<PAGE>

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


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

                                    FORM 10-K

<TABLE>
<CAPTION>
(Mark One)
<S>         <C>
    [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934

            FOR THE FISCAL YEAR ENDED JUNE 29, 2007

    [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934

            FOR THE TRANSITION PERIOD FROM            TO
</TABLE>


                        COMMISSION FILE NUMBER 333-28157


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

                                TEKNI-PLEX, INC.
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                             <C>
                   DELAWARE                                       22-3286312
           (State of Incorporation)                            (I.R.S. Employer
                                                              Identification No.)
           260 NORTH DENTON TAP ROAD                                 75019
                COPPELL, TEXAS                                    (Zip Code)
   (Address of principal executive offices)
</TABLE>


              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                                 (972) 304-5077

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

     Indicate by check mark if the Registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.  Yes [ ]     No [X]

     Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.  Yes [ ]     No [X]

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]     No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K.  [ ]

     Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated filer or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

     Large accelerated filer [ ]     Accelerated filer [ ]     Non-accelerated
                                    filer [X]

     Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Act).  Yes [ ]     No [X]

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<PAGE>

                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION

     We were founded as a Delaware corporation in 1967 to acquire the General
Felt Products division of Standard Packaging Corporation. At that time, we were
located in Brooklyn, NY, where we produced laminated closure (cap) liners
primarily for the pharmaceutical and food industries. Over the years, we have
built a reputation for solving difficult packaging problems and providing
customers with high quality, advanced packaging materials. In 1970, we built an
additional manufacturing facility in Somerville, New Jersey, diversifying into
the business of producing polystyrene foam trays for the poultry processing
industry.

     In March 1994, Tekni-Plex was acquired by Dr. F. Patrick Smith and other
investors. Dr. Smith was elected Chief Executive Officer. At that time, the
principal product lines consisted of clear, high-barrier laminations for
pharmaceutical blister packaging (which we refer to as clear blister packaging);
closure liners, primarily for pharmaceutical end-uses; and foam processor trays
primarily for the poultry industry.

     In December 1995, Tekni-Plex acquired the Flemington, NJ, plant and
business of Hargro Flexible Packaging Corporation. The Flemington plant utilized
lamination and coating technology to produce packaging materials primarily for
pharmaceutical products such as transdermal patches, sutures, iodine and alcohol
swabs, aspirin and other physician samples. We relocated the Brooklyn equipment
and business into the Flemington facility during 1996. The synergistic result of
having complementary technologies in one location created a combined operation
with considerably higher efficiencies and lower costs than the sum of the stand-
alone operations.

     In February 1996, we expanded our food packaging business by completing our
acquisition of Dolco Packaging Corp., a publicly-traded $81 million foam
products company that was nearly twice the size of Tekni-Plex. Dolco had been in
the business of producing foam packaging products since the 1960s and had
attained the leading share of foam egg carton sales in the United States. The
Dolco acquisition also solidified our position as a leading supplier of foam
processor trays. In August 1997, Dolco, which had been a wholly owned subsidiary
of Tekni-Plex, was merged into Tekni-Plex.

     In July 1997, we acquired the business and operating facility of PurePlast
Inc. of Cambridge, Ontario, Canada. PurePlast produced calendered polyvinyl
chloride (vinyl) sheet primarily for food and electronics packaging
applications. Following the acquisition, we diversified the end markets served
by this location by developing proprietary formulations of vinyl sheet for
vertical integration into our clear blister packaging business and for sale
directly to our global pharmaceutical customers.

     In March 1998, Tekni-Plex acquired PureTec Corporation, a publicly-traded
company with annual sales of $315 million. PureTec was a leading manufacturer of
plastic packaging, products, and materials primarily for the healthcare and
consumer markets. PureTec enjoyed leading market positions in its core products,
including garden and irrigation hose, precision tubing and gaskets primarily for
the aerosol packaging industry, vinyl medical tubing, and vinyl compounds for
the production of medical devices. PureTec is a wholly-owned subsidiary of
Tekni-Plex.

     In January 1999, we acquired substantially all the assets of Tri-Seal
International, Inc., a leader in sophisticated extruded and co-extruded
capliners and seals. The Tri-Seal operations have been integrated with and into
our closure liner business.

     In April 1999, we acquired substantially all the assets of Natvar, a
producer of disposable medical tubing and electrical sheathing. As with Tri-
Seal, the Natvar acquisition was intended to strengthen our existing core
business and expand product offerings. The Natvar operation has been integrated
into our medical tubing and industrial extrusions businesses.

     In June 2000, we completed a recapitalization of Tekni-Plex. As part of the
recapitalization, existing investors other than management sold most of their
interests, and a group of new investors contributed an aggregate of $167 million
in new equity and agreed to contribute up to $103 million in additional equity
over

                                        1

<PAGE>

the next five years, all of which has been funded. All members of management
maintained 100% of their interests in the Company. Also, Tekni-Plex entered into
a new credit agreement, issued $275 million in new senior subordinated notes,
and repaid the debt that existed prior to the recapitalization.

     In October 2000, we acquired substantially all the assets of the Super
Plastics division of RCR International Inc. Super Plastics is primarily a
manufacturer of garden hose and has a manufacturing facility in Mississauga,
Ontario, Canada. The Super Plastics operations have been integrated with and
into our garden hose business.

     In October 2001, we acquired substantially all of the assets of the garden
hose business of Mark IV Industries, Inc. which operates under the name Swan
Hose. Swan, which has one manufacturing facility located in Bucyrus, Ohio,
enhanced Tekni-Plex's geographic coverage of the North American garden hose
market. The Swan operations have been integrated with and into our garden hose
business.

     In July 2002, we acquired substantially all of the assets of Elm Packaging
Company. Elm produces polystyrene foam plates, bowls, and meat and bakery trays.
The Elm acquisition significantly increases our capacity to produce foamed
polystyrene products primarily for customers in the food packaging and food
service markets.

     In July 2004, we acquired the egg carton business of Genpak and we have
integrated this business into our packaging operations.

DESCRIPTION OF SEGMENTS

     See footnote 14 of our June 29, 2007 audited consolidated financial
statements.

DESCRIPTION OF BUSINESS

     We are a global, diversified manufacturer of packaging, packaging products
and materials as well as tubing products. We primarily serve the food,
healthcare and consumer markets. We have built leadership positions in our core
markets, and focus on vertically integrated production of highly specialized
products. We have operations in the United States, Europe, China, Argentina and
Canada. We believe that our end market and product line diversity has the effect
of reducing overall risk related to any single product or customer. Our
operations are aligned under two business segments: Packaging and Tubing
Products. Products that do not fit in either of these two segments, including
recycled PET, vinyl compounds and specialty resins have been reflected in Other.
Representative product lines in each of our business segments are listed below:

                                BUSINESS SEGMENT

<Table>
<Caption>
PACKAGING                                                  TUBING PRODUCTS
---------                                                  ---------------
<S>                                                 <C>
-- Foam egg cartons                                 -- Garden and irrigation hose
-- Pharmaceutical blister films                     -- Medical tubing
-- Poultry and meat processor trays                 -- Aeration hose
-- Closure liners
-- Aerosol and pump packaging components
-- Foam plates
</Table>




                                        2

<PAGE>

COMPETITIVE STRENGTHS

     We believe that our competitive strengths include:

     - Strong market positions in core businesses.  We have a strong market
       presence in the United States in our core product lines. The following
       table shows what we believe to be our market position in the U.S. in our
       primary product lines:

                             PRODUCT MARKET POSITION

<Table>
<S>                                                                  <C>
Vinyl medical device materials.....................................   1
Vinyl medical tubing...............................................   1
Laminated, clear, high barrier pharmaceutical blister packaging....   1
Multi-layered co-extruded and laminated closure liners.............   1
Garden and irrigation hose.........................................   1
Precision tubing and gaskets for aerosol packaging.................   1
Egg cartons........................................................   1
Foam processor trays...............................................   2
</Table>


     - Significant barriers to entry.  We believe there are significant barriers
       to entry to our packaging and tubing products businesses. In our
       pharmaceutical packaging business, we believe that pharmaceutical
       companies are generally reluctant to change or substitute packaging once
       a new drug offering has gained FDA approval. In our food packaging
       businesses, we believe that high capital costs and high technical
       competence required for manufacturing processes create barriers to entry.
       In our medical tubing and garden hose business, we utilize proprietary
       formulations and are a market leader with technologically advanced
       processes that cannot be readily replicated.

     - Non-cyclical end markets.  A majority of our packaging products and
       materials are sold into markets which are traditionally stable through
       economic cycles, including food and beverages, personal care products,
       pharmaceuticals, and medical tubing. We also believe that our garden hose
       business, while highly seasonal, is resistant to economic cyclicality.

     - Strong customer relationships.  We have long-standing relationships with
       many of our customers. We attribute our long-term customer relationships
       to our ability to consistently manufacture high quality products and
       provide a superior level of customer service. We routinely win customer
       awards for our superior products and customer service.

     - Cost efficient producer.  We continually focus on improving underlying
       operations and reducing costs. Our acquisitions since 1995 have provided
       significant opportunities to realize cost savings and synergies in the
       combined businesses through the sharing of complementary technologies and
       manufacturing techniques, as well as economies of scale, including the
       purchase of raw materials. For example, we applied technologies that we
       utilize in the manufacturing of our aerosol packaging components to our
       garden hose business which significantly increased manufacturing
       throughput and product functionality while reducing material cost.

     - Producer of high quality, technically sophisticated products.  We
       believe, based upon our knowledge and experience in the industry, we have
       a long-standing reputation as a manufacturer of high quality, high
       performance products, materials and primary packaging (where the
       packaging material comes into direct contact with the end product). Our
       emphasis on quality is evidenced by our product lines which address the
       more technically sophisticated areas of their respective markets.

     - Experienced management team.  Since 1994, management has successfully
       integrated the acquisition of the operations and assets of 10 businesses.
       Management has substantially improved the competitive position of each of
       the acquired businesses by integrating the acquisitions, effecting
       turnarounds, providing strategic direction and leadership, increasing
       sales and market share, improving manufacturing efficiencies and
       productivity, and developing new technologies to enhance their
       competitive

                                        3

<PAGE>

       strengths. Current management owns more than 20% of the fully diluted
       common stock of the Company.

EMPLOYEES

     We have approximately 3,200 employees. Approximately one quarter of our
employees are represented by labor unions; we believe our labor relations with
those unions are satisfactory.

BUSINESS STRATEGY

     We seek to maximize our profitability and growth and take advantage of our
competitive strengths by pursuing the following business strategy:

     - Ongoing cost reduction through technical process improvement. We have an
       ongoing program to improve manufacturing and other processes in order to
       drive down costs. Examples of cost improvement programs include:

       - material and energy conservation through enhanced process controls and
         advanced product design;

       - reduction in machine set-up time through the use of proprietary
         technology;

       - continual product line rationalization; and

       - development of backward and forward integration opportunities.

     - Growth through product line extension and improvement. We continually
       seek to improve and extend our product lines and leverage our existing
       technological capabilities in order to increase market share in existing
       markets, effectively penetrate new markets and improve profitability. Our
       strategy is to emphasize our expertise in providing packaging, products
       and materials with specific high performance characteristics through the
       development of various unique proprietary materials and proprietary
       manufacturing process techniques.

     - Growth through international expansion. We believe that there is
       significant opportunity to expand our international sales, which
       currently represent approximately 13.6% of our total revenues. At
       present, we have manufacturing operations with attached sales offices in
       Europe, China, Canada and Argentina. We have sales representatives on six
       continents. We believe that our growing international presence, which is
       a combination of our own regional manufacturing and sales forces and
       independent sales representatives, will continue to generate
       opportunities to increase our sales.

PACKAGING SEGMENT

     The Packaging segment of our business had revenues of $405.4 million (52.4%
of total revenues) for the year ended June 29, 2007 and $374.1 million (50.4% of
total revenues) for the year ended June 30, 2006. Further details of the major
markets served by this segment are given below:

FOAM EGG CARTONS

     We believe that we are the leading manufacturer of egg cartons in the
United States. Thermoformed foam polystyrene packaging has been the material of
choice for food packaging cartons for many years. In terms of economic and
functional characteristics, foamed polystyrene products offer a combination of
high strength, minimum material content and superior moisture barrier
performance. Foamed polystyrene products also offer greater dimensional
consistency that enhances the high speed mechanical feeding of cartons into
automated package filling operations. We sell these products through our direct
sales force.

