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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, 1997.

COMMISSION FILE NO. 0-21061.

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

Delaware                                                        58-2044990
--------                                                     ---------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               identification No.)


                   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.   [X]

The issuer's revenues for the fiscal year ended March 31, 1997 were $23,918.

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, 1997,
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 $16,323,125.

The number of shares of the issuer's Common Stock outstanding as of April 30,
1997 was 3,185,000.

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
Commision, press releases and other communications. The Company assumes no
obligation to update forward-looking statements.

ITEM 1. DESCRIPTION OF BUSINESS

         Laminating Technologies, Inc. ("Company", "LTI") 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(TM)"). LTI Processed(TM) is a procedure by which
polyester film is laminated onto single thickness paper ("linerboard") prior to
corrugation. The Company believes that the LTI Processed(TM) method is the only
process currently available in which polyester film can be laminated onto
linerboard such that the resulting laminate can withstand the heat and stress of
corrugation. This procedure results in a packaging material that the Company
believes is physically superior, more attractive and potentially more
cost-effective than many currently existing packaging materials such as plastic,
metal and certain corrugated cardboard products, including those that are
laminated with paper and/or coated after corrugation.

         The LTI Processed(TM) method can be utilized to produce a wide variety
of packaging products and specialty displays. To date, the Company has produced
a number of prototype products, including bakery dessert boxes, coolers, frozen
food shippers, point of purchase displays, pizza delivery boxes, medical
product/specimen shippers and microwavable food discs used as pie plates and
pizza slice trays. The Company believes that these products, together with other
potential LTI Processed(TM) products, are capable of improving upon existing
packaging products by reducing or eliminating certain limitations associated
with such products. For example, the Company believes that LTI Processed(TM)
products may be leakproof, resistant to a variety of solvent and petroleum-based
chemicals, recyclable, stronger and have a higher bursting strength than
conventional corrugated products. The Company also believes that the LTI
Processed(TM) 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, the Company believes that while LTI Processed(TM) material
may be 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(TM) 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 


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performance advantages and cost savings, the Company believes that LTI
Processed(TM) packaging materials may be preferred to many packaging products
currently marketed by others.

         Since its inception, the Company has focused on research and
development, had only a limited number of sales and only recently began to focus
on broader-based marketing. Most of the sales did not involve significant orders
and the Company believes that these customers were primarily evaluating the
commercial application of LTI Processed(TM) products. Moreover, further
development of the LTI Processed(TM) method may be necessary to satisfy the
requirements of specific end users or strategic partners.

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 proprietary (patent pending) 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.

STRATEGY

         The Company's strategy is to focus principally on (i) designing,
developing and marketing value-added, niche LTI Processed(TM) products directly
to end users and (ii) leveraging its resources by establishing strategic
alliances with vertically integrated corrugators ("converters") for whom the
Company could potentially supply LTI Processed(TM) linerboard for further
manufacture and sale by such converters. The principal elements of the Company's
strategy are as follows:

         Design, Develop and Market Products Directly. The Company intends to
design, develop and market value-added, niche LTI Processed(TM) products
directly to end users. The Company believes that this strategy will provide more
flexibility to (i) identify quickly certain end users for whom the physical
properties or potential cost-effectiveness of LTI Processed(TM) materials may
provide a significant advantage over their current packaging or display products
and (ii) design specific products that satisfy such end user's requirements.

         Out-Source Manufacturing Activities. With the exception of design
activities, the Company currently has out-sourced substantially all of its
manufacturing to existing laminating, corrugating, printing and sheet plant
companies with whom the Company has established formal, contractual
relationships. The Company believes that such out-sourcing may be more
cost-effective and will enable it to maintain the flexibility to both
accommodate the varied product needs of a wide array of customers and adjust
rapidly to developments in the Company's product offerings.

         Seek Strategic Alliances for Production and Marketing. In the future,
the Company hopes to seek strategic alliances with vertically integrated
converters for whom the Company could supply LTI Processed(TM) board for further
manufacturing and sale by such converters. The Company believes that such
relationships could enable the Company to more effectively penetrate the
national market and persuade larger end users of the value of LTI Processed(TM)
products without disrupting existing supplier relationships. The Company expects
that such alliances, if entered into, would involve the purchase by such
converters of LTI Processed(TM) linerboard (either printed or unprinted) from
the Company and the completion (i.e., die-cutting and printing, if necessary)
and sale of finished products by such converters.

         Licensing of LTI Processed(TM) Technology. The Company may in the
future also seek to license its LTI Processed(TM) technology to manufacturers
who would produce LTI Processed(TM) linerboard and finished products
independently. Such licensing agreements might provide for up-front licensing
fees and/or royalty payments.



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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 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
corrugated 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 corrugated
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


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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.

         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(TM)

         The Company believes that the application of the LTI Processed(TM)
method, which is a 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 Company
believes that the LTI Processed(TM) method is the only currently available
procedure that permits the lamination of 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, burn or
delaminate over time and can cause improper bonding agents to bubble or
crystallize. The Company believes that the LTI Processed(TM) 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, with the proper direction by
the Company's personnel, independent companies possessing the proper machinery
can produce LTI Processed(TM) 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(TM) corrugated
material.

         The Company believes that the LTI Processed(TM) laminate provides a
protective barrier allowing corrugated board, in the right configuration, to be
leakproof and resistant to a variety of solvents, paints, petroleum-based
products and other chemicals for extended periods of time. The Company believes
that this 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(TM) materials may also
be recyclable, a significant advantage over styrofoam, which may pose certain
environmental hazards and has been restricted in certain areas, including the
European Union.

         The Company believes that the LTI Processed(TM) method can also
significantly improve on the ability to print corrugated board, especially for
high volume production orders. The Company expects that high volume printing of
LTI Processed(TM) materials will 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 the
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 and again, allows
less ink to be used. However, the quality of the images are somewhat diminished
relative to reverse printing due to the porous nature of the linerboard.
Pre-printing



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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 are expected to solve the chafing and cracking
problems associated with traditional printing methods 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, 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. Because these processes require printing in advance of corrugation
and thus the timely coordination of the entire production process, the Company
expects to utilize these methods only for high volume orders.

         For smaller orders, which are expected to constitute most of the
Company's business for the foreseeable future, the Company expects to "screen
print" after corrugation onto previously laminated board. Screen printing
entails applying ink to the film surface of the corrugated board using a
silk-screen type process. While this process can be more expensive than reverse
printing and pre-printing and suffers some of the scuffing problems associated
with exterior surface printing, the Company uses particular inks which allow a
superior bond of the ink to the film, thereby minimizing scuffing. Additionally,
screen printing allows more ink to be used to attain greater opacity and a
glossy finish while the particular screen printing technique maintains high
quality resolution.

PRODUCT DEVELOPMENT

         The Company believes that the LTI Processed(TM) method can be utilized
to produce a wide variety of packaging products and specialty displays. For
example, the Company believes that LTI Processed(TM) 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(TM) 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 insulated
catering and pizza delivery boxes and believes that LTI Processed(TM) can
produce improved alternatives to corrugated products currently used in these
industries. LTI Processed(TM) 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(TM) 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 has targeted the prepared desserts segment of the bakery
industry as an initial market and has developed a line of LTI Processed(TM)
bakery products that it believes 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(TM)
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, 1997 and 1996, the
Company has spent approximately $1,779,339 and $1,042,290, respectively, for
operating expenses. The Company is a development stage entity 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.

SALES AND MARKETING

         The Company's sales force currently consists of two salespersons. The
Company intends to hire approximately two additional salespersons in the near
term. The Company may also determine to utilize 



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the services of independent sales representatives. See "--Employees". The sales
force is under the direction of J. Scott Stewart, Senior Vice President -
Marketing/Sales.

         The Company believes that direct sales to end users of LTI
Processed(TM) finished products could enable the Company to more effectively
penetrate the national market. The Company also believes that direct sales to
end users will enable the Company to identify and design particular niche
products that may provide a significant advantage over alternative packaging or
display products. To the extent that the Company enters into relationships with
converters, the Company will be dependent to a large degree upon such converters
to market products incorporating LTI Processed(TM) technology, and the success
of any such relationship will depend in part upon the converter's own
competitive, marketing and strategic considerations, including the relative
advantages of alternative products being developed or marketed by such
converters. To date, the Company has not entered into any marketing arrangements
with any converter, and the Company anticipates that such arrangements, if any,
will become more likely only if the Company is able to effectively penetrate the
direct sales market.

         The Company believes that much of the corrugated packaging industry is
characterized by long-standing business relationships between manufacturers and
end users. In addition, the Company will need to convince potential customers
currently utilizing non-corrugated packaging products of the relative advantages
of LTI Processed(TM) 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(TM)
products. Moreover, the Company anticipates that it will be required in certain
cases to design and produce at its expense prototype products prior to
consummating a sale, which activities could have an adverse effect on the
Company's results of operations.

