 shares of common stock ("Automatic
Grant") on the day immediately following the date of each annual meeting of
stockholders, as long as such director is a member of the Board of Directors.
The exercise price for each share subject to a Director Option shall be equal to
the fair market value of the common stock on the date of grant, except for
directors who receive incentive options and who own more than 10% of the voting
power, in which case the exercise price shall be not less than 110% of the fair
market value on the date of grant. Director Options are exercisable in four
equal annual installments, commencing six months from the date of grant.
Director Options expire the earlier of 10 years after the date of grant or 90
days after the termination of the director's service on the Board of Directors.

     Stock options activity is summarized as follows:

<TABLE>
<CAPTION>
                                                      MARCH 31, 1999       MARCH 31, 1998
                                                    ------------------   ------------------
                                                              WEIGHTED             WEIGHTED
                                                              AVERAGE              AVERAGE
                                                              EXERCISE             EXERCISE
                                                    SHARES     PRICE     SHARES     PRICE
                                                    -------   --------   -------   --------
<S>                                                 <C>       <C>        <C>       <C>
Outstanding, beginning of year....................  247,000    $3.09     170,000    $4.29
Granted...........................................       --       --      87,000      .96
Exercised.........................................       --       --          --       --
Forfeited.........................................       --       --      10,000     5.00
                                                    -------    -----     -------    -----
Outstanding end of year...........................  247,000     3.09     247,000     3.09
                                                    =======    =====     =======    =====
</TABLE>

                                      F-16
<PAGE>   38
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            MARCH 31, 1999 AND 1998


                                  (CONTINUED)


     The following table summarizes information about stock options outstanding
at March 31, 1999:

<TABLE>
<CAPTION>
                                            OPTIONS OUTSTANDING                 OPTIONS EXERCISABLE
                                  ----------------------------------------   -------------------------
                                                     WEIGHTED
                                      NUMBER         AVERAGE      WEIGHTED       NUMBER       WEIGHTED
                                  OUTSTANDING AT    REMAINING     AVERAGE    EXERCISABLE AT   AVERAGE
                                    MARCH 31,      CONTRACTUAL    EXERCISE     MARCH 31,      EXERCISE
         EXERCISE PRICE                1999        LIFE (YEARS)    PRICE          1999         PRICE
         --------------           --------------   ------------   --------   --------------   --------
<S>                               <C>              <C>            <C>        <C>              <C>
$ .75...........................      84,000           8.99        $ .75         56,000        $0.75
 4.00...........................     120,000           2.21         4.00        120,000         4.00
 5.00...........................      40,000           6.04         5.00         32,500         5.00
 6.75...........................       3,000           8.39         6.75          1,500         6.75
                                     -------           ----        -----        -------        -----
                                     247,000           5.21        $3.09        210,000        $3.31
                                     =======           ====        =====        =======        =====
</TABLE>

     The following table summarizes information about stock options outstanding
at March 31, 1998:

<TABLE>
<CAPTION>
                                            OPTIONS OUTSTANDING                 OPTIONS EXERCISABLE
                                  ----------------------------------------   -------------------------
                                                     WEIGHTED
                                      NUMBER         AVERAGE      WEIGHTED       NUMBER       WEIGHTED
                                  OUTSTANDING AT    REMAINING     AVERAGE    EXERCISABLE AT   AVERAGE
                                    MARCH 31,      CONTRACTUAL    EXERCISE     MARCH 31,      EXERCISE
         EXERCISE PRICE                1998        LIFE (YEARS)    PRICE          1998         PRICE
         --------------           --------------   ------------   --------   --------------   --------
<S>                               <C>              <C>            <C>        <C>              <C>
$ .75...........................      84,000           9.99        $ .75             --        $  --
 4.00...........................     120,000           3.21         4.00         80,000         4.00
 5.00...........................      40,000           7.04         5.00         26,666         5.00
 6.75...........................       3,000           9.39         6.75             --           --
                                     -------           ----        -----        -------        -----
                                     247,000           6.21        $3.09        106,666        $4.25
                                     =======           ====        =====        =======        =====
</TABLE>