     In the egg packaging market, our primary competitor manufactures pulp-based
egg cartons. We believe that we compete effectively based on product quality,
performance and prompt delivery. Our customer base includes most of the domestic
egg packagers (including those owned by egg retailers).


                                        4

<PAGE>

PHARMACEUTICAL BLISTER FILMS

     We believe that we are a market leader for clear, high-barrier laminations
for pharmaceutical blister packaging. These packaging materials are used for
fast-acting pharmaceuticals that are generally highly reactive to moisture.
Transparent, high-barrier blister packaging is primarily used to protect drugs
from moisture vapor infiltration or desiccation. Blister packaging is the
preferred packaging form when dispenser handling can affect shelf life or drug
efficacy, or when unit dose packaging is needed. Unit dose packaging is being
used to improve patient compliance with regard to dosage regimen, and has been
identified as the packaging form of choice in addressing child safety aspects of
drug packaging. The advantages of transparent blisters, as opposed to opaque
foil-based materials manufactured by various competitors, include the ability to
visually inspect the contents of the blister and to present the product with
maximum confidence.

     We believe the flexible and semi-rigid packaging segment of the
pharmaceutical packaging industry is growing at a faster rate than the non-
plastics segments because of the generally lower package cost and broader range
of functional characteristics of plastic packaging. As a result, the
technologies used to manufacture plastic packaging materials continue to develop
at a faster pace than those used in the more mature paper, glass, and metal
products.

     Our high-barrier blister packaging is sold to major pharmaceutical
companies (or their designated contract packagers). We market our full
pharmaceutical product line directly on a worldwide basis, and have assembled a
global network of sales and marketing personnel on six continents.

     In the clear blister packaging market, we have one principal competitor
worldwide with resources equal to or greater than ours. However, we believe that
this competitor does not have the breadth of product offering to match ours, and
that this differentiation is significant as viewed by the pharmaceutical
industry. Also, the high manufacturing and compliance standards imposed by the
pharmaceutical companies on their suppliers provide a significant barrier to the
entry of new competitors. Entry barriers also arise due to the lengthy and
stringent approval process required by pharmaceutical companies. Since approval
requires that the drug be tested while packaged in the same packaging materials
intended for commercial use, changing materials after approval risks renewed
scrutiny by the FDA. The packaging materials for pharmaceutical applications
also require special documentation of material sources and uses within the
manufacturing process as well as heightened quality assurance measures.

POULTRY AND MEAT PROCESSOR TRAYS

     Our processor tray operations produce thermoformed foam polystyrene poultry
and meat processor trays. We are a leading supplier of processor trays to the
poultry industry.

     As with egg cartons, thermoformed foam polystyrene has been the material of
choice for processor trays for the same reasons noted above.

     Within the polystyrene foam processor tray market, we compete principally
with one large competitor, who has significantly greater financial resources
than ours and who controls the largest share of this market.

CLOSURE LINERS

     Tekni-Plex is also a leading producer of sophisticated extruded, co-
extruded and laminated cap-liners and seals, known as closure liners, for glass
and plastic bottles. Closure liners perfect the seal between a container and its
closure, for example, between a bottle and its cap. The liner material has
become an integral part of the container/closure package. Without the gasketing
effect of the liner, most container/closure packages would not be secure enough
to protect the contents from contamination or loss of product efficacy.

     We sell these products through our direct sales force primarily to
packagers of pharmaceutical, healthcare and food products. We have two principal
competitors in North America but also compete with several smaller companies
having substantially smaller market shares. However, as a result of the Tri-Seal
acquisition, we believe that we offer the widest range of liner materials in the
industry. We remain competitive by focusing on product quality, performance and
prompt delivery.


                                        5

<PAGE>

AEROSOL AND PUMP PACKAGING COMPONENTS

     Our Aerosol and Pump Packaging Components business produces dip tubes,
which transmit the contents of the container to the nozzle, and specialized,
molded or punched rubber-based valve gaskets that serve to control the release
of the product from the container. The group also produces writing instrument
products, including pen barrels and ink tubing as well as ink reservoirs for
felt-tip pens.

     Sales are primarily to manufacturers of aerosol valves, dispenser pumps,
and writing instruments. These products are sold throughout the United States
and Europe, as well as selected worldwide markets. Sales are made through our
direct sales force. We believe that we are the leading supplier of aerosol valve
and dispenser pump gaskets and dip tubes in the world.

     Our dip tubes and pen barrels are manufactured at extremely high speeds
while holding to precise tolerances. The process enhancements that allow
simultaneous high speed and precision are proprietary to us. The precision
rubber gasket products, which we have manufactured for over fifty years, are
produced using proprietary formulations. These formulations are designed to
provide consistent functional performance throughout the entire shelf life of
the product by incorporating chemical resistance characteristics appropriate to
the fluid being packaged. For example, we have developed unique formulations
that virtually eliminate contamination of the products packaged in spray
dispensers. This has greatly expanded the use of these dispensers for personal
hygiene products, foods, and fragrances. The Company has also developed
proprietary methods for achieving extremely accurate thickness control, superior
surface finish, and the elimination of internal imperfections prevalent in other
processing methods.

     We are the single-source supplier to much of the industry. The principal
competitive pressure in this product line, particularly the dip tube portion, is
the possibility of customers switching to internal production, or vertical
integration. To counteract this possibility, the Company focuses on product
quality, cost reduction, prompt delivery, technical service and innovation.

FOAM PLATES

     Our foam plate operations produce thermoformed foam polystyrene disposable
plates, bowls, and hinged-lid containers as well as agricultural packaging
products. Our sales are primarily to the consumer, agricultural and foodservice
industries. We compete with numerous participants who use a variety of materials
including foam polystyrene, pulp-based products and various plastic materials.

TUBING SEGMENT

     The Tubing Products segment of our business had revenues of $205.6 million
(26.6% of total revenues) for the year ended June 29, 2007 and $215.8 million
(29.1% of total revenues) for the year ended June 30, 2006. Further details of
the major markets served by this segment are given below:

GARDEN AND IRRIGATION HOSE PRODUCTS

     We believe that we are the leading producer of garden hose in North
America. We have produced garden hose products for over fifty years, and produce
its primary components internally, including proprietary material formulations
and brass couplings. Innovations have included our Pressure Master(R) and Kink
Free(R) product lines which utilize our DuraFlow(R) technology as well as our
Colorite(R) Evenflow(R) design. We also manufacture specialty hose products such
as air hose, aeration hose and irrigator ("soaker") hose.

     We sell these products primarily through our direct sales force and also
through independent representatives. Both private label and brand-name products
are sold to the retail market, primarily to home centers, hardware cooperatives,
food, automotive, drug and mass merchandising chains and catalog companies
throughout the United States and Canada. Our customers include some of the
fastest growing and the most widely respected retail chains in North America.
Our market strategy is to provide a complete line of innovative, high-quality
products along with superior customer service.


                                        6

<PAGE>

     The garden hose business is highly seasonal with approximately 75% of sales
occurring in the spring and early summer months. This seasonality tends to have
an impact on the Company's financial results from quarter to quarter.

MEDICAL TUBING

     We believe we are the leading non-captive supplier of vinyl medical tubing
in North America and Europe. We manufacture medical tubing using proprietary
plastic extrusion processes. The primary raw materials are proprietary
compounds, which we produce. We specialize in high-quality; close tolerance
tubing for various surgical procedures and related medical applications. These
applications include intravenous ("IV") therapy, hemodialysis therapy, cardio-
vascular procedures such as coronary bypass surgery, suction and aspiration
products, and urinary drainage and catheter products. New medical tubing
products we have developed include microbore tubing and silicone substitute
formulations. Microbore tubing can be used to regulate the delivery of critical
intravenous fluids without the need for more expensive drip control devices.
Medical professionals can precisely control the drug delivery speed simply by
selecting the proper (color-coded) diameter tube, thereby improving accuracy and
reducing cost. More importantly, as home healthcare trends continue, the use of
microbore tubing will help eliminate critical dosage errors on the part of the
non-professional caregiver or the patient.

     Medical tubing is sold primarily to manufacturers of medical devices that
are packaged specifically for such procedures and applications. These products
are sold through our direct sales force. We remain competitive by focusing on
product quality, performance and prompt delivery.

ITEM 1A.  RISK FACTORS

  OUR PROFITS WILL LIKELY DECLINE AS A RESULT OF PRICE VOLATILITY AND
  AVAILABILITY OF RAW MATERIALS IF WE ARE UNABLE TO PASS PRICE INCREASES ON TO
  CUSTOMERS OR TO OBTAIN NECESSARY RAW MATERIALS.

     Our profitability will likely decline if raw material prices increase and
we are unable to pass these price increases on to our customers, employ
successful hedging strategies, enter into supply contracts at favorable prices
or buy on the spot market at favorable prices. Our products are manufactured
from commodity petrochemicals that are readily available in bulk quantities from
numerous large, vertically integrated chemical companies. We currently purchase
each principal raw material from a few of the top suppliers. Prices for our raw
materials have fluctuated in the past and likely will continue to do so in the
future. Historically, we have been able to pass on substantially all of the
price increases in raw materials to our customers on a timely basis, although in
the case of most of our garden hose products we are usually not able to do so
until the following season because prices are typically set annually. While we
have not guaranteed prices for our garden hose product for the 2007 selling
season, we cannot assure you that we will be able to pass on raw material price
increases in the future.

  WE OPERATE IN DISCRETE MARKET SEGMENTS OF OUR INDUSTRY, SOME OF WHICH ARE
  HIGHLY COMPETITIVE AND INCLUDE PARTICIPANTS WITH GREATER RESOURCES THAN OURS.
  WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST THESE PARTICIPANTS.

     We compete with a wide variety of manufacturers because we operate in
discrete market segments. Some of our competitors are larger, have greater
financial resources and are less leveraged than we are. As a result, these
competitors may be better able to withstand a change in market conditions within
the industry and throughout the economy as a whole. These competitors may also
be able to maintain significantly greater operating and financial flexibility
than we can. Additionally, a number of our niche product applications are
customized or sold for highly specialized uses. Competitors with greater
financial, technological, manufacturing and marketing resources than ours and
that do not currently market similar applications for these uses could choose to
do so in the future. If we are faced with increased competition, our business,
financial condition or results of operations could suffer as a result of loss of
customers and declining profits.


                                        7

<PAGE>

  THE GARDEN AND IRRIGATION HOSE PRODUCTS BUSINESS IS HIGHLY SEASONAL AND IS
  IMPACTED BY WEATHER CONDITIONS, WHICH RESULTS IN SIGNIFICANT FLUCTUATION OF
  OUR FINANCIAL RESULTS OVER THE COURSE OF THE FISCAL YEAR.

     The market for our garden and irrigation hose products is highly seasonal,
with a majority of our sales occurring in spring and early summer. As a result
of the need to build up inventories in anticipation of such sales, our working
capital requirements peak in the spring. In addition, this seasonality has a
significant impact on our net income and liquidity from quarter to quarter. To
the extent such sales peak later in any fiscal year compared to other fiscal
years, as a result of weather or other factors, cash flows may not be comparable
on an interim period basis. In addition, the market for our garden and
irrigation hose products is impacted by adverse weather conditions.

  OUR FOREIGN INVESTMENT AND OPERATIONS SUBJECT OUR BUSINESS TO ONGOING FOREIGN
  REGULATION AND OTHER RISKS ASSOCIATED WITH CONDUCTING BUSINESS IN FOREIGN
  COUNTRIES. IF WE FAIL TO COMPLY WITH SUCH REGULATION OR ADAPT TO SUCH RISKS,
  WE MAY BE UNABLE TO SELL OUR PRODUCTS.

     We have operations and other investments in a number of countries outside
of the United States. Our foreign operations and investments are subject to the
risks normally associated with conducting business in foreign countries,
including:

     - limitations on ownership and on repatriation of earnings;

     - import and export restrictions and tariffs;

     - additional expenses relating to the difficulties and costs of staffing
       and managing international operations;

     - labor disputes and uncertain political and economic environments,
       including risks of war and civil disturbances and the impact of foreign
       business cycles;

     - change in laws or policies of a foreign country;

     - delays in obtaining or the inability to obtain necessary governmental
       permits;

     - potentially adverse consequences resulting from the applicability of
       foreign tax laws;

     - cultural differences; and

     - increased expenses due to inflation.

     Our foreign operations and investments may be limited, and our ability to
sell our products may be disrupted by, laws and policies of the United States
and the other countries in which we operate affecting foreign trade, investment
and taxation.