MANUFACTURING

         The Company does not intend to directly manufacture either LTI
Processed(TM) roll-stock or finished products. Instead, the Company has
contracted with manufacturers and may enter into formal and informal
arrangements with additional manufacturers and outside laminators, corrugators
and sheet plants. However, the Company may, in the future, consider performing
some or all of the manufacturing processes if it believes it is appropriate
under the circumstances. The Company has no experience in manufacturing products
on a commercial scale and does not have the resources to directly manufacture on
a commercial scale any of its products. In the event the Company decides to
engage in any manufacturing activities, the Company will require substantial
funds and will be required to hire and train significant additional personnel.

         LTI Processed(TM) 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 with polyethylene and
other coatings for finishes such as those on cereal boxes. The Company believes
that, with the proper direction by the Company's personnel, independent
companies possessing the proper laminating and coating machinery can produce LTI
Processed(TM) 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 intends to out-source the corrugation of LTI Processed(TM)
roll-stock with corrugators with whom the Company has established formal
relationships. See "--Strategy." The Company believes that the corrugation of
LTI Processed(TM) roll-stock requires little oversight by the Company, that no
modification of existing machinery is required and that corrugators are widely
available. However the Company will be dependent on these corrugators for
production and there can be no assurance that these corrugators will continue to
fill the Company's production needs or, if they cease to do so, that the Company
would be able to secure adequate production on terms acceptable to the Company.
The Company has entered into a formal arrangement with Jet Corr, Inc., a
corrugator, to provide for the corrugation of LTI Processed(TM) roll-stock and
such production is currently commercialized.



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         After corrugation, sheets of LTI Processed(TM) board will typically be
stored on the converter's premises to await specific orders. To fill smaller
customer orders, this inventory can be die-cut and printed if necessary by sheet
plants and made into final products. On larger orders for printed products, the
Company expects to laminate onto pre-printed linerboard or laminate with
reverse-printed film and thus run printed roll-stock through the corrugating
process, allowing higher volume and faster and less expensive production. See
"--LTI Processed(TM)." Through the use of a laminator, a corrugator and a
converter, the Company is now 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(TM) 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 will face intense competition from these
manufacturers to the extent that these products present viable alternatives to
LTI Processed(TM) products. These products may 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. The Company intends to compete with such
manufacturers by offering a product that can be more expensive but which the
Company believes will be of a higher quality, and in many circumstances, more
efficient in the long term. Additionally, the Company will face 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(TM) and
offer little price advantage over LTI Processed(TM), they will effectively
compete with the Company's products in the market for quality printed products.

         The Company also expects to encounter significant competition as it
seeks to enter markets for other forms of value-added packaging and seeks to
compete with products such as styrofoam, metal and plastic. Given the fact that
the physical properties of these other materials have been long established,
that end users are accustomed to using these materials and that manufacturers
have massive national and international production and marketing efforts as well
as sophisticated and well developed product lines, the Company will need to
persuade end users of the value of an entirely new material and product design
which is purchased from a new supplier. There can be no assurance that such
efforts will be successful. Moreover, there can be no assurance that other
companies will not develop products which are superior to the Company's or which
achieve greater market penetration.

PATENTS AND PROPRIETARY RIGHTS

         The Company's success 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(TM)
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(TM) 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 




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rights to this patent application to the Company. The Company submitted a
modification of its original application on March 27, 1997. This resulted in
withdrawal of part of the rejections, and the Company expects to attempt to
submit a further modification or responsive arguments not later than November,
1997, to attempt to overcome the remaining rejections.

         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, if any,
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, if patents are issued to the Company, will not
design around such patents.

         The Company's potential products may conflict with patents which have
been or may be granted to competitors or others. In particular, the Company is
aware of a patent to Adolph Coors Company that relates to certain processes by
which film, including polyester film, is reverse-printed and laminated onto
linerboard. Such patent may affect the ability of the Company to obtain patent
protection for some or all of the claims included in its patent application.
Moreover, there can be no assurance that any application of the Company's
technology will not infringe the Coors patent or any other patents or
proprietary rights of others. Such other persons could bring legal actions
against the Company claiming damages and seeking to enjoin manufacturing and
marketing of the Company's products. If any such actions are successful, in
addition to any potential liability for damages, the Company could be required
to obtain a license in order to continue to manufacture or market the affected
products. There can be no assurance that the Company would prevail in any such
action or that any license required under any such patent would be made
available on acceptable terms, if at all. If the Company becomes involved in
litigation, it could consume a substantial portion of the Company's time and
resources. Moreover, the non-approval of the Company's patent application or the
invalidation of any patent that may be issued to the Company would likely have a
material adverse effect on the Company.

         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 unpatented trade secrets.

         The Company intends to protect its proprietary technology through the
use of non-disclosure agreements with the laminators, corrugators, converters
and printers 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(TM) 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(TM) packaging, a
shortage-induced price increase could raise the price of such LTI Processed(TM)
materials beyond the value margin, causing end users to seek integrated
suppliers which may not use the Company's products. Although the Company's
requirements for linerboard have to date been limited, the Company has relied,
and will likely continue to rely, upon Ludlow Corporation as a principal
supplier of linerboard. Additionally, the 




                                                                               9
<PAGE>   10

Company has entered into contracts with Jet Corr, Inc. and Packaging-Atlanta,
Corporation to corrugate and convert, respectively, the Company's integrated
products.

         In the absence of a shortage, the Company believes that there are
numerous sources of supply of its raw materials. However, should the Company be
unable to obtain an adequate supply of necessary raw material, the Company's
ability to continue to manufacture products in accordance with its business plan
would be adversely affected.

GOVERNMENT REGULATION

         To the extent that LTI Processed(TM) 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. A primary supplier of polyester film has informed the
Company that the 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(TM) 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(TM) products shipped
to those countries. For example, the European Union has strict regulations as to
the disposability and recyclability of imported packaging and paper products.
There can be no assurance that such foreign regulations will not restrict or
preclude the Company from engaging in activities in such countries, which could
have a material adverse effect on the Company. 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.

EMPLOYEES

         The Company currently has seven full-time employees and one part-time
employee. The Company intends to hire two additional salespersons in the near
future and may hire up to three additional salespersons. The Company may also
determine to utilize the services of independent sales representatives. The
Company's future success depends in significant part upon the continued services
of its executive officers and its ability to attract and retain highly qualified
sales and marketing and managerial personnel. Competition for such personnel is
intense and there can be no assurance that the Company can retain its key
employees or that it can attract, assimilate or retain other highly qualified
sales and marketing and managerial personnel in the future. 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.

RISK FACTORS

         DEVELOPMENT STAGE COMPANY; LIMITED HISTORY OF OPERATIONS; NEED FOR
SIGNIFICANT ADDITIONAL FUNDS. The Company was organized in March, 1993 and is
currently in the development stage. While it has conducted limited research and
development and sales and marketing activities, it has not generated significant
revenues and may experience many of the problems, delays, expenses and
difficulties commonly encountered by early stage companies, many of which are
beyond the Company's control. These include, but are not limited to,
unanticipated problems relating to product development, testing, manufacturing,
marketing, competition and regulatory compliance, included but not limited to
possible regulations governing food packaging and recyclability, as well as
additional costs and expenses that may exceed current estimates. There can be no
assurance that the Company will successfully develop



                                                                              10
<PAGE>   11

and commercialize any products, generate any revenues or ever achieve profitable
operations. Additionally, the Company has never produced LTI Processed(TM)
materials under the conditions and in the volume that will be required to be
profitable and cannot predict all of the manufacturing difficulties that may
arise. Given the particular properties of LTI Processed(TM) materials, the
Company has in the past been forced to modify package construction to
accommodate unforeseen design problems, including those associated with excess
heat and cold retention in food service packaging. Thus, the Company's proposed
products may require significant further research, development, design and
testing, as well as regulatory clearances, prior to larger-scale
commercialization. There can be no assurance that the Company's products will be
successfully marketed, prove to be safe and practical, receive regulatory
approvals if required (including, but not limited to, possible domestic or
foreign requirements regarding packaging used in food service as well as
possible domestic or foreign requirements regarding the recyclability of the
Company's materials), or be capable of being produced in commercial quantities
at reasonable costs.

         The Company's cash requirement may vary materially from those currently
anticipated due to product development programs, relationships with strategic
partners, if any, changes in the direction of the Company's activities and other
factors. The Company has no commitments for any future funding and there can be
no assurance that the Company will be able to obtain additional financing in the
future from either debt or equity financings, collaborative arrangements or
other sources on acceptable terms. Any future financing may result in
significant dilution to investors. If the Company is unable to obtain the
necessary financing, it will be required to significantly curtail its activities
or cease operations.