     The Company uses the intrinsic value method in accounting for its stock
option plans. In applying this method, no compensation cost has been recognized
in the accompanying financial statements. Had compensation cost for the
Company's stock option plans been determined based on the fair value at the
grant dates for awards under those plans, the Company's net loss and loss per
share would have resulted in the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                            MARCH 31, 1999   MARCH 31, 1998
                                                            --------------   --------------
<S>                                                         <C>              <C>
Net loss
  As reported.............................................   $  (967,176)     $(1,352,072)
  Pro forma...............................................    (1,102,739)      (1,487,635)
Basic net loss per common share
  As reported.............................................   $     (0.35)     $     (0.49)
  Pro forma...............................................         (0.40)           (0.54)
Diluted net loss per common share
  As reported.............................................   $     (0.35)     $     (0.49)
  Pro forma...............................................         (0.40)           (0.54)
</TABLE>

     For purposes of the pro forma amounts above, the fair value of each option
grant was estimated on the date of grant using the Black-Scholes options-pricing
model with the following weighted-average assumptions used for grants in the
years ended March 31, 1999 and 1998; expected volatility of 90%, risk-free
interest rates of 6.7%; and expected lives of 10 years.

                                      F-17
<PAGE>   39
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            MARCH 31, 1999 AND 1998


                                  (CONTINUED)


NOTE J.  SUBSEQUENT EVENT

     On April 26, 1999, the Company signed an agreement to sell substantially
all of the operating assets of the Company, developed technology and the Company
name to an unrelated third party. This agreement also includes covenants not to
compete regarding certain technologies owned and developed by the Company. If
ratified by a majority of the shareholders, the proposed transaction would
result in the Company recording a loss of approximately $350,000 upon closing.
The following pro forma financial information presents the proposed transaction
as if it had occurred on March 31, 1999.

<TABLE>
<CAPTION>
                                                                    REF.                   MARCH 31, 1999
                                                 MARCH 31, 1999   FOOTNOTE   ADJUSTMENTS     PRO FORMA
                                                 --------------   --------   -----------   --------------
                                                   (AUDITED)
<S>                                              <C>              <C>        <C>           <C>
Consolidated balance sheet:
  Assets:
     Cash......................................    $1,880,570        (1)      $ 477,890      $2,358,460
     Accounts receivable.......................       197,733        (2)       (197,733)             --
     Inventory.................................       400,812        (3)       (400,812)             --
     Property and equipment, net...............       261,234        (4)       (261,234)             --
     Other assets..............................        61,516                                    61,516
                                                   ----------                                ----------
          Total assets.........................    $2,801,865                                $2,419,976
                                                   ==========                                ==========
Liabilities and stockholders' equity:
  Liabilities:
     Accounts payable and accrued expenses.....    $  150,228                        --      $  150,228
     Note payable..............................        39,840                        --          39,840
                                                   ----------                                ----------
          Total liabilities....................       190,068                        --         190,068
Stockholders' equity:
  Preferred stock..............................    $       --                 $      --      $       --
  Common stock.................................        31,851                        --          31,851
  Additional paid-in capital...................    11,709,254                        --      11,709,254
  Accumulated deficit..........................    (9,129,308)       (5)       (381,889)     (9,511,197)
                                                   ----------                                ----------
          Total stockholders' equity...........     2,611,797                                 2,229,908
                                                   ----------                                ----------
          Total liabilities and stockholders'
            equity.............................    $2,801,865                                $2,419,976
                                                   ==========                                ==========
</TABLE>

Footnote references:

(1)Cash has been adjusted to reflect the proceeds of the sale as follows:

<TABLE>
<S>                                                           <C>
Accounts receivable.........................................  $146,867
Inventory...................................................   200,406
Property and Equipment, net.................................   130,617
                                                              --------
                                                              $477,890
                                                              ========
</TABLE>

(2) Accounts receivable has been adjusted to reflect the removal of the assets
    sold.
(3) Inventory has been adjusted to reflect the removal of the assets sold.
(4) Fixed assets has been adjusted to reflect the removal of assets sold.
(5) Accumulated deficit has been adjusted to reflect the additional loss
    attributable to the sale.

                                      F-18
<PAGE>   40
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            MARCH 31, 1999 AND 1998


                                  (CONTINUED)


NOTE K  NEW ACCOUNTING PRONOUNCEMENT

     The AICPA Accounting Standards Executive Committee has issued Statement of
Position (SOP) 98-1, Costs of Software for Internal Use and Related
Reengineering Costs, which is effective for fiscal years beginning after
December 15, 1998. SOP 98-1 segments an internal use software project into
stages and the accounting is based on the stage in which the cost is incurred.
The Company has not yet adopted this SOP 98-1, referred to above, and does not
expect the adoption to have a material impact on the Company's results of
operations or financial condition.

                                      F-19