  OUR LIQUIDITY WILL DEPEND ON OUR ABILITY TO EXECUTE OUR BUSINESS PLAN AND HAVE
  A POSITIVE CASH FLOW.

     Significant increases in raw material costs and soft demand in our garden
hose business brought about by unfavorable weather conditions have negatively
impacted our financial performance. As a result, our liquidity position as of
June 29, 2007 was constrained. We have developed a business plan aimed at
improving our profitability and restoring positive cash flow. However, we cannot
assure you that we will be able to execute our business plan, reduce costs or
increase prices. If we are unable to execute our business plan, our liquidity
position may be constrained again in the future and we cannot assure you that we
will have access to additional debt or equity financing.


                                        8

<PAGE>

  WE ARE DEPENDENT ON CERTAIN KEY PERSONNEL AND THE LOSS OF THEIR SERVICES OR
  THE FAILURE TO ATTRACT ADDITIONAL QUALIFIED PERSONNEL COULD HARM OUR BUSINESS.

     We are dependent on the management experience and continued services of our
executive officers, including Dr. F. Patrick Smith, who may be difficult to
replace if we lose his services. The loss of the services of these officers
could have a material adverse effect on our business. In addition, our continued
growth depends on our ability to attract and retain experienced key employees.
We maintain a key person life insurance policy on Dr. Smith, and we have an
employment agreement with Dr. Smith.

  IF WE WERE REQUIRED TO WRITE DOWN ALL OR PART OF OUR GOODWILL, OUR NET LOSS
  AND NET DEFICIT COULD INCREASE.

     Historically, we have amortized goodwill on a straight-line basis.
Effective June 29, 2002, we no longer amortize goodwill. Instead, we are
required to periodically determine if our goodwill has become impaired, in which
case we would write down the impaired portion of our goodwill. If we were
required to write down all or part of our goodwill, our net income and net worth
could decrease. In fiscal 2006 we decreased our goodwill by $35.1 million due to
impairment at our Swan garden hose operation resulting from lost market share.

  COMPLIANCE WITH ENVIRONMENTAL AND HEALTH AND SAFETY LAWS AND REGULATIONS COULD
  IMPOSE SUBSTANTIAL COSTS UPON US.

     Our facilities, operations, and properties are subject to federal, foreign,
provincial, state and local environmental and health and safety laws and
regulations. These laws and regulations are complex, change frequently and they
and the enforcement of them against our industry have tended to become more
stringent over time. We are involved from time to time in administrative or
legal proceedings relating to environmental and health and safety matters and
have in the past and will continue to incur capital costs and other expenditures
relating to these matters. While we have budgeted for future capital and
operating expenditures to maintain compliance with environmental and health and
safety laws and regulations, these laws and regulations may change or become
more stringent in the future. Failures to comply with these laws and regulations
or more stringent enforcement of them could result in fines, other sanctions or
could require changes in our product formulation or labeling.

     We could incur significant fines, penalties, capital costs or other
liabilities or obligations associated with any noncompliance, contamination or
natural resource damage or toxic tort liability at or related to any of our
current or former operations, facilities or properties. Changes in laws or the
interpretation thereof, the development of new facts or the failure of third
parties to address contamination at current or former facilities or properties
could also cause us to incur additional costs. Any of these foregoing fines,
penalties, capital costs, liabilities or obligations could impose substantial
costs on us and could, in turn, harm our businesses, financial condition or
results of operations.

     Current and prior owners and operators of property or businesses may be
subject to joint and several liability for investigation and remediation costs
at contaminated sites under environmental laws without regard to fault or to
knowledge about the condition or action causing the liability and may have
liability for related damages to natural resources. We are currently, and may in
the future be, required to incur costs relating to the investigation or
remediation of property, including property where we dispose of our waste, under
the requirements of New Jersey's Industrial Site Recovery Act or other laws, and
environmental conditions could lead to other claims for damages to natural
resources, personal injury or property damage.

     Certain properties that we now or previously owned or leased are undergoing
investigation or remediation by us or by third parties or may in the future
require such action as a result of historical operations. We cannot assure you
that any costs ultimately borne by us in connection with any of these
remediation projects would not be material.

     Item 3 contains additional information of our known environmental
liabilities.


                                        9

<PAGE>

  A SIGNIFICANT PORTION OF OUR WORKFORCE IS UNIONIZED AND UNSATISFACTORY
  RELATIONS WITH OUR WORKFORCE, INCLUDING WORK STOPPAGES, COULD DISRUPT OUR
  PRODUCTION AND HARM OUR BUSINESS.

     As of September 1, 2007, we had approximately 3,200 employees, of whom
approximately one quarter were represented by labor unions under various
collective bargaining agreements. We have had one labor strike in the United
States in our history, which occurred at our Ridgefield, NJ plant in August
2003. Although we consider our current relations with these unions to be
generally good, if we do not maintain these good relations, if we cannot
negotiate the collective bargaining agreements on favorable terms or if a major
work disruption event were to occur, it could harm our business.

  OUR DISCLOSURE CONTROLS AND PROCEDURES ARE NOT EFFECTIVE.

     In connection with the completion of its audit of and the issuance of an
unqualified report on the Company's consolidated financial statements for the
fiscal year ended June 29, 2007, the Company's independent registered public
accounting firm, BDO Seidman, LLP ("BDO"), communicated to the Company's Audit
Committee that the following matters involving the Company's internal controls
and operations were considered to be "material weakness", as defined under
standards established by the Public Company Accounting Oversight Board:

     - Lack of quantity of staff in order to maintain proper supervision and
       ensure the accuracy of detailed financial analyses.

     We agree with this assessment.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

     Not Applicable.

ITEM 2.  FACILITIES

     The Company believes that its facilities are suitable for their purposes
and have sufficient productive capacity for its current and foreseeable
operational and administrative needs. Set forth below is a list and brief
description of all the Company's offices and facilities, 19 which are owned and
33 are leased. The lease on the Piscataway, New Jersey facility will not be
renewed.

<Table>
<Caption>
                                                                            APPROXIMATE
LOCATION                                        PRIMARY FUNCTION            SQUARE FEET
--------                               ----------------------------------   -----------
<S>                                    <C>                                  <C>
Belfast, Northern Ireland............  Manufacturing                           47,580
Blauvelt, New York(8)................  Manufacturing, Warehouse & Office       56,431
Burlington, New Jersey...............  Manufacturing                          124,000
Bucyrus, Ohio........................  Manufacturing                          587,649
Cambridge, Ontario, Canada...........  Manufacturing and Warehouse             25,000
City of Industry, California(4)......  Manufacturing, Warehouse, & Office     110,000
Clayton, North Carolina..............  Manufacturing, Warehouse, & Office      99,665
Clinton, Illinois....................  Manufacturing, Warehouse, & Office      69,000
Clinton, Illinois(6).................  Warehouse                               40,000
Coppell, Texas(6)....................  Executive Offices                        3,125
Dallas, Texas........................  Manufacturing                          139,227
Dallas, Texas(3).....................  Warehouse                               10,759
Decatur, Indiana.....................  Manufacturing                          187,000
Decatur, Indiana(1)..................  Warehouse                                3,750
East Farmingdale, New York(1)........  Warehouse                                1,000
East Farmingdale, New York(1)........  Warehouse                                5,000
</Table>

                                       10

<PAGE>

<Table>
<Caption>
                                                                            APPROXIMATE
LOCATION                                        PRIMARY FUNCTION            SQUARE FEET
--------                               ----------------------------------   -----------
<S>                                    <C>                                  <C>
East Farmingdale, New York(4)........  Manufacturing & Warehouse               56,556
East Farmingdale, New York(4)........  Warehouse                               11,000
Erembodegem (Aalst), Belgium.........  Manufacturing                          125,667
Erembodegem (Aalst), Belgium(9)......  Manufacturing & Office                  64,658
Flemington, New Jersey...............  Manufacturing                          145,000
Fullerton, California(3).............  Warehouse                               64,000
Fullerton, California(8).............  Manufacturing and Warehouse             60,000
Harrison, New Jersey(7)..............  Warehouse                              135,501
Lawrenceville, Georgia...............  Manufacturing                          150,000
Lawrenceville, Georgia(4)............  Warehouse                               13,000
McKenzie, Tennessee..................  Manufacturing and Warehouse             60,000
Memphis, Tennessee(3)................  Manufacturing and Warehouse            100,000
Memphis, Tennessee(3)................  Warehouse                               50,000
Milan (Gaggiano), Italy(4)...........  Warehouse & Office                      21,913
Milan (Gaggiano), Italy(7)...........  Warehouse                               19,591
Milan (Gaggiano), Italy..............  Manufacturing                           14,900
Milan (Gaggiano), Italy..............  Manufacturing                           25,800
Milan (Rosate), Italy(3).............  Manufacturing, Warehouse & Office       44,096
Mississauga, Ontario, Canada(5)......  Warehouse                               46,000
Mississauga, Ontario, Canada(5)......  Manufacturing                          111,570
Piscataway, New Jersey(2)............  Manufacturing                          155,000
Ridgefield, New Jersey...............  Manufacturing                          330,000
Schaumburg, Illinois(11).............  Manufacturing and Warehouse             97,000
Schiller Park, Illinois..............  Manufacturing                           15,232
Shelby, Ohio(4)......................  Warehouse                              350,000
Somerville, New Jersey...............  Manufacturing                          172,000
Sparks, Nevada(7)....................  Manufacturing                          448,000
Suzhou, China(2).....................  Manufacturing & Warehouse              113,021
Tonawanda, New York(7)...............  Manufacturing                           49,960
Troy, Ohio(3)........................  Manufacturing and Warehouse            200,000
Tustin, California(1)................  Sales Office                               414
Waco, Texas..........................  Manufacturing                          104,600
Wenatchee, Washington................  Manufacturing                           97,000
Wenatchee, Washington(3).............  Warehouse                               26,200
Wenatchee, Washington(1).............  Warehouse                                9,000
Wenatchee, Washington(1).............  Warehouse                                9,000
</Table>


       (Years relate to calendar years)

--------

    (1) Leased on a month-to-month basis.

    (2) Lease expires in December 31, 2007.

    (3) Lease expires in 2008.

    (4) Lease expires in 2009.

    (5) Lease expires in 2010.


                                       11

<PAGE>

    (6) Lease expires in 2011.

    (7) Lease expires in 2012.

    (8) Lease expires in 2013.

    (9) Lease expires in 2014.

   (10) Lease expires in 2015.

   (11) Lease expires in 2029.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is a party to various legal proceedings arising in the normal
conduct of business. Management believes that the final outcome of these
proceedings will not have a material adverse effect on the Company's financial
position.

     We previously reported, in January 1993 and 1994, our Belgian subsidiary
received income tax assessments aggregating approximately 74.9 million Belgian
Francs for the disallowance of certain foreign tax credits and investment losses
claimed for the years ended July 31, 1990 and 1991. Additionally, in January
1995, the subsidiary received an income tax assessment of approximately 32.8
million Belgian francs for the year ended July 31, 1992. By Belgium law, these
assessments are capped at the values above, increased by late payment interest
for a period of 18 months only (approximately 15.5 million Belgian francs) and
do not continue to accrue additional penalties or interest as long as the Tax
Director has not rendered a decision in connection with the tax complaints that
have been filed against these tax assessments. To date, the Tax Director has not
rendered a decision. These liabilities, which total approximately EUR 3,054,000
or $4.2 million at current exchange rates, have been fully accrued for in fiscal
2006.

     We are subject to environmental laws requiring the investigation and
cleanup of environmental contamination. In addition to remediation being
undertaken by third parties at a limited number of our locations, we are
currently remediating contamination resulting from past industrial activity at
two of our New Jersey facilities which we acquired from PureTec in 1998. This
remediation is being conducted pursuant to the requirements of New Jersey's
Industrial Site Recovery Act which were triggered by the 1998 PureTec
transaction. If any other events were to occur in the future that would be
deemed to have effected a "change of control" of any of our New Jersey
facilities as defined under New Jersey's Industrial Site Recovery Act, we would
be required to take additional actions to comply with such statute, including
possibly additional investigations and remediation. We also are conducting
remediation at a formerly-owned New Jersey facility under a voluntary cleanup
agreement with the state.

     We recently voluntarily self-disclosed to regulators certain non-
compliances with the air permit for our Troy, OH facility. We have installed
additional pollution controls at this facility and we are currently in
compliance with our air permit. We may also be required to pay a fine, but we
cannot predict whether such a fine will be imposed, or if so, in what amount.