         UNCERTAINTY OF MARKET ACCEPTANCE. The success of LTI Processed(TM)
products will require the Company to secure production and marketing alliances
within the highly competitive corrugated packaging market, which is
characterized by manufacturers who operate at very low profit margins and by end
users who often seek the lowest packaging and material costs possible.
Additionally, much of the corrugated packaging industry is characterized by
long-standing business relationships between manufacturer and end users. The
Company will likely encounter resistance from end users reluctant to incur
possible additional costs associated with LTI Processed(TM) products (compared
to non-laminated corrugated products and other materials). In addition, the use
of LTI Processed(TM) products may require that end users change both their
packaging material and their source of packaging material, and perhaps incur the
further cost and inconvenience of interrupting their production line to
accommodate these changes. The Company has not conducted any market studies as
to the commercial viability of LTI Processed(TM) products and there can be no
assurance that the Company will be able to successfully demonstrate to
manufacturers and end users that the properties of LTI Processed(TM) products
justify the additional costs and/or burdens associated with such products.

         DEPENDENCE ON SUPPLIERS; SHORTAGES OF RAW MATERIALS AND PRICE
FLUCTUATIONS. The Company does not manufacture the raw material that is used in
its products and thus it depends on its raw material suppliers. The Company does
not have any long-term supply or distribution agreements with any of its
suppliers. The Company's success will depend in part on its ability to maintain
relationships with its current suppliers and to develop new supplier
relationships, as to which there can be no assurance. There can be no assurance
that the loss of, or a significant disruption in the relationship with, one or
more of the Company's suppliers would not have a material adverse effect on the
Company's business and results of operations. Moreover, the corrugating industry
periodically suffers shortages of roll stock paper from which corrugated board
is made. These shortages more seriously affect non-vertically integrated
corrugating converters (i.e., those that 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. In that the Company intends to
utilize, to some extent, non-integrated converters for the production of LTI
Processed(TM) packaging, a shortage-induced price increase could raise the price
of such LTI Processed(TM) materials beyond its value margin, causing end users
to seek integrated suppliers who may not use the Company's products.

         DEPENDENCE ON THIRD PARTIES FOR MANUFACTURING AND MARKETING ACTIVITIES.
The Company does not intend to directly manufacture either LTI Processed(TM)
linerboard or finished products. Instead the Company expects to contract for
manufacture with additional outside laminators, corrugators and sheet plants
with whom the Company may establish formal or informal relationships. Although
the Company believes that such services are widely available, there can be no
assurance that the Company 



                                                                              11
<PAGE>   12

will be able to procure these services on terms acceptable to the Company.
Moreover, the Company's dependence on such third parties will reduce its control
over the manufacturing process.

         Additionally, the Company may rely on large integrated converters to
market LTI Processed(TM) products to their end users and intends to pursue
strategic alliances with such companies for manufacture and marketing. The
success of the Company will depend, in part, on its ability to enter into and
maintain such strategic alliances and the collaborator's strategic interest in
and ability to successfully manufacture and/or market LTI Processed(TM)
products. To the extent the Company enters into any strategic alliance, the
Company will be dependent to a significant extent on such partners. The success
of any such strategic alliance will depend in part upon such partners' own
competitive, marketing and strategic considerations, including the relative
advantages of alternative products being developed and/or marketed by such
partners. If any such partners are unsuccessful in manufacturing and/or
marketing the Company's products, the Company's business, financial condition
and results of operations would be materially adversely affected.

         The Company has no experience in manufacturing or marketing products on
a commercial scale and does not have the resources to manufacture on a
commercial scale any of its products. To the extent that the Company determines
not to, or is unable to, enter into strategic alliances with respect to the
manufacture or marketing of LTI Processed(TM) products, significant additional
funds, capital expenditures, management resources and time will be required to
establish a manufacturing facility or develop a larger sales force. There can be
no assurance that the Company will be able to enter into strategic alliances to
manufacture or market its proposed products or, in lieu thereof, establish a
manufacturing facility or develop a sufficient sales force, or be successful in
gaining market acceptance of its products. See "Description of
Business--Manufacturing" and "--Sales and Marketing".

         DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY; UNCERTAINTY OF PATENT
PROTECTION; NO ASSURANCE OF SIGNIFICANT COMPETITIVE ADVANTAGE. The Company's
success 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(TM) 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(TM) technology. On March 15, 1990, the U.S. Patent Office rejected the
claims of the Company's patent application as being too broad in light of prior
art. On April 19, 1993, Mr. Olvey assigned all rights to this patent application
to the Company. The Company submitted a modification of its original application
on March 27, 1997. This resulted in withdrawal of part of the rejections, and
the Company expects to submit a further modification or responsive arguments not
later than November, 1997, to attempt to overcome the remaining rejections.

         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, if any,
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, if patents are issued to the Company, will not
design around such patents.

         The Company's potential products may conflict with patents which have
been or may be granted to competitors or others. In particular, the Company is
aware of a patent issued to Adolph Coors Company that relates to certain
processes by which film, including polyester film, is reverse-printed and
laminated onto linerboard. Such patent may affect the ability of the Company to
obtain patent protection for some or all of the claims included in its patent
application. Moreover, there can be no assurance that any application of the
Company's technology will not infringe the Coors patent or any other patents or
proprietary rights of others. Such other persons could bring legal actions
against the Company claiming damages and seeking to enjoin manufacturing and
marketing of the Company's products. If any such actions are successful, in
addition to any potential liability for damages, the Company could be required
to obtain a license in order to continue to manufacture or market the affected
products. There can be no assurance that the Company would prevail in any such
action or that any license required under any such patent would be made
available on acceptable terms, if at all. If the Company becomes involved in
litigation, it could consume a substantial portion of the Company's time and
resources. Moreover, the


                                                                              12
<PAGE>   13

non-approval of the Company's patent application or the invalidation of any
patent that may be issued to the Company would likely have a material adverse
effect on the Company.

         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 unpatentable trade secrets.

         The Company intends to protect its proprietary technology through the
use of licensing, exclusivity and non-disclosure agreements with the laminators,
corrugators, converters and printers 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. See "Description of Business--Patents and Proprietary Rights."

         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 are 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(TM) 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 will face intense competition from these
manufacturers to the extent that these products present viable alternatives to
LTI Processed(TM) products. These products may 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. The Company intends to compete with such
manufacturer by offering a product that can be more expensive but which the
Company believes will be of higher quality, and in many circumstances may be
more cost-efficient in the long term. Additionally, the Company will face
competition from 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(TM), these products may offer a price advantage over LTI Processed(TM)
and will effectively compete with the Company's products in the market for
quality printed products.

         The Company also expects to encounter significant competition as it
seeks to enter markets for other forms of value-added packaging and products
such as styrofoam, metal and plastic. Given the fact that the physical
properties of these other materials have been long established, that end users
are accustomed to using these materials and that manufacturers have massive
national and international production and marketing efforts as well as
sophisticated and well developed product lines, the Company will need to
persuade end users of the value of an entirely new material and product design
which is purchased from a new supplier. There can be no assurance that such
efforts will be successful. Moreover, there can be no assurance that other
companies will not develop products which are superior to the Company's or which
achieve greater market penetration. See "Description of Business--Competition".




                                                                              13
<PAGE>   14

         UNCERTAINTY OF GOVERNMENT REGULATORY REQUIREMENTS. To the extent that
LTI Processed(TM) is used in the food service and packaging industries, the
Company will be required to ensure that its products meet federal Food and Drug
Administration (the "FDA") regulations regarding materials used in contact with
food. The Company believes that both the polyester film and the bonding agents
used in LTI Processed(TM) products will be 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 LTI Processed(TM) products shipped to those
countries. For example, the European Union has strict regulations as to the
disposability and recyclability of imported packaging and paper products. There
can be no assurance that such foreign regulations will not restrict or preclude
the Company from engaging in activities in such countries, which could have a
material adverse effect on the Company. The failure to obtain any required
regulatory approvals could have a material adverse effect on the Company.

         DEPENDENCE ON KEY PERSONNEL. The Company is dependent on Michael E.
Noonan, the Company's Chairman and Chief Executive Officer, as well as principal
members of its management, design and marketing staff, the loss of one or more
of whom could substantially impair the Company's development and marketing
plans. The Company has obtained a $2,000,000 "key-man" life insurance policy on
the life of Mr. Noonan and has also entered into a one year employment agreement
with Mr. Noonan. The future success of the Company depends in large part upon
its ability to attract and retain highly qualified personnel. The Company faces
intense competition for such highly qualified personnel from other corrugated
manufacturers and may be required to pay higher salaries to attract and retain
such personnel. There can be no assurance that the Company will be able to hire
sufficient qualified personnel on a timely basis or retain such personnel. The
loss of such key personnel or failure to recruit additional key personnel by the
Company could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, many members of the
Company's management team have only recently joined the Company. Managing the
integration of new personnel could adversely affect the Company's growth and
progress until such integration occurred.

         POTENTIAL ADVERSE IMPACT OF RELEASE OF LOCKED-UP SECURITIES. All of the
Company's current stockholders, officers and directors have agreed not to sell,
assign, transfer or otherwise dispose publicly any of their shares of Common
Stock for a period from October 9, 1996, until November 10, 1997, without the
prior written consent of the D. H. Blair Investment Banking Corporation. Sales
of such shares of Common Stock, or the possibility of such sales, in the public
market may have an adverse effect on the market price of the securities offered
hereby.

         POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. On October 9, 1997,
the Warrants may be redeemed by the Company at a redemption price of $.05 per
Warrant upon not less than 30 days prior written notice if, with respect to the
Class A Warrants, the closing bid price of the Common Stock shall have averaged
in excess of $9.10 per share and, with respect to the Class B Warrants, $12.25
per share, in each instance for 30 consecutive trading days ending within 15
days of the notice. Redemption of the Warrants could force the holders (i) to
exercise the Warrants and pay the exercise price therefor at a time when it may
be disadvantageous for the holders to do so, (ii) to sell the Warrants at the
then current market price when they might otherwise wish to hold the Warrants,
or (iii) to accept the nominal redemption price which, at the time the Warrants
are called for redemption, is likely to be substantially less than the market
value of the Warrants. See footnotes to financial statements.

         CURRENT PROSPECTUS AND STATE REGISTRATION TO EXERCISE WARRANTS; LACK OF
CERTAIN AFTERMARKET EXEMPTIONS. Holders of Warrants will be able to exercise the
Warrants only if (i) a current prospectus under the Securities Act relating to
the securities underlying the Warrants is then in effect, and (ii) such
securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various holders of
Warrants reside. Although the Company has undertaken and intends to use its best
efforts to maintain a current prospectus covering the securities underlying the
Warrants following completion of the Offering to the extent required by Federal
securities laws, there can be no assurance that the Company will be able to do
so. The value of the Warrants may be greatly 



                                                                              14
<PAGE>   15

reduced if a prospectus covering the securities issuable upon the exercise of
the Warrants is not kept current or if the securities are not qualified, or
exempt from qualification, in the states in which the holders of Warrants
reside. Persons holding Warrants who reside in jurisdictions in which such
securities are not qualified and in which there is no exemption will be unable
to exercise their Warrants and would either have to sell their Warrants in the
open market or allow them to expire unexercised. If and when the Warrants become
redeemable by the terms thereof, the Company may exercise its redemption right
even if it is unable to qualify the underlying securities for sale under all
applicable state securities laws.

         POSSIBLE DELISTING OF SECURITIES FROM THE NASDAQ STOCK MARKET. While
the Company's Units, Common Stock, Class A Warrants and Class B Warrants meet
the current Nasdaq listing requirements and are included on the Nasdaq SmallCap
Market, there can be no assurance that the Company will meet the criteria for
continued listing. Continued inclusion on Nasdaq generally requires that (i) the
Company maintain at least $2,000,000 in total assets and $1,000,000 in capital
and surplus, (ii) the minimum bid price of the Common Stock be $1.00 per share,
(iii) there be at least 100,000 shares in the public float valued at $200,000 or
more, (iv) the Common Stock have at least two active market makers, and (v) the
Common Stock be held by at least 300 holders.

         If the Company is unable to satisfy Nasdaq's maintenance requirements,
its securities may be delisted from Nasdaq. In such event, trading, if any, in
the Units, Common Stock and Warrants would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the NASD's "Electronic
Bulletin Board". Consequently, the liquidity of the Company's securities could
be impaired, not only in the number of securities which could be bought and
sold, but also through delays in the timing of transactions, reduction in
security analyst's and the news media's coverage of the Company, and lower
prices for the Company's securities than might otherwise be attained.

         RISKS OF LOW-PRICED STOCK. If the Company's securities were delisted
from Nasdaq (See "--Risk Factors--Possible Delisting of Securities from the
Nasdaq Stock Market"), they could become subject to Rule 15g-9 under the
Exchange Act, which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with net worths in
excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together
with their spouses). For transactions covered by this rule, a broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, such
rule may adversely affect the ability of broker-dealers to sell the Company's
securities and may adversely affect the ability of the Company's security
holders to sell the Company's securities in the secondary market.

         Commission regulations define a "penny stock" to be any non-Nasdaq
equity security that has a market price (as therein defined) of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.

         The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on Nasdaq and have certain
price and volume information provided on a current and continuing basis or meet
certain minimum net tangible assets or average revenue criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, it would remain subject to Section 15(b)(6) of the Exchange
Act, which gives the Commission the authority to prohibit any person that is
engaged in unlawful conduct while participating in a distribution of a penny
stock from associating with a broker-dealer or participating in a distribution
of a penny stock, if the Commission finds that such a restriction would be in
the public interest. If the Company's securities were subject to the rules on
penny stocks, the market liquidity for the Company's securities could be
severely adversely affected.




                                                                              15
<PAGE>   16

ITEM 2. PROPERTIES

         The Company currently leases approximately 5,000 square feet of office
space for its executive offices pursuant to a two year agreement which provides
for a monthly rent of $3833. The office space, located in Atlanta, Georgia, is
in excellent condition.

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, 1997.

                                   PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        A.   MARKET INFORMATION

               The Company's units, Common Stock, Class A Warrants and Class B
Warrants are reported by the Nasdaq SmallCap Market under the symbols, "LAMTU",
"LAMT", "LAMTW" and "LAMTZ", respectively. The following table sets forth the
range of high and low bid quotations or high and low sales prices for the
Company's Common Stock for each of the periods indicated as reported by the
Nasdaq. 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.

<TABLE>
<CAPTION>

         Fiscal year ended March 31, 1997.
                                                              High              Low
                                                              ----              ---
         <S>                                                  <C>               <C>    

         Units    ("LAMTU")
         3rd quarter (commencing October 9, 1996)             $ 10.25           $ 6.25
                                                              -------           ------
         4th quarter                                          $ 9.625           $ 7.75

         Common Stock   ("LAMT")
         3rd quarter (commencing October 9, 1996)             $ 5.625           $ 3.75
                                                              -------           ------
         4th quarter                                          $ 5.625           $ 4.00

         Class A Warrants    ("LAMTW")
         3rd quarter (commencing October 9, 1996)             $  2.75           $ 2.00
                                                              -------           ------
         4th quarter                                          $  3.00           $.9375

         Class B Warrants    ("LAMTZ")
         3rd quarter (commencing October 9, 1996)             $  2.00           $ 1.50
                                                              -------           ------
         4th quarter                                          $ 1.375           $1.125

</TABLE>


         B.   HOLDERS

         The approximate number of record holders of shares of the Common Stock
of the Company outstanding as of June 10, 1997 was 29.

         C.   DIVIDENDS

              The Company has never paid cash dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future. The
Company currently intends to retain all 


                                                                              16
<PAGE>   17

earnings, if any, for use in the expansion of the Company's business. The
declaration and payment of future dividends, if any, will be at the sole
discretion of the Board of Directors and will depend upon the Company's
profitability, financial condition, cash requirements, future prospects and
other 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, has generated minimal revenues from
operations and has incurred substantial operating losses from these activities.

         Most of the Company's sales to date did not involve significant orders
and the Company believes that these customers were primarily evaluating the
commercial potential of the Company's products. The Company also incurred
significant costs associated with such sales in part because a large percentage
of finished product was distributed free of charge as samples. The Company's
sales efforts have also been adversely affected by periods with no operations, a
lack of continuity of management and inadequate capital.

         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, 1996 and 1997. Net sales decreased from
approximately $119,000 in the twelve months ended March 31, 1996 ("fiscal 1996")
to $24,000 in the twelve months ended March 31, 1997 ("fiscal 1997"). Management
invested its resources in developing its technology for commercialization during
fiscal 1997 and thus did not pursue product sales. Gross loss, which includes
the costs of items manufactured as well as the cost of samples, was
approximately ($158,000) in fiscal 1996 as compared to a gross profit of $7,000
in fiscal 1997. The gross profit margin in fiscal 1996 and fiscal 1997 includes
pre-production costs and therefore is not indicative of future margins. The
gross loss in fiscal 1996 was primarily attributable to the amount of product
given away as samples.

         Selling, general and administrative expenses increased by 71% from
approximately $1,042,000 in fiscal 1996 to approximately $1,779,000 in fiscal
1997. The increase is primarily attributable to (1) a charge of approximately
$386,000 relating to the fair market value of stock options granted by two
principal stockholders of the Company to the Company's Chairman, President and
Chief Executive Officer, (2) a cost of approximately $279,000 for debt placement
fees regarding placement of $1,995,000 in bridge notes, and (3) increased
business activity prior and subsequent to the Company's public stock offering in
October, 1996.