     In 2004, the National Enforcement Investigation Center (NEIC), on behalf of
the United States Environmental Protection Agency (EPA), conducted an
environmental review of our Burlington, NJ site concerning federal Clean Air Act
requirements. The EPA subsequently issued a request for further information
regarding these air issues under Section 114 of the federal Clean Air Act. In
February and March, 2006 the New Jersey Department of Environmental Protection
(NJDEP) issued administrative orders alleging violations of certain state air
regulations at the Burlington facility. In March, 2006, the United States
Department of Justice (DOJ) contacted Colorite on behalf of the EPA. The DOJ
indicated that certain violations under several federal environmental statutes
had been identified as a result of the EPA's inspection. They discussed the
alleged violations and attempted to negotiate a settlement. Since that date,
representatives of Colorite have met with representatives of EPA, DOJ and NJDEP
on several occasions to discuss the alleged federal and state violations. Tekni-
Plex continues to evaluate the alleged violations and its defenses to them, and
anticipates negotiating with the government agencies to attempt to resolve these
matters.

     As of June 29, 2007 we had a $1.4 million reserve in our financial
statements to reflect our best estimate of the aggregate expenses associated
with these environmental matters. This reserve is in addition to existing

                                       12

<PAGE>

environmental reserves which total $500,000 and the reserves described in Note 3
related to our Elm and Swan acquisitions.

     Although we believe that, based on historical experience, the costs of
achieving and maintaining compliance with environmental laws and regulations are
unlikely to have a material adverse effect on our business, we could incur
significant fines, penalties, capital costs or other liabilities associated with
any confirmed noncompliance or remediation of contamination or natural resource
damage liability at or related to any of our current or former facilities, the
precise nature of which we cannot now predict. Furthermore, we cannot assure you
that future environmental laws or regulations will not require substantial
expenditures by us or significant modifications of our operations.

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

     Not Applicable.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         ISSUER PURCHASES OF EQUITY SECURITIES

     Not Applicable.


                                       13

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The following table sets forth selected historical consolidated financial
information of the Company, and has been derived from and should be read in
conjunction with the Company's audited consolidated financial statements,
including the notes thereto, which appear elsewhere herein and previously filed.
Acquisitions the Company made in certain years result in years not being
comparable.

<Table>
<Caption>
                                                             YEAR ENDED
                                      --------------------------------------------------------
                                      JUNE 27,    JULY 2,     JULY 1,     JUNE 30,    JUNE 29,
                                        2003        2004        2005        2006        2007
                                      --------   ---------   ---------   ---------   ---------
<S>                                   <C>        <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Net sales...........................  $610,663   $ 635,642   $ 695,524   $ 742,683   $ 773,337
Cost of goods sold..................   459,981     530,372     600,170     621,983     656,150
Gross profit........................   150,682     105,270      95,354     120,700     117,187
Integration expense.................    11,164       7,775      10,478       5,250       1,715
Selling, general and administrative
  expenses(c).......................    61,600      69,159      60,690      96,490      64,469
Income from operations..............    77,918      28,336      24,186      18,960      51,003
Interest expense, net(a)............    71,266      84,451      89,899     104,831     104,468
Unrealized loss (gain) on derivative
  contracts.........................     1,997     (10,654)     (8,287)     (3,800)       (243)
Other expense (income)..............      (531)        605      (2,194)     (2,737)      2,307
Pre-tax income (loss)...............     5,186     (46,066)    (55,232)    (79,334)    (55,529)
Income tax provision (benefit)......     2,306      11,121      26,247       4,977       5,785
                                      --------   ---------   ---------   ---------   ---------
Net income (loss)...................  $  2,880   $ (57,187)  $ (81,479)  $ (84,311)  $ (61,314)
                                      ========   =========   =========   =========   =========
BALANCE SHEET DATA (AT YEAR END):
Working capital.....................  $248,372   $ 225,857   $ 200,818   $ 215,415   $ 183,519
Total assets........................   783,471     743,663     691,695     663,355     639,293
Total debt (including current
  portion and preferred stock)......   729,484     734,007     800,517     849,621     873,294
Stockholders' (deficit).............   (66,104)   (105,054)   (213,327)   (288,931)   (347,627)
OTHER FINANCIAL DATA:
Depreciation and amortization.......  $ 28,342   $  32,304   $  32,653   $  31,996   $  29,014
Goodwill impairment(c)..............        --      10,000          --      35,131          --
Capital expenditures................    32,232      29,472      18,246      19,082      21,544
Cash flows:
From (used in) operating
  activities........................    15,029      (7,364)    (24,461)    (11,199)     14,188
(Used in) investing activities......   (49,994)    (34,126)    (19,000)    (18,874)    (24,180)
From financing activities...........    54,203      23,513      32,272      32,598      11,860
                                      --------   ---------   ---------   ---------   ---------

</Table>


--------

(a)    Interest expense included a reduction in deferred financing costs of
       $1,400 and $5,000 in fiscal years 2005 and 2004 respectively. Interest
       expense includes $11,538 and $15,288 non-cash, preferred stock accretion
       in fiscal 2007 and 2006, respectively.

(b)    Income tax provision contains an increase in the valuation allowance of
       deferred tax assets of $23.1 million and $7.0 million in 2005 and 2004,
       respectively.

(c)    In September 2005, we concluded our annual garden hose contract
       negotiations. While we were largely successful in securing our target
       price increases, we lost meaningful market share. With this information
       in mind, in the second quarter of fiscal 2006 we deemed it appropriate to
       retest the goodwill in our Tubing

                                       14

<PAGE>

       segment in greater detail, evaluating each line of business within this
       segment separately. Accordingly, we recorded a $35.1 million impairment
       charge against the goodwill associated with our Swan operations as we
       anticipate reducing the capacity of this operation, eliminating much of
       its fixed costs, to reflect our reduced market position. As a result of
       impairment tests being performed at the end of fiscal 2007, 2006 and
       2005, the Company did not record an impairment charge. In fiscal 2004, an
       impairment charge of $10.0 million associated with its specialty resins
       operations was recorded.

(d)    The fourth quarter of fiscal 2007 includes certain fourth quarter
       adjustments, including the following:

     (1) $1.1 million reduction in inventory to correct a misstated inventory
         count at our Action Technology unit in Clinton, IL.

     (2) $2.8 million increase in fixed assets to correct excess depreciation
         charged in prior years.

(e)    The first quarter of fiscal 2007 included a $2.4 million reduction in
       interest expense due to a change in the methodology used to accrete our
       preferred stock to its mandatory redemption value from the straight-line
       method to the effective interest method.


                                       15

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     You should read the following discussion and analysis in conjunction with
the "Selected Historical Financial Information" and the Financial Statements
included elsewhere in this Annual Report. Restated financial statements can be
found elsewhere in this filing. The table below sets forth, for the periods
indicated, selected operating data as a percentage of net sales.

                         SELECTED FINANCIAL INFORMATION
                            (PERCENTAGE OF NET SALES)

<Table>
<Caption>
                                                      JULY 1,   JUNE 30,   JUNE 29,
                                                        2005      2006       2007
                                                      -------   --------   --------
<S>                                                   <C>       <C>        <C>
Net sales...........................................   100.0%     100.0%     100.0%
Cost of sales.......................................    86.3       83.7       84.8
Gross profit........................................    13.7       16.3       15.2
Integration expense.................................     1.5        0.7        0.2
Selling, general and administrative expenses........     8.7       13.0        8.3
Income from operations..............................     3.5        2.6        6.6
Interest expense....................................    12.9       14.1       13.5
Provision for income taxes..........................     3.8        0.7        0.7
Net (loss)..........................................   (11.7)     (11.4)      (7.9)
Depreciation and amortization.......................     4.7        4.3        3.8
</Table>


YEAR ENDED JUNE 29, 2007 COMPARED TO THE YEAR ENDED JUNE 30, 2006

     Tekni-Plex faced a number of challenges during fiscal 2007. Adverse weather
conditions resulted in a 12.7% decline in our garden hose sales volumes as
measured in pounds sold. Higher raw material costs that we did not pass onto our
customers negatively affected our operations, particularly our garden hose and
egg packaging operations. During fiscal 2007 we closed our Piscataway, New
Jersey compounding facility and consolidated those operations into our
Ridgefield, New Jersey compounding business. We also exited vinyl garden hose
production at our Bucyrus, Ohio location, and we began production at our new
packaging and tubing facility in China.

     Net sales increased to $773.3 million in fiscal 2007 from $742.7 million
the same period last year, representing a 4.1% increase. Net sales in our
Packaging Segment grew 8.4% to $405.4 million in the most recent period from
$374.1 million in fiscal 2006 due to higher selling prices which increased
approximately 10.0% on average. Our Packaging Segment sales volume, measured in
pounds, declined approximately 1.3% in fiscal 2007. Net sales at our Tubing
Products Segment decreased 4.7% to $205.6 million in fiscal 2007 from $215.8
million in fiscal 2006 due to weak demand for our garden hose products. The
average price of our Tubing Segment product increased 8.9% in fiscal 2007, while
our sales volume, measured in pounds, declined 12.4%. Other net sales grew 6.2%
to $162.3 million in fiscal 2007 compared to $152.8 million in the previous year
due to higher sales volumes which rose 5.4%. Average prices at our Other Segment
was flat.

     Rebates, discounts and sales allowances totaled to $47.7 million or 6.2% of
net sales in fiscal 2007 compared to $57.3 million or 7.7% of net sales in
fiscal 2006. The decrease was due to changes in our sales programs as well as
changes in the volumes purchased by each of our customers during the relevant
years.

     Cost of goods sold increased to $656.2 million in fiscal 2007 from $622.0
million in fiscal 2006 primarily due to higher raw material costs. During fiscal
2007, our material cost as a percent of net sales increased

                                       16

<PAGE>

2.4 percentage points compared to the previous year. Expressed as a percentage
of net sales, cost of goods sold increased to 84.8% in the current period
compared to 83.7% in the prior period

     Tekni-Plex's primary raw materials are Polyvinyl Chloride (PVC),
Polystyrene, Vinyl Chloride Monomer (VCM) and various plasticizers, all of which
are petrochemical based. Generally higher oil prices, coupled with strong global
demand for commodity chemicals and tight supplies, have resulted in generally
higher costs for all of our key raw materials. We expect this trend to continue
for the foreseeable future. In most of our businesses we have been able to pass
on higher material costs to our customers in a relatively short time period.
However, like most seasonal retail products, we traditionally have sold garden
hose under annual agreements, where prices are generally set in the fall and
generally remain in effect for the calendar year. Typically, the increase in raw
material costs at our garden hose operations during a 12-month time period
reduces our profitability. In fiscal 2007, the two primary raw materials for our
garden hose business, PVC and plasticizers, rose an average of 3.5% and 17.6%
respectively. To mitigate the potential impact of continued increases in the
cost of our raw materials and in contrast to previous years, we no longer
guarantee garden hose pricing.

     During most of fiscal 2007 we did not pass on higher raw material costs to
many of our food packaging customers. The primary raw material for our food
packaging operations is polystyrene the cost of which increased by 22.3% during
fiscal 2007.

     Gross profit, as a result of the above, decreased to $117.2 million in the
current period compared to $120.7 million in the prior period. Expressed as a
percentage of net sales, gross profit decreased to 15.2% in fiscal 2007 from
16.3% last year.

     Our Packaging Segment gross profit increased modestly to $93.9 million in
fiscal 2007 from $93.7 million in fiscal 2006. Expressed as a percentage of net
sales, Packaging Segment gross profit decreased to 23.2% in the current period
from 25.1% in the previous period primarily due to higher raw material costs at
our food packaging operations.

     Our Tubing Products Segment gross profit increased slightly to $17.4
million in fiscal 2007 from $16.8 million in fiscal 2006 as improved pricing was
offset by both weaker demand and higher raw material costs. Expressed as a
percentage of net sales, our Tubing Products Segment gross profit improved to
8.4% in the current period from 7.8% in the previous period.

     Other gross profit decreased to $6.0 million in fiscal 2007 from $10.1
million in fiscal 2006 primarily due to weak demand for our specialty resins
products and higher VCM costs. Expressed as a percentage of net sales, other
gross profit declined to 3.7% in fiscal 2007 from 6.6% a year earlier.

     Selling, general and administrative expenses decreased to $64.5 million in
the most recent fiscal year from $96.5 million last year largely due to the
inclusion of a $35.1 million non-cash charge in fiscal 2006 to write off
goodwill associated with our garden hose operations. Measured as a percentage of
net sales, selling, general and administrative expenses decreased to 8.3% in the
current period from 13.0% in the previous period.