         In fiscal 1996 the Company charged to earnings approximately $944,000
relating to the repayment of the Bridge Notes.

         Interest expense increased by approximately 681% from approximately
$101,000 for fiscal 1996 to approximately $789,000 for fiscal 1997. The increase
is primarily due to an increase in interest bearing debt outstanding during
fiscal 1997, which was retired in October, 1996 with the use of part of the
proceeds from the October, 1996 sale of stock.

         Interest income increased from zero in fiscal 1995 to approximately
$110,000 in fiscal 1997 as cash proceeds from the Company's public stock
offering in October, 1996 have been invested in short term cash investments to
the extent not needed for current operations.


                                                                              17
<PAGE>   18

         Net loss increased 96% from approximately $1,229,000, or $2.02 per
share, in fiscal 1996 to approximately $2,409,000, or $ 1.47 per share, in
fiscal 1997, as a result of the foregoing factors.

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. The remaining proceeds of the
offering are intended to be used by the Company to implement its business plan,
which includes the development and testing of products utilizing the LTI
Processed(TM) method and sales and marketing activities. At March 31, 1997, the
Company had $4.9 million in cash and liquid investments. The Company expects to
continue to incur substantial research, development and marketing costs in the
future. The Company also expects 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 expects to continue to
incur operating losses for the foreseeable future.

         Certain common stockholders have agreed to place 410,000 shares of
Common Stock of the Company into escrow. Conditions for release of the escrowed
shares are discussed in the footnotes to the financial statements, Part II, Item
7. 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, 1997 the Company had net operating loss carry-forwards for
Federal income tax purposes of approximately $5,250,000. The net operating loss
and credit carry-forwards expire from March, 2008 through March, 2012.
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 as a result of this Offering.

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.

                                   PART III

ITEM  9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.



                                                                              18
<PAGE>   19

ITEM 10. MANAGEMENT REMUNERATION AND TRANSACTIONS.

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

ITEM 12. MANAGEMENT TRANSACTIONS.

         The information for Part III, Items 9, 10, 11 and 12 is hereby
incorporated by reference to the Company's Proxy Statement, which will be filed
with the commission within one hundred twenty (120) days of the close of the
Company's fiscal year pursuant to regulation 14A.

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

         (a)      Financial Statements
                  See "Index to Consolidated Financial Statements at page F-1.

         (b)      Reports on Form 8-K.
                  No reports on Form 8-K.

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


                                EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.                                 DESCRIPTION
-----------       --------------------------------------------------------------

        <S>       <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
</TABLE>



                                                                              19
<PAGE>   20

<TABLE>
         <S>      <C>                                                
         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.

(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.


                                                                              20
<PAGE>   21
                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)


                                  - I N D E X -
                                  -------------


                                                              PAGE
                                                             NUMBER
                                                             ------


REPORT OF INDEPENDENT AUDITORS                                F-2


CONSOLIDATED BALANCE SHEET AS AT
MARCH 31, 1997                                                F-3


CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996, THE
YEAR ENDED MARCH 31, 1997 AND THE
PERIOD FROM APRIL 19, 1993 (COMMENCEMENT
OF OPERATIONS) THROUGH MARCH 31, 1997                         F-4


CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
FOR THE PERIOD FROM APRIL 19, 1993
(COMMENCEMENT OF OPERATIONS) THROUGH
MARCH 31, 1997                                                F-5


CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 
THE YEAR ENDED MARCH 31, 1996, THE YEAR
ENDED MARCH 31, 1997 AND THE PERIOD FROM 
APRIL 19, 1993 (COMMENCEMENT OF OPERATIONS)
THROUGH MARCH 31, 1997                                        F-6


NOTES TO FINANCIAL STATEMENTS                                 F-7



                                       F-1

<PAGE>   22



                         REPORT OF INDEPENDENT AUDITORS



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


        We have audited the accompanying consolidated balance sheet of
Laminating Technologies, Inc. and subsidiary (a development stage company) as at
March 31, 1997, and the related consolidated statements of operations, changes
in stockholders' equity (capital deficiency) and cash flows for each of the
years in the two-year period ended March 31, 1997 and for the period from April
19, 1993 (commencement of operations) through March 31, 1997. 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.

        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 audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements enumerated above present
fairly, in all material respects, the consolidated financial position of
Laminating Technologies, Inc. and subsidiary at March 31, 1997 and the
consolidated results of their operations, and their consolidated cash flows for
each of the years in the two-year period ended March 31, 1997 and for the period
from April 19, 1993 (commencement of operations) through March 31, 1997 in
conformity with generally accepted accounting principles.



Richard A. Eisner & Company, LLP

New York, New York
June 4, 1997

                                       F-2

<PAGE>   23



                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                           CONSOLIDATED BALANCE SHEET

                              AS AT MARCH 31, 1997



                                   A S S E T S
<TABLE>
<S>                                                                   <C>
Current assets:
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . .           $   907,850 
   Investments (Note B[2]). . . . . . . . . . . . . . . . .             4,032,267 
   Accounts receivable. . . . . . . . . . . . . . . . . . .                 8,772 
   Inventories (Notes B[3] and C) . . . . . . . . . . . . .               103,326 
   Other current assets . . . . . . . . . . . . . . . . . .                41,567 
                                                                      -----------    
    
          Total current assets. . . . . . . . . . . . . . .             5,093,782        
                                                                                         
Fixed assets, net (Notes B[4] and D). . . . . . . . . . . .               209,224        
                                                                      -----------        

          T O T A L . . . . . . . . . . . . . . . . . . . .           $ 5,303,006      
                                                                      ===========      

                               L I A B I L I T I E S                         

Current liabilities:                                                        
   Accounts payable . . . . . . . . . . . . . . . . . . . .           $   256,341    
   Accrued expenses . . . . . . . . . . . . . . . . . . . .                39,268    
   Payroll taxes payable. . . . . . . . . . . . . . . . . .                51,625     
                                                                      -----------     

          Total current liabilities . . . . . . . . . . . .               347,234     
                                                                      -----------     
                                                                   
Commitments and other matters (Note F)                                      
                                                                            
                              STOCKHOLDERS' EQUITY                          
                                    (Note E)                                

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,                 
   3,185,000 shares issued and outstanding. . . . . . . . .                31,850       
                                                                            
Additional paid-in capital. . . . . . . . . . . . . . . . .            11,708,605       
                                                                            
Deficit accumulated during the development stage. . . . . .            (6,784,683)     
                                                                     ------------      
                                                                            
          Total stockholders' equity. . . . . . . . . . . .             4,955,772      
                                                                      -----------      
                                                                            
          T O T A L . . . . . . . . . . . . . . . . . . . .           $ 5,303,006       
                                                                      ===========       
                                                                            
</TABLE>                                                                    






                 The accompanying notes to financial statements
                          are an integral part hereof.


                                       F-3

<PAGE>   24



                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                                          April 19, 1993
                                                                                                           (Commencement 
                                                                    Year Ended March 31,                  of  Operations)          
                                                              ---------------------------------               Through     
                                                                  1996                  1997              March 31, 1997     
                                                              -----------           -----------           --------------        
<S>                                                           <C>                   <C>                     <C>                   
Net sales. . . . . . . . . . . . . . . . . .                  $   119,412           $    23,918             $   365,703           
                                                                                                                                  
Cost of goods sold . . . . . . . . . . . . .                      277,454                16,751               1,032,524           
                                                              -----------           -----------             -----------           
                                                                                                                          
Gross profit (loss). . . . . . . . . . . . .                     (158,042)                7,167                (666,821)          
                                                                                                                                  
Selling, general and administrative                                                                                               
   expenses. . . . . . . . . . . . . . . . .                    1,042,290             1,779,339               5,082,384           
                                                              -----------           -----------             -----------           
                                                                                                                          
Operating (loss) . . . . . . . . . . . . . .                   (1,200,332)           (1,772,172)             (5,749,205)          
                                                                                                                                  
Interest expense . . . . . . . . . . . . . .                      100,874               789,433                 955,783           
                                                                                                                                  
Interest income. . . . . . . . . . . . . . .                                           (109,533)               (109,533)          
                                                                                                                                  
Cancellation of debt . . . . . . . . . . . .                     (121,738)              (49,170)               (170,908)          
                                                                                                                                  
Loss on abandonment of fixed assets. . . . .                       49,277                 5,808                 104,184           
                                                              -----------           -----------             -----------            
                                                                                                                                   
NET (LOSS) . . . . . . . . . . . . . . . . .                  $(1,228,745)          $(2,408,710)            $(6,528,731)           
                                                              ===========           ===========             ===========            
                                                                                                                                   
Net (loss) per share of common stock . . . .                  $     (2.02)          $     (1.47)                                   
                                                              ===========           ===========                                    
Weighted average number of common shares                                                                                           
   outstanding . . . . . . . . . . . . . . .                      632,719             1,667,821                                    
                                                              ===========           ===========                                    
</TABLE>                              
                                                                   
                 The accompanying notes to financial statements    
                          are an integral part hereof.             
                                                                   
                                       F-4                         
<PAGE>   25



                 LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                        (a development stage company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
                                   (Note E)

<TABLE>
<CAPTION>
                                                                                                                                
                                                                   Convertible                                                  
                                                                 Preferred Stock             Common Stock                  
                                                                 Par Value $.01              Par Value $.01              Stock 
                                                              ---------------------      ----------------------      Subscription 
                                                                Shares       Amount       Shares        Amount        Receivable  
                                                              ---------     -------      ---------     --------     -------------- 
<S>                                                            <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
Common stock issued in connection with obtaining                                                                           
   rights to developed technology in April 1993 . . . . . .                                150,126       1,501  
Issuance of common stock for cash and settlement of debt                                                                   
   in April 1993. . . . . . . . . . . . . . . . . . . . . .                                235,221       2,352  
Cash contributed by stockholder . . . . . . . . . . . . . .                                                                
Issuance of convertible preferred stock for cash                           
   in September 1993. . . . . . . . . . . . . . . . . . . .    250,000      $ 2,500    
Common stock issued to an officer in connection                                                                                   
   with the signing of an employment agreement in                                                                                 
   October 1993 . . . . . . . . . . . . . . . . . . . . . .                                 46,122         461        $  (1,250)
Net (loss) for the period April 19, 1993 (commencement of                                                       
   operations) through March 31, 1994 . . . . . . . . . . .   --------      -------      ---------     -------        ---------
                                                                                                                            
Balance - March 31, 1994  . . . . . . . . . . . . . . . . .    250,000        2,500        599,583       5,995           (1,250)
Issuance of common stock for cash in May 1994 . . . . . . .                                  3,690          37  
Common stock issued as consideration for                                                                         
   compensation in August 1994. . . . . . . . . . . . . . .                                 50,662         507 
Services contributed by stockholder . . . . . . . . . . . .                                                       
Net (loss) for the year ended March 31, 1995. . . . . . . .   --------      -------      ---------     -------        ---------
                                                                                                                                  
Balance - March 31, 1995  . . . . . . . . . . . . . . . . .    250,000        2,500        653,935       6,539           (1,250)
Issuance of common stock as settlement of notes payable                                                                          
   to a stockholder in June 1995. . . . . . . . . . . . . .                                 33,208         332 
Collection of stock subscription. . . . . . . . . . . . . .                                                               1,250
Common stock purchased for treasury . . . . . . . . . . . .                               (126,114)                             
Common stock issued from treasury . . . . . . . . . . . . .                                126,114                              
Common stock contributed to treasury and cancelled. . . . .                                 (7,379)        (74)               
Contribution to capital (Note G). . . . . . . . . . . . . .                                                                     
Net (loss) for the year ended March 31, 1996. . . . . . . .                                                                     
                                                              --------      -------      ---------     -------        ---------
                                                                                                                               
Balance - March 31, 1996  . . . . . . . . . . . . . . . . .    250,000        2,500        679,764       6,797            - 0 -   
Warrants issued in connection with Bridge Notes . . . . . .                                                                    
Conversion of debt to common stock. . . . . . . . . . . . .                                361,061       3,611      
Common stock issued as consideration for compensation . . .                                  4,689          47      
Stock options issued by stockholders to an officer as                                                                          
   compensation . . . . . . . . . . . . . . . . . . . . . .                                                                    
Payment of cumulative dividends on Series A                                                                                    
   preferred stock. . . . . . . . . . . . . . . . . . . . .                                                                    
Preferred stock conversion. . . . . . . . . . . . . . . . .   (250,000)      (2,500)                                      
Sale of 1,955,000 shares of common stock (net of                                                                               
   offering costs). . . . . . . . . . . . . . . . . . . . .                              1,955,000      19,550      
Net (loss) for the year ended March 31, 1997. . . . . . . .                                                                    
                                                              --------      -------      ---------     -------        --------- 
                                                                                                                                  
BALANCE AT MARCH 31, 1997 . . . . . . . . . . . . . . . . .      - 0 -      $ - 0 -      3,185,000     $31,850        $   - 0 -   
                                                              ========      =======      =========     =======        ========= 
          

<CAPTION>

                                                                                                                          
                                                                                                        Deficit                 
                                                                                                      Accumulated               
                                                                   Additional                          During the              
                                                                    Paid-in         Treasury          Development        
                                                                     Capital          Stock              Stage            Total  
                                                                  -------------     ---------         ------------      -----------
<S>                                                               <C>                <C>               <C>             <C>
Common stock issued in connection with the acquisition of                                                                 
   the assets of Cool-R Enterprises, Inc. in April 1993 . .             (1,681)                        $  (255,952)    $  (255,952) 
Common stock issued in connection with obtaining                                                                           
   rights to developed technology in April 1993 . . . . . .             (1,501)                                              - 0 -
Issuance of common stock for cash and settlement of debt                                                                    
   in April 1993. . . . . . . . . . . . . . . . . . . . . .            635,148                                             637,500
Cash contributed by stockholder . . . . . . . . . . . . . .             12,500                                              12,500
Issuance of convertible preferred stock for cash                                                                             
   in September 1993. . . . . . . . . . . . . . . . . . . .            497,500                                             500,000
Common stock issued to an officer in connection                                                                                
   with the signing of an employment agreement in                                                                        
   October 1993 . . . . . . . . . . . . . . . . . . . . . .            124,539                                             123,750 
Net (loss) for the period April 19, 1993 (commencement of                                                                
   operations) through March 31, 1994 . . . . . . . . . . .                                             (1,361,215)     (1,361,215)
                                                                  ------------                         -----------     -----------
                                                                                                                                 
Balance - March 31, 1994  . . . . . . . . . . . . . . . . .          1,266,505                          (1,617,167)       (343,417)
Issuance of common stock for cash in May 1994 . . . . . . .             19,963                                              20,000
Common stock issued as consideration for                                                                           
   compensation in August 1994. . . . . . . . . . . . . . .            136,799                                             137,306
Services contributed by stockholder . . . . . . . . . . . .             30,000                                              30,000
Net (loss) for the year ended March 31, 1995. . . . . . . .                                             (1,530,061)     (1,530,061)
                                                                  ------------                         -----------     ------------
                                                                                                                 
Balance - March 31, 1995  . . . . . . . . . . . . . . . . .          1,453,267                          (3,147,228)     (1,686,172)
Issuance of common stock as settlement of notes payable                                                              
   to a stockholder in June 1995. . . . . . . . . . . . . .             89,668                                              90,000
Collection of stock subscription. . . . . . . . . . . . . .                                                                  1,250
Common stock purchased for treasury . . . . . . . . . . . .                          $(150,000)                           (150,000)
Common stock issued from treasury . . . . . . . . . . . . .                            150,000                             150,000  
Common stock contributed to treasury and cancelled. . . . .                 74                                               - 0 - 
Contribution to capital (Note G). . . . . . . . . . . . . .            307,457                                             307,457  
Net (loss) for the year ended March 31, 1996. . . . . . . .                                             (1,228,745)     (1,228,745)
                                                                  ------------       ---------         -----------     -----------
                                                                                                        
Balance - March 31, 1996  . . . . . . . . . . . . . . . . .          1,850,466           - 0 -          (4,375,973)     (2,516,210)
Warrants issued in connection with Bridge Notes . . . . . .            665,000                                             665,000
Conversion of debt to common stock. . . . . . . . . . . . .            974,961                                             978,572
Common stock issued as consideration for compensation . . .             12,660                                              12,707
Stock options issued by stockholders to an officer as                                                                             
   compensation . . . . . . . . . . . . . . . . . . . . . .            386,000                                             386,000
Payment of cumulative dividends on Series A                                                                                       
   preferred stock. . . . . . . . . . . . . . . . . . . . .           (150,000)                                           (150,000)
Preferred stock conversion. . . . . . . . . . . . . . . . .                655                                                 -0- 
Sale of 1,955,000 shares of common stock (net of                                                                        
   offering costs). . . . . . . . . . . . . . . . . . . . .          7,968,863                                           7,988,413
Net (loss) for the year ended March 31, 1997. . . . . . . .                                             (2,408,710)     (2,408,710) 
                                                                  ------------       ---------         -----------     ----------- 
                                                                                                                                  
BALANCE AT MARCH 31, 1997 . . . . . . . . . . . . . . . . .       $ 11,708,605       $   - 0 -         $(6,784,683)    $ 4,955,772
                                                                  ============       =========         ===========     ===========

</TABLE>


                The accompanying notes to financial statements
                         are an integral part hereof.