     Integration expenses decreased to $1.7 million, or 0.2% of net sales in
fiscal 2007 from $5.3 million, or 0.7% of net sales in fiscal 2006. The decrease
was largely related to the fact that we completed the closing of our Rockaway
facility early in fiscal 2007 and we incurred lower costs associated with the
integration of our Elm facilities. Our integration expenses are typically cash
expenses and relate to reconfiguring and realignment

                                       17

<PAGE>

of acquired facilities to conform to the Company's current production and
product standards as well as the costs associated with consolidating facilities.
These costs are comprised of the following measured in millions:

<Table>
<Caption>
                                                               2007   2006
                                                               ----   ----
<S>                                                            <C>    <C>
Elm Packaging
  Material...................................................  $1.1   $2.6
  Labor......................................................   0.3    0.8
  Overhead...................................................   0.3    1.6
Rockaway closing
  SG&A.......................................................    --    0.3
                                                               ----   ----
Total........................................................  $1.7   $5.3
                                                               ====   ====

</Table>


     We expect the reconfiguring and realignment of our Elm facilities to result
in significant cost reductions as well as enable us to produce higher value
added products; however, we cannot currently quantify these benefits. We do not
expect to report integration expenses in fiscal 2008.

     Operating profit, as a result of the above, increased to $51.0 million in
fiscal 2007 from $19.0 million in fiscal 2006. Expressed as a percentage of net
sales, operating profit increased to 6.6% in the most recent period from 2.6% in
the comparable period of last year.

     Our Packaging Segment operating profit increased to $66.3 million or 16.4%
of net sales in the current period compared to $63.6 million or 17.0% of net
sales in the previous period. Our Tubing Products Segment reported an operating
profit of $4.6 million in fiscal 2007 compared to an operating loss of ($30.5)
million in fiscal 2006. Measured as a percent of net sales, our Tubing Segment
operating loss improved to 2.2% of net sales in the current period compared to
(14.2%) of net sales in the previous year. The 2006 period included a $35.1
million non-cash charge to write-off goodwill associated with our garden hose
operations. Our Tubing Segment reported $4.6 million of operating profit before
goodwill impairment in fiscal 2006. Our Other segment reported a ($1.0) million
or (0.6%) of net sales operating loss in fiscal 2007 compared to a profit of
$3.0 million or 2.0% of net sales in the comparable period of 2006.

     Interest expense decreased modestly to $104.5 million (13.5% of net sales)
in fiscal 2007 from $104.8 million (14.1% of net sales) in fiscal 2006. Our
interest expense included $11.5 million of non-cash interest expense associated
with our Series A Redeemable preferred stock in fiscal 2007 reflecting its
accretion to its mandatory redemption amount. In fiscal 2006 the accretion on
our preferred stock included in interest expense totaled $15.2 million

     Unrealized gain on derivative transactions was $0.2 million or 0.0% of net
sales in fiscal 2007 compared to $3.8 million or 0.5% of net sales in the
previous year due to the various movements of the interest rates embedded in our
derivative contracts. See the Liquidity and Capital Resources discussion below
for a detailed description of our derivative transactions.

     Loss before income taxes, as a result, was a loss of ($55.5) million or
(7.2%) of net sales for fiscal 2007 compared to a loss of ($79.3) million or
(10.7%) of net sales for fiscal 2006.

     Income tax expense was $5.8 million for fiscal 2007 compared to $5.0
million for fiscal 2006 primarily reflecting foreign taxes as we continued to
fully reserve against our deferred tax asset.

     Net loss, as a result, was a loss of ($61.3) million for fiscal 2007 or
(7.9%) of net sales compared with a loss of ($84.3) million for fiscal 2006 or
(11.4%) of net sales.

YEAR ENDED JUNE 30, 2006 COMPARED TO THE YEAR ENDED JULY 1, 2005

     Net sales increased to $742.7 million in fiscal 2006 from $695.5 million
the same period last year, representing a 6.8% increase. Net sales in our
Packaging Segment grew 7.3% to $374.1 million in the most recent period from
$348.7 million in fiscal 2005 primarily due to higher selling prices. Net sales
in our Tubing Products Segment increased 1.3% to $215.8 million in fiscal 2006
from $213.1 million in fiscal 2005 due to

                                       18

<PAGE>

significant price increases, in excess of 10% on average, that went into effect
midway through 2006 fiscal year for our garden hose products. These price
increases were largely offset by lower sales volumes due to lost market share,
in excess of 10 percentage points, at our garden hose operations. Other net
sales grew 14.2% to $152.8 million in fiscal 2006 compared to $133.8 million in
the previous year due to higher selling prices which rose 16.8% on average,
offset by lower volumes which declined by approximately 2.4%.

     Rebates, discounts and sales allowances totaled to $57.3 million or 7.7% of
net sales in fiscal 2006 compared to $43.0 million or 6.2% of net sales in
fiscal 2005. The increase was due to changes in our sales programs as well as
changes in the volumes purchased by each of our customers during the relevant
years.

     Cost of goods sold increased to $622.0 million in fiscal 2006 from $600.2
million in fiscal 2005 due to higher energy, labor and freight costs. Despite
generally higher prices for our raw materials, our material cost decreased a
modest 0.3% in fiscal 2006 compared to fiscal 2005. Lower material costs
resulted from both lower garden hose volumes due to lost market share and
improved material utilization rates. Expressed as a percentage of net sales,
cost of goods sold decreased to 83.7% in the current period compared to 86.3% in
the prior period

     Tekni-Plex's primary raw materials are Polyvinyl Chloride (PVC),
Polystyrene, Vinyl Chloride Monomer (VCM) and various plasticizers, all of which
are petrochemical based. Generally higher oil prices, coupled with strong global
demand for commodity chemicals and tight supplies, have resulted in generally
higher costs for all of our key raw materials. In most of our businesses we have
been able to pass on higher material costs to our customers in a relatively
short time period. However, like most seasonal retail products, we traditionally
have sold garden hose under annual agreements, where prices are generally set in
the fall and generally remain in effect for the calendar year. In general, the
increase in raw material costs at our garden hose operations during a 12-month
time period reduces our profitability. In fiscal 2006, the two primary raw
materials for our garden hose business, PVC and plasticizers, rose an average of
12.4% and 18.3% respectively. Price increases on our garden hose products that
generally went into effect in January 2006 coupled with cost reduction
initiatives and product mix improvements more than offset this increase in raw
material costs. To further mitigate the potential impact of continued increases
in the cost of our raw materials and in contrast to previous years, we did not
guarantee garden hose pricing for the 2006 selling season.

     Our cost of goods sold includes a $2.8 million inventory write-down (0.4%
of net sales) in fiscal 2005 to reflect inventory restatements at our American
Gasket and Rubber Division.

     Gross profit, as a result of the above, increased to $120.7 million in the
current period compared to $95.4 million in the prior period. Expressed as a
percentage of net sales, gross profit increased to 16.3% in fiscal 2006 from
13.7% last year.

     Our Packaging Segment gross profit increased 12.7% to $93.7 million in
fiscal 2006 from $83.1 million in fiscal 2005 due to higher selling prices.
Expressed as a percentage of net sales, Packaging Segment gross profit increased
to 25.1% in the current period from 23.8% in the previous period.

     Our Tubing Products Segment gross profit increased 136.6% to $16.8 million
in fiscal 2006 from $7.1 million in fiscal 2005 as significantly higher selling
prices more than offset both higher raw material costs and reduced volumes.
Expressed as a percentage of net sales, our Tubing Products Segment gross profit
more than doubled to 7.8% in the current period from 3.3% in the previous
period.

     Other gross profit increased to $10.1 million in fiscal 2006 from $5.2
million in fiscal 2005 primarily due to higher pricing. Expressed as a
percentage of net sales, other gross profit improved to 6.6% in fiscal 2006 from
3.8% a year earlier.

     Selling, general and administrative expenses increased to $96.5 million in
the most recent fiscal year from $60.7 million last year largely due to the
inclusion of a $35.1 million non-cash charge in our second fiscal quarter to
write off goodwill associated with our garden hose operations. In recent years
our garden hose operations have not been profitable. While the price increases
we secured for the 2006 selling season has returned these operations to
profitability, we have lost significant market share. In the near term, we
expect to reduce our production capacity at our Swan operations to reflect our
reduced market share and accordingly we

                                       19

<PAGE>

have deemed it appropriate to write-off the goodwill associated with these
operations. Measured as a percentage of net sales, selling, general and
administrative expenses increased to 13.0% in the current period from 8.7% in
the previous period.

     Integration expenses decreased to $5.3 million or 0.7% of net sales in
fiscal 2006 from $10.5 million or 1.5% of net sales in fiscal 2005. The decrease
was largely related to the fact that we completed the closing of our Rockaway
facility early in fiscal 2006 and we incurred lower costs associated with the
integration of our Elm facilities. Our integration expenses are typically cash
expenses and relate to reconfiguring and realignment of acquired facilities to
conform to the Company's current production and product standards as well as the
costs associated with consolidating facilities. These costs are comprised of the
following measured in millions:

<Table>
<Caption>
                                                              2006    2005
                                                              ----   -----
<S>                                                           <C>    <C>
Elm Packaging
  Material..................................................  $2.6   $ 3.8
  Labor.....................................................   0.8     1.5
  Overhead..................................................   1.6     2.5
Rockaway closing
  Material..................................................   0.0     1.5
  Labor.....................................................   0.0     0.1
  Overhead..................................................   0.0     0.9
  SG&A......................................................   0.3     0.2
                                                              ----   -----
Total.......................................................  $5.3   $10.5
                                                              ====   =====

</Table>


     We expect the closing of our Rockaway facility to result in approximately
$1.0 million of annual cost savings. We also expect the reconfiguring and
realignment of our Elm facilities to result in significant cost reductions as
well as enable us to produce higher value added products; however, we cannot
currently quantify these benefits.

     Operating profit, as a result of the above, decreased to $19.0 million in
fiscal 2006 from $24.2 million in fiscal 2005. Expressed as a percentage of net
sales, operating profit decreased to 2.6% in the most recent period from 3.5% in
the comparable period of last year.

     Our Packaging Segment operating profit increased 29.9% to $63.6 million
(17.0% of net sales) in the current period compared to $49.0 million (14.0% of
net sales) in the previous period. Our Tubing Products Segment reported an
operating loss of ($30.5) million in fiscal 2006 compared to an operating loss
of $6.5 million in fiscal 2005. Measured as a percent of net sales, our Tubing
Segment operating loss decreased to (14.2%) of net sales in the current period
compared to (3.0%) of net sales in the previous year. The 2006 period included a
$35.1 million non-cash charge to write-off goodwill associated with our garden
hose operations. Our Tubing Segment reported $4.6 million of operating profit
before goodwill impaiment in fiscal 2006. Our Other segment reported a $3.0
million or 2.0% of net sales operating profit in fiscal 2006 compared to a loss
of ($1.2) million or (0.9%) of net sales in the comparable period of 2005.

     Interest expense increased to $104.8 million (14.1% of net sales) in fiscal
2006 from $89.9 million (12.9% of net sales) in fiscal 2005 due to the inclusion
of a $15.2 million, non-cash interest expense associated with our Series A
Redeemable preferred stock reflecting its accretion to its mandatory redemption
amount.

     Unrealized gain on derivative transactions was $3.8 million or 0.5% of net
sales in fiscal 2006 compared to $8.3 million or 1.2% of net sales in the
previous year due to the various movements of the interest rates embedded in our
derivative contracts. See the Liquidity and Capital Resources discussion below
for a detailed description of our derivative transactions.

     Loss before income taxes, as a result, was a loss of ($79.3) million or
(10.7%) of net sales for fiscal 2006 compared to a loss of ($55.2) million or
(7.9%) of net sales for fiscal 2005.


                                       20

<PAGE>

     Income tax expense was $5.0 million for fiscal 2006 compared to $26.2
million for fiscal 2005 primarily reflecting foreign taxes as we continued to
fully reserve against our deferred tax asset. Our fiscal 2005 tax provision
include a $23.1 million charge to increase our deferred tax assets' valuation
allowance.

     Net loss, as a result, was a loss of ($84.3) million for fiscal 2006 or
(11.4%) of net sales compared with a loss of ($81.5) million for fiscal 2005 or
(11.7%) of net sales.

LIQUIDITY AND CAPITAL RESOURCES

     For the year ended June 29, 2007, net cash provided from operating
activities was $14.2 million compared to $11.2 million of cash used in operating
activities in the prior year. The $25.4 million improvement was primarily due to
improved earnings. In addition, we lowered our working capital requirements,
largely by selling our European accounts receivable to a third party. Beginning
with the 2006 selling season, we have discontinued the practice of guaranteeing
garden hose prices for the entire season. While we believe raw material costs
may continue to rise in fiscal 2008, we also believe the prices we have secured
to date for our garden hose products should continue to improve this unit's
profitability. Furthermore, we believe that, subject to prevailing competitive
pressures, we will generally be able to pass on future increases in raw material
costs to primarily all of our customers, including our garden hose customers,
albeit with a lag of one to three months. However, we can give you no assurance
to that effect.

     Improved earnings, decreases in our accounts receivable and inventories and
increases in our accounts payable all contributed to our improvement in cash
generated from operations in fiscal 2007. Other various year-over-year changes
in operating assets, accrued expenses, and liabilities are generally due to
offsetting timing differences.

     As of September 25, 2007, we had an outstanding balance of $41.0 million
under our $75.0 million asset backed credit facility. Also as of September 25,
2007 availability under this facility was reduced by $10.8 million of letters of
credit related to our workmen's compensation insurance programs.

     Working capital at June 29, 2007 was $183.5 million compared to $215.4
million at June 30, 2006. The decrease was primarily caused by an increase in
net borrowings under our asset backed credit facility offset by operating
losses.

     Our principal uses of cash are expected to be debt service, capital
expenditures and working capital requirements. Our capital expenditures for the
years ended June 29, 2007, June 30, 2006 and July 1, 2005 were $21.5 million and
$19.1 million and $18.2 million, respectively. Management believes that we will
be able to pass along expected higher raw material costs to our garden hose
customers during fiscal 2008 and consequently, cash generated from operations
plus funds available in the Company's asset backed facility will be sufficient
to meet its needs and to provide it with the flexibility to make capital
expenditures, which are expected to be between $20.0 and $30.0 million annually,
and other investments which management believes are prudent. However, we cannot
assure you that sufficient funds will be available from operations or borrowings
under our credit facility to meet all of our future cash needs.

     In June 2000, Tekni-Plex entered into a series of interest rate derivative
transactions designed to protect us from rising interest rates on our senior
term debt facilities while enabling us to partially benefit from falling
interest rates. At that time, Tekni-Plex had $344.0 million of term loans
outstanding with variable rates of interest tied to US$ LIBOR. These loans,
which originally had maturity dates ranging from June 2006 through June 2008,
have been repaid. Concurrent with incurring this debt, Tekni-Plex entered into a
series of interest swap contracts to pay variable rates of interest based on a
basket of LIBOR benchmarks and receive variable rates of interest based on 3
month dollar LIBOR on an aggregate of $344.0 million amount of indebtedness. The
swaps amortized on the same schedule as the original term loans. As of June 29,
2007 the notional amount of the swaps is $143.4 million.

     Portfolio theory and empirical evidence suggested that the change in value
of a basket of LIBOR benchmarks would be less volatile than the change in value
of a single benchmark. Since 2000, this has generally been our experience.


                                       21

<PAGE>

     In conjunction with its swap contracts Tekni-Plex also purchased an
interest rate cap. Tekni-Plex believes the reduced volatility created by the
interest rate swaps made the interest rate cap less expensive.

     We recorded an unrealized gain from derivative transactions of $0.2 million
and $3.8 million in fiscal 2007 and 2006, respectively.

     Our Senior debt and our Senior Subordinated Notes include various
covenants, the most restrictive of which limit our incremental debt and capital
expenditures. The availability of borrowings under our new asset based facility
is subject to a borrowing base limitations equal to the lesser of the borrowing
base as defined in the asset backed agreement and the then effective commitments
under the new asset based facility minus such availability reserves as the
administrative agent, in its sole discretion, deems appropriate.

     At June 29, 2007, the Company's contractual obligations are as follows:

<Table>
<Caption>
                          PENSION
                         AND POST
PAYMENTS                RETIREMENT     INTEREST    LONG-TERM     PREFERRED     PREFERRED STOCK
DUE BY PERIOD           HEALTHCARE   EXPENSE (1)      DEBT     DIVIDENDS (2)    ACCRETION (3)    LEASES   TOTAL
-------------           ----------   -----------   ---------   -------------   ---------------   ------   -----
<S>                     <C>          <C>           <C>         <C>             <C>               <C>      <C>
Less than 1 year......     $ 1.7         86.7          0.9           7.2              8.3         12.8    117.6
Year 2................       1.9         85.6         51.4           7.2              9.9          9.1    165.1
Year 3................       2.0         80.6        314.4           7.2             11.7          6.8    422.7
Year 4................       2.1         40.4          0.3           7.2             13.9          5.9     69.8
Year 5................       2.2         40.4          0.3           7.2             16.6          5.5     72.2
After 5 years.........      11.6         35.4        504.8          11.7             33.8         13.1    610.4
</Table>


--------

   (1) Interest expense includes obligations under our interest rate swap
       agreement.

   (2) May be paid in kind

   (3) Non-cash increase in preferred stock.

CRITICAL ACCOUNTING POLICIES

     The Company prepares its financial statements in accordance with accounting
principles generally accepted in the United States. Preparing financial
statements in accordance with generally accepted accounting principles requires
the Company to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The following paragraphs include a
discussion of some critical areas where estimates are required. You should also
review Note 1 to the financial statements for further discussion of significant
accounting policies.

     The Company records revenue when products are shipped. Legal title and risk
of loss with respect to the products pass to customers at the point of shipment.
The Company provides an allowance for returned product and volume sales rebates
on an estimated basis based on written agreements and past experience.

     The Company makes estimates of sales rebates and allowances related to
current period product revenue. Management analyzes historical trends, current
economic conditions, and compliance with written agreements when evaluating the
adequacy of the reserve for sales rebates and allowances. Management judgments
and estimates must be made and used in connection with establishing the sales
rebates and allowances in any accounting period.

     The Company evaluates its long-lived assets for impairment based on the
undiscounted future cash flows of such assets. If a long-lived asset is
identified as impaired, the value of the asset will be reduced to its fair
value.

     The Company records inventories at the lower of cost (weighted average) or
market. We record inventory reserves to reduce the carrying value of inventory
for estimated obsolescence or unmarketable inventory equal to the difference
between the cost of inventory and estimated market value based on assumptions
about future

                                       22

<PAGE>

demand and market conditions. If actual market conditions are less favorable
than those projected by management, additional inventory reserves may be
required.

     The Company extends credit based upon evaluations of a customer's financial
condition and provide for any anticipated credit losses in our financial
statements based upon management's estimates and ongoing reviews of recorded
allowances. If the financial conditions of our customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
reserves may be required. Conversely, reserves are deducted to reflect credit
and collection improvements.

     The Company has intangible assets. The determination of related estimated
useful lives and whether or not these assets are impaired involves management
judgments. Changes in strategy and/or market conditions could significantly
impact these judgments and require adjustments to recorded asset balances. We
adopted SFAS 142, which requires us to cease amortization of goodwill, but
instead be tested for impairment at least annually or earlier if there are
impairment indicators. The Company performs a two-step process for impairment
testing of goodwill as required by SFAS No. 142. The first step of this test,
used to identify potential impairment, compares the fair value of a reporting
unit with its carrying amount. The second step (if necessary) measures the
amount of the impairment. We have traditionally conducted these tests at the
segment level of our businesses. In September 2005, we concluded our annual
garden hose contract negotiations. While we were largely successful in securing
our target price increases, we lost meaningful market share. With this
information in mind, in the second quarter of fiscal 2006 we deemed it
appropriate to retest the goodwill in our Tubing segment. Accordingly, we
recorded a $35.1 million impairment charge against the goodwill associated with
our Swan operations as we anticipate reducing the capacity of this operation,
eliminating much of its fixed costs, to reflect our reduced market position. As
a result of impairment tests being performed at the end of fiscal 2007, 2006 and
2005, the Company did not record an impairment charge. In fiscal 2004, an
impairment charge of $10.0 million associated with its specialty resins
operations was recorded.

     In performing the above noted goodwill impairment testing, the Company uses
a measure of fair value based on an evaluation of future discounted cash flows.
This evaluation utilized what management believes to be the best information
available in the circumstances, including what management believes to be
reasonable and supportable assumptions and projections. Such assumptions are
consistent with those utilized in the Company's annual planning process and
appropriately take into account managements' initiatives to improve operational
efficiencies. If these turnaround initiatives do not achieve their earning
objectives, the assumptions and estimates underlying this goodwill impairment
evaluation could be modified in the future leading to further impairment in the
recorded value of goodwill.

     The Company records a valuation allowance to reduce the amount of our
deferred tax assets to the amount that is more likely than not to be realized.
While we have considered future taxable income and ongoing tax planning
strategies in assessing the need for the valuation allowance, in the event that
we determined that we would be able to realize our deferred tax assets in the
future in excess of the net recorded amount, an adjustment to the deferred tax
asset would increase income in the period such determination was made. Likewise,
if it were determined that we would not be able to realize all or part of the
net deferred tax asset in the future, an adjustment to the deferred tax asset
would be charged to income in the period such determination was made. Based on
our recent financial performance, in fiscal 2007 we continued to fully reserve
against our deferred tax asset.

     Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated, based on current law and existing technologies. These accruals are
adjusted periodically as assessment and remediation efforts progress or as
additional technical or legal information becomes available. Accruals for
environmental liabilities are included in the consolidated balance sheets as
"Accrued liabilities -- other" at undiscounted amounts.


                                       23

<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

  SFAS NO. 123R, SHARE-BASED PAYMENT

     As of July 1, 2006 the Company adopted the Statement of Financial
Accounting Standards No. 123(R), "Share-Based Payment," ("SFAS No. 123(R)").
SFAS No. 123(R) requires the Company to recognize in the statement of operations
the grant-date fair value of stock options and other equity-based compensation
issued to employees and directors, including employee stock options and
restricted stock. SFAS No. 123(R) supersedes Accounting Principal Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"), which
the Company previously applied for all periods prior to 2007.

     Prior to the adoption of SFAS No. 123(R), we accounted for share-based
payment awards using the intrinsic value method in accordance with APB No. 25 as
allowed under SFAS No. 123, "Accounting for Stock Based Compensation" ("SFAS No.
123"). The adoption of SFAS No. 123(R), did not impact the Company's net loss
for the year ended June 29, 2007.

     For purposes of determining the estimated fair value of share-based payment
awards issued in the form of stock options, under SFAS No. 123(R), we utilize
the Black-Scholes option-pricing model. The Black-Scholes model requires the
input of certain assumptions that involve judgment. Because stock options have
characteristics significantly different from those of traded options, and
because changes in the input assumptions can materially affect the fair value
estimate, the existing models may not provide a reliable single measure of the
fair value of our stock options. Management will continue to assess the
assumptions and methodologies used to calculate estimated fair value under the
Black-Scholes model. Circumstances may change and additional data may become
available over time, which could result in changes to these assumptions and
methodologies, and thereby materially impact our fair value determination.

     The fair value of options granted during the year ended June 29, 2007 was
estimated to be negligible on the grant date using the Black Scholes Model with
the following weighted average assumptions.

<Table>
<Caption>
                                                                YEAR ENDED
                                                                 JUNE 29,
WEIGHTED AVERAGE ASSUMPTIONS                                       2007
----------------------------                                    ----------
<S>                                                             <C>
Expected holding period (years)...............................       10
Risk-free rate................................................     5.31%
Volatility factor.............................................      100%
Dividend yield................................................     0.00%
</Table>


     The expected holding period was determined based on management's assessment
including the Company's historical data. Due to the lack of a public market for
the Company's equity instruments, volatility was estimated considering the
historical volatility of similar publicly traded manufacturing companies over a
period similar to the expected holding period of the option. The risk-free
interest rate was based on U.S. Treasury rates appropriate for the expected
holding period of the option.

     SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R)

     In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 158, which requires the Company to (a) recognize in its
statement of financial position the overfunded or underfunded status of a
defined benefit postretirement plan measured as the difference between the fair
value of plan assets and the benefit obligation, (b) recognize as a component of
other comprehensive income, net of tax, the actuarial gains and losses and the
prior service costs and credits that arise during the period, (c) measure
defined benefit plan assets and defined benefit plan obligations as of the date
of the Company's statement of financial position, and (d) disclose additional
information about certain effects on net periodic benefit costs in the upcoming
fiscal year that arise from the delayed recognition of the actuarial gains and
losses and the prior service costs and credits. The Company's adoption of SFAS
No. 158 effective for fiscal year ended June 29, 2007 which resulted in an
adjustment of $7,898 to the opening balance of accumulated other comprehensive
loss.