                                      F-5
<PAGE>   26



                 LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                        (a development stage company)
                                      
                    CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                                                 
                                                                                                                 April 19,1993     
                                                                                                                 (Commencement     
                                                                                 Year Ended March 31,            of Operations) 
                                                                            ------------------------------          Through
                                                                                1996              1997          March 31, 1997    
                                                                            ------------       -----------       --------------    
<S>                                                                          <C>               <C>               <C>               
Cash flows from operating activities:                                                                                              
   Net (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $(1,228,745)      $(2,408,710)      $ (6,528,731)      
   Adjustments to reconcile net (loss) to net cash (used in)                                                                       
     operating activities:                                                                                                         
       Provision for doubtful accounts . . . . . . . . . . . . . . . . . .         7,000                               20,000      
       Depreciation and amortization . . . . . . . . . . . . . . . . . . .        34,158            51,311            199,456      
       Compensation recorded for fair value of common shares                                                                       
         issued in excess of price paid by employee. . . . . . . . . . . .                          12,707            273,763    
       Compensation recorded for stock options issued by stockholders                                                              
         to an officer . . . . . . . . . . . . . . . . . . . . . . . . . .                         386,000            386,000     
       Services contributed by stockholder. . . . .  . . . . . . . . . . .                                             30,000
       Noncash finance charge . . . . . . . . . . .  . . . . . . . . . . .        19,551           665,000            684,551
       Loss on disposal of fixed assets. . . . . . . . . . . . . . . . . .        49,277                              122,375
       Changes in operating assets and liabilities:                                                                                
         (Increase) decrease in accounts receivable. . . . . . . . . . . .         4,877               549            (16,342)
         (Increase) decrease in inventories. . . . . . . . . . . . . . . .        70,454          (103,326)           (43,625)
         (Increase) decrease in other assets . . . . . . . . . . . . . . .        17,998           (38,567)           (25,550)
         Increase in due to related party. . . . . . . . . . . . . . . . .        71,329                              790,082  
         (Decrease) increase in accounts payable and accrued                                                                       
           expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .       228,761          (327,281)           218,529 
                                                                             -----------       -----------       ------------ 
                                                                                                                                   
             Net cash (used in) operating activities . . . . . . . . . . .      (725,340)       (1,762,317)        (3,889,492)
                                                                             -----------       -----------       ------------
                                                                                                                                   
Cash flows from investing activities:                                                                                              
   Acquisitions of fixed assets. . . . . . . . . . . . . . . . . . . . . .       (14,733)         (253,674)          (487,979)
   Purchase of government securities . . . . . . . . . . . . . . . . . . .                      (4,032,267)        (4,032,267)
                                                                             -----------       -----------       ------------
                                                                                                                                   
             Net cash (used in) investing activities . . . . . . . . . . .       (14,733)       (4,285,941)        (4,520,246)
                                                                             -----------       -----------       ------------
                                                                                                                                   
Cash flows from financing activities:                                                                                              
   Proceeds of notes payable . . . . . . . . . . . . . . . . . . . . . . .       459,250         1,500,000          2,557,750
   (Repayment of) notes payable. . . . . . . . . . . . . . . . . . . . . .       (52,118)       (2,352,616)        (2,583,907)
   Proceeds of notes payable - stockholders. . . . . . . . . . . . . . . .       350,000                              458,700
   (Repayment of) notes payable - stockholders . . . . . . . . . . . . . .        (7,995)          (31,036)           (49,736)
   Advances from stockholders. . . . . . . . . . . . . . . . . . . . . . .         9,485                               11,485
   (Repayment of) capital leases payable . . . . . . . . . . . . . . . . .       (20,288)                             (41,367)
   Proceeds from sale of common stock. . . . . . . . . . . . . . . . . . .                       7,988,413          8,600,913
   Proceeds from sale of preferred stock . . . . . . . . . . . . . . . . .                                            500,000
   Proceeds from stock subscription receivable . . . . . . . . . . . . . .         1,250                                1,250
   Cash contributed by stockholder . . . . . . . . . . . . . . . . . . . .                                             12,500
   Payment of dividends on preferred stock . . . . . . . . . . . . . . . .                        (150,000)          (150,000)
                                                                             -----------       -----------       ------------
                                                                                                                                   
               Net cash provided by financing activities . . . . . . . . .       739,584         6,954,761          9,317,588 
                                                                             -----------       -----------       ------------ 
                                                                                                                                   
NET INCREASE (DECREASE) IN CASH. . . . . . . . . . . . . . . . . . . . . .          (489)          906,503            907,850
                                                                                                                                   
Cash - beginning of period . . . . . . . . . . . . . . . . . . . . . . . .         1,836             1,347              - 0 -   
                                                                             -----------       -----------        -----------   
                                                                                                                                   
CASH - END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . .   $     1,347       $   907,850        $   907,850 
                                                                             ===========       ===========        =========== 
                                                                                                                                   
Supplemental disclosures of cash flow information:                                                                                 
   Cash paid during the period for interest. . . . . . . . . . . . . . . .        28,206       $   507,423        $   673,773
   Noncash transactions:                                                                                                           
     Common stock subscribed . . . . . . . . . . . . . . . . . . . . . . .                                              1,250
     Common stock issued for developed technology. . . . . . . . . . . . .                                            406,875
     Conversion of debt to equity. . . . . . . . . . . . . . . . . . . . .                         978,572            978,572
     Common stock issued as settlement of note payable to                                                                          
       stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . .        90,000                               90,000
     Due to stockholder for shares purchased for treasury. . . . . . . . .        19,551                               19,551
     Cancellation of debt obligation in exchange for fixed assets. . . . .        54,279                               54,279
     Settlement of related party debt by capital contribution. . . . . . .       307,457                              307,457
                                                                            
</TABLE>                                                                    

                 The accompanying notes to financial statements
                          are an integral part hereof.


                                       F-6
                                      
<PAGE>   27


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


(NOTE A) - The Company and Basis of Presentation:

         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. 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.

         In April 1996, the Board of Directors and stockholders approved a
reverse split of approximately 2.71022 to 1. Such split has been retroactively
reflected in the accompanying financial statements.


(NOTE B) - Summary of Significant Accounting Policies:

         [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 United States government
obligations with various maturity dates. These investments are accounted for as
available for sale securities and are stated at fair value which approximates
cost.

         [3]  Inventory:

              Inventory is recorded at lower of cost or market.

         [4]  Fixed assets:

              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 useful lives of the assets.


(continued)

                                       F-7

<PAGE>   28


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


(NOTE B) - Summary of Significant Accounting Policies:  (continued)

         [5]  Net loss per share of common stock:

              Net loss per share of common stock was determined by dividing
net loss, as adjusted by cumulative dividends on the Company's preferred stock
during the time it was outstanding, by the weighted average number of shares
outstanding during each period. The weighted average number of shares
outstanding excludes 410,000 shares held in escrow. The computation of fully
diluted net loss per share of common stock would have been antidilutive in each
of the periods presented.

         [6]  Income taxes:

              Deferred income taxes are provided for temporary differences
between financial statement and taxable income or loss.

         [7]  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.

         [8]  Major customers and concentration of credit risk:

              As a result of the Company's limited sales volume, the percentage 
of net sales and accounts receivable balances outstanding relating to any one
customer is significant.

         [9]  Fair value of financial instruments:

              The carrying value of cash, accounts receivable and accounts
payable approximates fair value because of the short-term maturity of those
instruments.

       [10]   Stock-based compensation:

              In fiscal 1997 the Company adopted the "disclosures only"
alternative available under Financial Accounting Standards Board No. 123 ("FASB
123") for its employee stock option grants and accounts for employee stock
option grants pursuant to Accounting Principles
Board Opinion No. 25 ("APB 25").


(continued)

                                       F-8

<PAGE>   29


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


(NOTE C) - Inventory:

         Inventories at March 31, 1997 are summarized as follows:


                Raw materials . . . . . . . . . . .     $ 45,393
                Work-in-process . . . . . . . . . .       40,964
                Finished goods. . . . . . . . . . .       16,969
                                                        --------
                                                         
                         T o t a l . . . . . . . .      $103,326
                                                        ========


(NOTE D) - Fixed Assets:

         Fixed assets at March 31, 1997 are summarized as follows:


                Machinery and equipment . . . . . .     $147,216
                Furniture and fixtures. . . . . . .       91,086
                Leasehold improvements. . . . . . .       15,371
                                                        --------
                                                        
                         T o t a l . . . . . . . .       253,673
                                                        
                Less accumulated depreciation . . .       44,449
                                                        -------- 
                                                        
                         B a l a n c e . . . . . .      $209,224
                                                        ========


(NOTE E) - Stockholders' Equity:

         [1]    Common stock:

                Upon incorporation in March 1993 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 had 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.