                                       24

<PAGE>

  FIN No. 48, Accounting for Uncertain Tax Positions -- An Interpretation of
  FASB Statement No. 109

     In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes- an
interpretation of FASB Statement No. 109." FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an entity's financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes, and
prescribes a recognition threshold and measurement attribute for the financial
statement disclosure of a tax position taken or expected to be taken in a tax
return. In addition, this interpretation provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company is currently evaluating the impact the adoption
of FIN No. 48 may have on its statements of operations and financial position.

  SFAS No. 157, Fair Value Measurements

     In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS No. 157"), which
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS No. 157 applies under a number of other accounting
pronouncements that require or permit fair value measurements. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. The Company is currently evaluating the impact the adoption
of SFAS No. 157 may have on its statements of operations and financial position.

     SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities Including an amendment of FASB Statement No. 115

     The FASB issued Statement of Financial Accounting Standards ("SFAS") No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities
Including an amendment of FASB Statement No. 115" ("SFAS No. 159") in February
2007. SFAS No. 159 permits a company to choose to measure many financial
instruments and other items at fair value that are not currently required to be
measured at fair value. The objective is to improve financial reporting by
providing a company with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. A company shall report
unrealized gains and losses on items for which the fair value option has been
elected in earnings at each subsequent reporting. SFAS 159 is effective for
fiscal years beginning after November 15, 2007. Early adoption is permitted as
of the beginning of a fiscal year that begins on or before November 15, 2007,
provided the Company also elects to apply the provisions of FASB Statement No.
157, Fair Value Measurements. The Company is currently evaluating the impact the
adoption of SFAS No. 159 may have on its statements of operations and financial
position.

INFLATION

     In recent years, we have contended with significant and rapidly rising raw
material prices. Over the long term, we believe we have generally been able to
offset the effects thereof through continuing improvements in operating
efficiencies and by increasing prices to our customers to the extent permitted
by competitive factors. However, we cannot assure you that such cost increases
can be passed through to our customers in the future or that the effects can be
offset by further improvements in operating efficiencies.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The market risk inherent in the Company's financial instruments and
positions represents the potential loss arising from adverse changes in interest
rates. At June 29, 2007 and June 30, 2006 the principal amount of the Company's
aggregate outstanding variable rate indebtedness was $51.0 million and $39.0
million respectively. A hypothetical 1% adverse change in interest rates would
have had an annualized unfavorable impact of approximately $0.5 million and $0.4
million respectively, on the Company's earnings and cash flows based upon these
year-end debt levels.


                                       25

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements commence on Page F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None

ITEM 9A.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

     The Company maintains disclosure controls and procedures designed to ensure
that information required to be disclosed in its Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to the Company's management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.

     In connection with the completion of its audit of and the issuance of an
unqualified report on the Company's consolidated financial statements for the
fiscal year ended June 29, 2007, the Company's independent registered public
accounting firm, BDO Seidman, LLP ("BDO"), communicated to the Company's Audit
Committee that the following matters involving the Company's internal controls
and operations were considered to be "material weakness", as defined under
standards established by the Public Company Accounting Oversight Board:

     - Lack of quantity of staff in order to maintain proper supervision and
       ensure the accuracy of detailed financial analyses.

     Management agrees with this assessment.

     Over the last 2 years we have made a number of significant changes to our
internal controls. They include:

          (1) creating an internal audit/Sarbanes Oxley compliance department;

          (2) adding additional staff to the accounting and finance functional
     group

          (3) centralizing the reporting of financial managers to 5 group
     controllers who provide increased oversight and improved training;

          (4) during annual performance reviews of accounting and bookkeeping
     personnel; requiring all reviewing personnel to inquire whether the
     reviewed employee has had or observed any problems in the use of approved
     accounting systems or in the accounting function generally;

          (5) improving our internal financial reporting systems and related
     controls across all of its divisions to, among other things, increase both
     the frequency by which inventory and rebates discounts and allowances are
     monitored as well as increasing the number of managers responsible for
     monitoring these functions;


                                       26

<PAGE>

          (6) instituting a policy of performing routine credit and background
     checks on all financial staff and key managers; and

          (7) instituting a Code of Ethics.

     As required by SEC, Rule 13a-15(b), the Company carried out an evaluation
under the supervision and with the participation of its management, including
its Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operations of the Company's disclosure controls and procedures
and internal controls over financial reporting as of September 25 2007 as well
as of June 29, 2007. Given the material weakness noted above, the Company's
Chief Executive Officer and Chief Financial Officer determined that its controls
are not effective as of those dates. However, the Chief Executive Officer and
Chief Financial Officer noted that significant improvement in its controls have
been made and they expect its controls can be improved further. Consequently,
the Company will continue to improve and refine its internal controls over the
next 12 months.

ITEM 9B.  OTHER INFORMATION

     Not Applicable

                                    PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

DIRECTORS AND EXECUTIVE OFFICERS

     Our current directors and executive officers are listed below. Each
director is elected at the annual meeting of the stockholders of Tekni-Plex to
serve a one year term until the next annual meeting or until a successor is
elected and qualified, or until his earlier resignation. Except for Dr. Smith,
who is party to an employment agreement with the Company, all executive officers
of Tekni-Plex are "at will" employees.

     Pursuant to our by-laws, we indemnify our officers and directors to the
fullest extent permitted by the General Corporation Law of the State of Delaware
and our Amended and Restated Certificate of Incorporation (our "Certificate of
Incorporation").

<Table>
<Caption>
NAME                       AGE            POSITION
----                       ---            --------
<S>                        <C>   <C>
Dr. F. Patrick Smith.....   59   Chairman of the Board,
                                 Chief Executive Officer
                                 and President
James E. Condon..........   45   Senior Vice President,
                                 Chief Financial Officer,
                                 Secretary and Director
Edward Goldberg..........   58   Senior Vice President and
                                 Director
John S. Geer.............   61   Director
J. Andrew McWethy........   66   Director
Michael F. Cronin........   53   Director
</Table>


     Dr. F. Patrick Smith has been Chairman of the Board and Chief Executive
Officer of Tekni-Plex since March 1994. He received his doctorate degree in
Chemical Engineering from Texas A&M University in 1975. Since 1990, Dr. Smith
has been a principal of Brazos Financial Group, a business consulting firm.
Since 2000, Dr. Smith has been a general partner of Eastport Operating Partners
L.P.

     James E. Condon is Senior Vice President, Chief Financial Officer and
Secretary of Tekni-Plex. He joined the Company in 2001 and became a Director in
2004.

     Edward Goldberg is Senior Vice President, and manages several divisions. He
joined Tekni-Plex in 2001 and became a Director in 2005. Prior to joining the
company he worked for Procter & Gamble and The Scott Paper Company. He received
his BS and MS degrees in Chemical Engineering from Rensselaer Polytechnic
Institute in 1971.


                                       27

<PAGE>

     John S. Geer has served as a director of Tekni-Plex since June 2000. He
also serves on the Executive Council of Century Park Capital Partners and on the
board of the Robb Report. He is a former Partner of Mellon Ventures, Inc. and
former Senior Vice President of Security Pacific Capital Corp. He has served on
20 boards of directors of emerging growth and middle market companies.

     J. Andrew McWethy has served as a director of Tekni-Plex since March 1994.
He co-founded and managed MST Partners L.P., a private equity investment fund,
from 1989 to 2000. In 2000, Mr. McWethy co-founded Eastport Operating Partners,
L.P., a private equity investment fund that he continues to manage. Prior to
1989, Mr. McWethy was employed by Irving Trust Company for 12 years.

     Michael F. Cronin has served as a director of Tekni-Plex since March 1994.
Since 1979, Mr. Cronin has invested in growth companies and various industrial
and service businesses. Mr. Cronin co-founded Weston Presidio, a venture capital
and private equity firm, in 1991. He currently serves as a Managing Partner of
that firm. Prior to the formation of Weston Presidio, Michael served as the
Senior Vice President of Security Pacific Venture Capital Group and Managing
Director of its Boston office. Mr. Cronin currently serves on the Board of
Directors of Amscan Holdings, Inc., Apple & Eve LLC, Durcon Laboratory Tops,
National Vascular Care, Star International Holdings, and The Wolf Holdings
Organization, Inc. Mr. Cronin earned his A.B. from Harvard College and his MBA
from Harvard Graduate School of Business. He has served on the National
Association of Small Business Investment Companies' Board of Governors and
currently serves on the National Venture Capital Association's Board of
Directors and on the Harvard University Board of Overseers.

ARRANGEMENTS REGARDING DIRECTORS

     Pursuant to our Certificate of Incorporation, the Board of Directors
currently consists of six directors, one of whom is elected by the holders of
the Series A Preferred Stock, as a separate class, and five of whom are elected
by the holders of the Common Stock. Effective on April 30, 2007, the Series A
Preferred Stockholders exercised their right under the Certificate of
Incorporation to increase the votes of the Series A Director from one to six, so
that the Series A Director now casts a majority of the votes for all matters
considered by the Board.

     An Amended and Restated Investors' Agreement dated as of May 13, 2005 among
the Company and its stockholders (the "Investors' Agreement") provides that the
Series A Director will be designated by Weston Presidio (the "WP Designee"), two
directors will be designated by a committee consisting of Dr. Smith and the WP
Designee (the "Nomination Committee") and three directors will be designated by
Dr. Smith from members of Company management. Since May 13, 2005, Michael Cronin
has been the WP Designee, Andrew McWethy and John S. Geer have been the
designees of the Nomination Committee, and Dr. Smith, James Condon and Edward
Goldberg have been Dr. Smith's designees. A quorum of the Board consists of four
directors with at least one of those directors being the WP Designee. The right
of Weston Presidio to designate a director or to have its designee on the
Nomination Committee will terminate when Weston Presidio beneficially owns less
than 20% of the Company's outstanding Common Stock (including through its equity
ownership in Tekni- Plex LLC); however, to the extent that there are any shares
of Preferred Stock outstanding, the Preferred Stockholders would still have the
right to appoint a director. Dr. Smith will lose his right to designate
directors or be on the Nomination Committee once his beneficial ownership falls
below the 20% level or once he is no longer actively involved in the management
of the Company.

     The Investors' Agreement also contains provisions regarding the appointment
of the Board's Compensation Committee and Audit Committee, and the level of
compensation for non-employee directors. Because the Company's voting securities
are closely held and the method for selecting directors is governed by
negotiated provisions in the Certificate of Incorporation and the Investors'
Agreement, the Board does not maintain a standing nominating committee and does
not have a policy regarding the consideration of director candidates recommended
by security holders.

     The preceding summary is qualified in its entirety by the terms and
conditions in our Certificate of Incorporation and the Investors' Agreement,
each of which has been filed as an exhibit to the Annual Report on Form 10-K, or
filed as an exhibit in an earlier SEC filing which is identified in the Index to
Exhibits in this Form 10-K.


                                       28

<PAGE>

CODE OF ETHICS

     The Company has adopted a Code of Business Conduct and Ethics for
directors, officers, and employees of the Company and its subsidiaries,
including but not limited to the principal executive officer, the principal
financial officer, the principal accounting officer or controller, or persons
performing similar functions for the Company and its subsidiaries. If the
Company makes any substantive amendment to the Code of Business Conduct and
Ethics or grants any waiver from a provision of the Code of Business Conduct and
Ethics for its executive officers or directors, the Company will disclose the
nature of such amendment or waiver in a filing on Form 8-K. The Company will
also provide a copy of the Code of Business Conduct and Ethics to any person,
without charge, upon written request made to the Company's General Counsel at
the following address: Michael W. Zelenty, Senior Vice President and General
Counsel, Tekni-Plex, Inc., 201 Industrial Parkway, Somerville, NJ 08876.

  AUDIT COMMITTEE

     The Company has established an Audit Committee of the Board of Directors
consisting of Messrs. Cronin and Geer. The Board has determined that Mr. Cronin
is an "audit committee financial expert" under applicable SEC rules.

ITEM 11.  EXECUTIVE COMPENSATION

  COMPENSATION DISCUSSION AND ANALYSIS

     Tekni-Plex believes that executive compensation should be designed to align
closely the interest of the Company, the executive officers, and its
stockholders and attract, motivate, reward and retain superior management
talent.