(continued)

                                       F-9

<PAGE>   30


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


(NOTE E) - Stockholders' Equity:  (continued)

         [2]  Convertible preferred stock:  (continued)
              
              Concurrent with the public offering in October 1996, the
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 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

(continued)

                                      F-10

<PAGE>   31


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


(NOTE E) - Stockholders' Equity:  (continued)

         [4]  Bridge financing:  (continued)

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 2,952,500 Class A warrants and
1,955,000 Class B warrants exercisable for a five year period commencing October
9, 1996.

              The Company has outstanding warrants to purchase 36,897 shares
of its common stock which are held by the underwriter of the Company's initial
public offering who assisted in raising capital for the Company. The warrants,
which were issued on March 25, 1994, have an exercise price of $2.71 and are
exercisable through March 25, 1999.

         [6]  Shares reserved for issuance:

              The Company has 8,656,897 shares of common stock for issuance
as follows:


              Class A warrants . . . . . . . . . .   2,952,500
              Class B warrants . . . . . . . . . .   4,907,500
              Underwriter's Unit Purchase Option .     510,000
              Underwriter's warrants . . . . . . .      36,897
              1996 Stock Option Plan . . . . . . .     250,000
                                                     ---------
                                                      
                                                     8,656,897
                                                     =========

(continued)

                                      F-11

<PAGE>   32


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


(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.

              In April 1996 two principal stockholders of the Company
granted options to an officer to purchase an aggregate of 116,347 of their
shares of common stock at an exercise price of $.68 per share. Such options,
which are fully vested, contain a predefined schedule for their exercise. In
connection therewith, a contribution to capital and compensation expense was
recorded, in the amount of $386,000 which represents the difference between the
exercise price and the fair value of the shares, on the date of grant.

         [2]  Operating lease:

              The Company entered into an operating lease for its office
facility. The lease provides for minimum annual rental payments through 1999 as
follows:

                
                  Year Ending
                    March 31,
                  -----------

                   1998 . . . . . . . . . . . . .        $46,342
                   1999 . . . . . . . . . . . . .         35,535
                                                         -------

                           T o t a l . . . . .           $81,877
                                                         =======

         [3]  Contingency:

              The Company is aware of a patent issued to an unrelated entity
that relates to certain processes by which film, including polyester film, is
reverse-printed and laminated onto linerboard. Such patent may affect the
ability of the Company to obtain patent protection for some or all of the claims
included in its patent

(continued)

                                      F-12

<PAGE>   33


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


(NOTE F) - Commitments and Other Matters:  (continued)

         [3]  Contingency:  (continued)

application. Moreover, there can be no assurance that any application of the
Company's technology will not infringe this or any other patents or proprietary
rights of others. Management believes that the Company has not infringed on any
patents.

              A predecessor to the Company may have entered into license
agreements regarding the developed technology owned by the Company. Even though
no executed agreement has been produced by the Company or other parties, there
can be no assurance that such license agreements do not exist or as to the terms
of any such licenses. In the event that any previous license agreements exist,
they may adversely affect the Company's ability to utilize its technology or
enter into additional licenses in the future.


(NOTE G) - Income Taxes:

         The Company has a deferred tax asset of $2,600,000 at March 31, 1997
attributable to the net operating losses discussed below. The Company has fully
reserved the deferred tax asset since the likelihood of realization cannot be
determined. The difference between the statutory tax rate of 34% and the
Company's effective tax rate of 0% is due to an increase in the valuation
allowance of $950,000 for the year ended March 31, 1997.

         At March 31, 1997, the Company has a net operating loss carryforward of
$5,250,000 expiring in various amounts through 2012. 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.


(NOTE H) - Related Party Transactions:

         TransMillenial Resource Corporation ("TMR") provided management
services to the Company. Management fees incurred for the year ended March 31,
1996 were $45,000.

         In addition, 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. The conversion was completed in April 1996. Two of the
Company's former officers are shareholders of TMR.

(continued)

                                     F-13

<PAGE>   34


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


(NOTE H) - Related Party Transactions:  (continued)

         The Company was located in office space which was leased by TMR. Rent
on such space is included in the indebtedness described above.

         In June 1995 the Company entered into an agreement with one of its
stockholders to repurchase 126,114 shares of common stock for $150,000. The
shares were simultaneously sold for approximately $85,000 to a third party. The
Company sold the shares from treasury at a discount to induce the third party to
loan the Company $250,000. As a result the Company recorded deferred financing
cost of $65,000, which was fully amortized over the term of the lend, which was
due in December 1995. Accordingly, the full amount was charged to earnings in
the year ended March 31, 1996.


(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 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 exceed 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. Through March
31, 1997, 120,000 options have been granted at exercise prices of $4.00 per
share and 10,000 options have been granted at $5.00 per share.

         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 shares 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,

(continued)

                                     F-14

<PAGE>   35


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


(NOTE I) - Stock Option Plan:  (continued)

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 option activity is summarized as follows:


                                                        Year Ended
                                                       March 31, 1997
                                                     -------------------- 
                                                                Weighted-
                                                                 Average
                                                                Exercise
                                                      Shares      Price
                                                     -------    ---------

         Options outstanding at beginning of year.      - 0 -     $- 0 -
                                                     
         Granted . . . . . . . . . . . . . . . . .    170,000       4.29
                                                     --------
                                                     
         Options outstanding at end of year. . . .    170,000       4.29
                                                     ========
                                                     
         Options exercisable at end of year. . . .     53,333       4.25
                                                     

         The following table presents information relating to stock options
outstanding at March 31, 1997:

<TABLE>
<CAPTION>

                                                                                     Weighted-              
                                               Weighted-                              Average              
                             Weighted-          Average                              Exercise              
Range of                      Average          Remaining                             Price of             
Exercise                     Exercise            Life           Exercisable        Exerciseable          
 Price        Shares          Price            in Years           Shares              Shares               
--------      ------         --------         ---------         -----------        ------------          
 <S>         <C>              <C>               <C>               <C>                <C>
 $4.00       120,000          $4.00             10.00             40,000             $ 4.00              
  5.00        50,000           5.00             10.00             13,333               5.00              
             -------                            10.00             ------                                 
             170,000                                              53,333
             =======                                              ======


</TABLE>

         As of March 31, 1997, a total of 80,000 options are available for
future grant.


(continued)

                                      F-15

<PAGE>   36


                  LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS

(NOTE I) - Stock Option Plan:  (continued)

         The weighted-average fair value at date of grant for options granted
during 1997 was $.60 per option, respectively. The fair value of the options at
date of grant was estimated using the Black-Scholes option-pricing model
utilizing the following assumptions for the year ended March 31, 1997:


             Risk-free interest rates. . . . . . . . .      6.70%
             Expected option life in years . . . . . .         5
             Expected stock price volatility . . . . .       .30
             Expected dividend yield . . . . . . . . .         0%

         Had the Company elected to recognize compensation cost based on the
fair value of the options at the date of grant, net loss applicable to common
stock in 1997 would have been $2,510,710 or $1.51 per share. There would have
been no effect for the year ended March 31, 1996.


                                     F-16

<PAGE>   37


                                  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
         ---------                                -----                                 ----

LAMINATING TECHNOLOGIES, INC.

<S>                                         <C>                                         <C> 
BY: /S/  MICHAEL E. NOONAN                  CHAIRMAN, PRESIDENT & CEO                   JUNE 26, 1997
   ---------------------------   
         MICHAEL E. NOONAN

BY: /S/  RICHARD B. CARLOCK                 CHIEF FINANCIAL OFFICER                     JUNE 26, 1997
    --------------------------   
         RICHARD B. CARLOCK

BY: /S/  SHIRLEY A. PIGG                    CONTROLLER                                  JUNE 26, 1997
   ---------------------------   
         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  25, 1997
-------------------------------  
         MICHAEL E. NOONAN

/S/      ROBERT L. DOVER                    DIRECTOR AND VICE PRESIDENT                 JUNE  25, 1997
-------------------------------  
         ROBERT L. DOVER

/S/      RONALD L. CHRISTENSEN              DIRECTOR                                    JUNE  25, 1997
-------------------------------  
         RONALD L. CHRISTENSEN

/S/      JEROME T. GELLMAN                  DIRECTOR                                    JUNE  25, 1997
-------------------------------  
         JEROME T. GELLMAN

                                            DIRECTOR                                                         
-------------------------------  
         LEONARD TOBOROFF                                                                                     
                                                                                                              
/S/      WILLIAM J. WARREN                  DIRECTOR                                    JUNE  25, 1997        
-------------------------------  
         WILLIAM J. WARREN

</TABLE>