     Dr. Smith, the Company's Chief Executive Officer, is paid pursuant to a
two-year employment contract that was negotiated in conjunction with the
issuance of the Company's preferred stock in April 2005. Because he has a
substantial pecuniary interest in the Company's stock, Dr. Smith's interests are
closely aligned with those of our other stockholders. His existing employment
agreement contains no provision for bonus or stock-based compensation. The
Compensation Committee is currently negotiating with Dr. Smith regarding a new
agreement, and has extended the term of the current agreement to allow
sufficient time for such negotiations.

     The compensation for our other executive officers is primarily in the
following three categories: (1) salary, (2) bonus, and (3) stock options. In
compensating these executives, Tekni-Plex seeks to:

     - Pay a base salary that is competitive with the practices of other
       competing businesses

     - Reward performance with bonus payments at times and in amounts determined
       at the discretion of the Chief Executive Officer. Historically, in
       determining the amount and timing of such bonus payments, the Chief
       Executive Officer has taken into account the performance of the Company
       as a whole, the performance of the business unit or function under the
       direction of the executive, including a comparison of performance against
       budget, and the performance of any particular tasks assigned to the
       executive by the Chief Executive Officer.

     - Provide long-term incentives in the form of stock options, in order to
       retain those individuals with the leadership abilities necessary for
       increasing long-term shareholder value while aligning with the interests
       of our investors.

     Tekni-Plex has selected these three compensation elements because each is
considered useful and/or necessary to meet one or more of the principal
objectives of the business. For instance, base salary and bonuses are set with
the goal of motivating employees and adequately compensating and rewarding them
on a day-to-day basis for the time spent and the services they perform, while
our stock option awards are geared toward providing an incentive and reward for
the achievement of long-term business objectives and retaining key talent.
Tekni-Plex believes that these elements of compensation, when combined, are
effective, and will continue to be effective. The compensation program is
reviewed on an annual basis. In setting individual

                                       29

<PAGE>

compensation levels for a particular executive, the total compensation package
is considered as well as each element individually, and the executive's past and
expected future contributions to our business.

                          COMPENSATION COMMITTEE REPORT

     The Compensation Committee of the Company has reviewed and discussed with
management the above Compensation Discussion and Analysis and, based on its
review and discussions, the Compensation Committee has recommended to the Board
that the Compensation Discussion and Analysis be included in this Annual Report
on Form 10-K.

                                        Compensation Committee of the Board of
                                        Directors:

                                        Michael Cronin (Chairman)
                                        Dr. F. Patrick Smith

                           SUMMARY COMPENSATION TABLE

     The table below summarizes the total compensation paid or earned by each of
the Company's named executive officers for the fiscal year ended June 29, 2007.
All compensation paid to Dr. Smith was pursuant to the terms of his employment
agreement with the Company.

<Table>
<Caption>
                                                                       ALL OTHER
NAME AND                                          SALARY     BONUS   COMPENSATION     TOTAL
PRINCIPAL POSITION                       YEAR      ($)        ($)         ($)          ($)
------------------                       ----   ---------   ------   ------------   ---------
<S>                                      <C>    <C>         <C>      <C>            <C>
Dr. F. Patrick Smith, Chief Executive
  Officer..............................  2007   4,000,000        0      71,139(1)   4,071,139
James E. Condon, Chief Financial
  Officer..............................  2007     579,290   50,000      25,891(2)     655,181
Edward Goldberg, Senior Vice
  President............................  2007     351,731   50,000      16,955(3)     418,686
</Table>


--------

   (1) This amount includes payments totaling $26,000 for country club
       membership and related costs, payments totaling $26,154 for a leased
       automobile and its insurance and maintenance, a matching contribution to
       Dr. Smith's 401k plan, payment on a life insurance policy for the benefit
       of Dr. Smith, payment of the premium on a long-term disability policy for
       the benefit of Dr. Smith, and a payment to Dr. Smith as a gross- up to
       cover additional taxes resulting from the payment of that disability
       policy premium.

   (2) This amount includes an automobile allowance and additional automobile
       expenses of $20,100, a matching contribution to Mr. Condon's 401k plan,
       and payment of a premium on a life insurance policy for his benefit.

   (3) This amount includes an automobile allowance and additional automobile
       expenses, a matching contribution to Mr. Goldberg's 401k plan, and
       payment of a premium on a life insurance policy for his benefit.

                2007 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

     The following table provides information concerning the current holdings of
unexercised stock options for each of our named executive officers as of June
29, 2007. All options have a 10-year life and vest five years after the grant
date.

<Table>
<Caption>
                                        NUMBER OF               NUMBER OF
                                  SECURITIES UNDERLYING   SECURITIES UNDERLYING    OPTION
                                   UNEXERCISED OPTIONS     UNEXERCISED OPTIONS    EXERCISE     OPTION
                                           (#)                     (#)              PRICE    EXPIRATION
NAME                                   EXERCISABLE            UNEXERCISABLE          ($)        DATE
----                              ---------------------   ---------------------   --------   ----------
<S>                               <C>                     <C>                     <C>        <C>          <C>
Dr. Smith.......................           -0-                     -0-                  --           --
Mr. Condon......................           4.0                                     559,316    4/25/2011
                                                                   4.0              43,681     6/1/2017
Mr. Goldberg....................                                   4.0              43,681     6/1/2017
</Table>




                                       30

<PAGE>

          TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS

     The Company entered into an Amended and Restated Employment Agreement with
Dr. Smith effective May 13, 2005. The Employment Agreement initially provided
for a two-year term ending May 13, 2007, and has been extended from time to time
to allow the Chairman of the Compensation Committee to negotiate with Dr. Smith
regarding the terms of his continued employment. The agreement is currently
scheduled to expire on September 30, 2007 and it has no "evergreen" or "change
in control" provisions. It does contain a covenant restricting Dr. Smith's
ability to compete against the Company for a period of one year following the
termination of his employment without the consent of the board of directors,
which cannot be unreasonably withheld.

     The Employment Agreement permits the Company to terminate Dr. Smith's
employment for "Cause" with no further liability to the Company. If Dr. Smith
were to resign for any reason other than the Company's failure to meet its
obligations under the Employment Agreement, the Company's only obligation to him
would be to pay any accrued but unpaid amounts under the agreement. If Dr. Smith
were to die during his employment term, the Company would be obligated to pay to
his designated beneficiary or estate a severance benefit (the "Severance
Benefit") equal to (i) his then current annual salary, (ii) any bonus amounts
awarded pursuant to the Employment Agreement but not yet paid, and (iii) any
other accrued benefits if due and payable at the time of his death. Had a
termination occurred on June 29, 2007, the Severance Benefit would have been
$4,000,000. The Company has the right to terminate the Employment Agreement if
disability or incapacity renders Dr. Smith unable to perform his duties for a
period in excess of 120 consecutive days or a total of more than 180 days in any
12-month period. Upon termination due to disability or incapacity, the Company
would be required to pay the Severance Benefit to Dr. Smith, and to transfer to
him ownership of all life insurance policies on his life. Those life insurance
policies had no economic value on June 29, 2007.

     Each outstanding stock option held by named executive officers contains a
provision for accelerated vesting of the option upon a change in control of the
Company. Because all of the options which were unvested on June 29, 2007 were
substantially "out of the money," there would have been no economic benefit to
any named executive officer from accelerated vesting had a change in control
occurred on that date.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The board of directors maintains a two-member compensation committee
comprised of Mr. Cronin (Chairman) and Dr. Smith, who is the Chief Executive
Officer of the Company. No member of the compensation committee is allowed to
vote on issues pertaining to that member's compensation (including option
grants). The compensation committee's duties include the annual review and
approval of the compensation for our Chief Executive Officer, as well as the
administration of the Company's stock incentive plan. Changes in Mr. Condon's
compensation are subject to approval by Mr. Cronin. Determination of
compensation levels and bonus awards for all other employees has been delegated
to Dr. Smith.

     In June and July, 2005, the Company received for shares of the Company's
Series A Redeemable Preferred Stock (a) $42 million of equity contributions from
existing investors, Weston Presidio Capital III, L.P., Weston Presidio Capital
IV, L.P., WPC Entrepreneur Fund, L.P. and WPC Entrepreneur Fund II, L.P.
(together, "WP"), (b) $1.8 million from Dr. Smith, (c) $10.5 million from
Eastport Partners, a private equity firm of which Dr. Smith and Mr. McWethy are
managing members and in which Weston Presidio Capital III, L.P. and WPC
Entrepreneur Fund, L.P. are investors, (d) $230,527 from WPC Tekni- Plex
Rollover LLC, in which Mr. Cronin owns an approximately 42% interest and (e)
approximately $5.2 million from certain other existing investors. In connection
with these equity contributions, the Company entered into a Series A Redeemable
Preferred Stock Purchase Agreement with the purchasers. We also amended our
Investors' Agreement and our Certificate of Incorporation to incorporate the
terms of the Series A Redeemable Preferred Stock and we amended Dr. Smith's
employment agreement which reduced his salary to $4.0 million. The amended
employment agreement, initially set to expire on May 13, 2007, has been extended
through September 30, 2007.

     The Company currently employs Dr. Smith's son, Mr. Frank Smith, as the
General Manager of its Natvar division. In this capacity, he received salary,
bonus and benefits of approximately $140,000 in fiscal 2007.


                                       31

<PAGE>

                              DIRECTOR COMPENSATION

     Tekni-Plex reimburses directors for any reasonable out-of-pocket expenses
incurred by them in connection with services provided in such capacity. In
addition, each non-employee director is paid a retainer. The retainer for each
outside director was payable at the rate of $50,000 per year until May, 2007
when, at the request of Weston Presidio, and with the concurrence of Messrs.
Cronin and Geer, the Company changed Mr. Cronin's retainer to $25,000 and Mr.
Geer's retainer to $75,000.

<Table>
<Caption>
                                                          FEES EARNED
NAME                                                  OR PAID IN CASH ($)   TOTAL ($)
----                                                  -------------------   ---------
<S>                                                   <C>                   <C>
John S. Geer........................................         58,250           58,250
J. Andrew McWethy...................................         50,000           50,000
Michael F. Cronin...................................         41,750           41,750
</Table>


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

     The following table sets forth information concerning the beneficial
ownership of the Company's Common Stock and its Series A Preferred Stock as of
September 14, 2007 by each director, by the Company's named executive officers,
by all directors and executive officers as a group, and by any individual or
group owning 5% or more of the Company's Common Stock or Series A Preferred
Stock. Unless otherwise specified, all persons listed below have sole voting and
investment power with respect to their shares.

<Table>
<Caption>
                                                 COMMON STOCK                 SERIES A PREFERRED STOCK
                                       --------------------------------   --------------------------------
                                          NUMBER OF SHARES                   NUMBER OF SHARES
BENEFICIAL OWNER                       BENEFICIALLY OWNED (A)   PERCENT   BENEFICIALLY OWNED (A)   PERCENT
----------------                       ----------------------   -------   ----------------------   -------
<S>                                    <C>                      <C>       <C>                      <C>
Dr. F. Patrick Smith(b)..............            671(c)           100%             1,800(d)(g)        3.0%
James Condon(b)......................              4(e)              *                --               --%
Michael Cronin(b)....................             (c)              (c)               231(f)              *
Eastport Partners(g).................             --               --%            10,500(g)          17.6%
Weston Presidio(h)...................             (c)              (c)            42,000(g)(h)       70.3%
Forrest Binkley & Brown L.P.(i)......             --               --%             5,000              8.4%
All Directors and Executive Officers
  of the Company as a Group (Six
  Persons)...........................            675              100%            54,531(j)          91.3%
</Table>


--------

     * Less than one percent.

(a)    The securities "beneficially owned" by an individual are determined in
       accordance with the definition of "beneficial interest" set forth in SEC
       regulations and, accordingly, may include securities owned by or for,
       among others, the wife and/or minor children of the individual and any
       other relative who has the same home as the individual, as well as other
       securities as to which the individual has or shares voting or investment
       power. Beneficial ownership may be disclaimed as to some of the shares. A
       person is also deemed to beneficially own shares of stock which the
       person does not own but has a right to acquire presently or within sixty
       days after September 14, 2007.

(b)    Each of these directors has a business address c/o Tekni-Plex, Inc., 260
       North Denton Tap Road, Coppell, TX 75019.

(c)    Tekni-Plex Partners LLC holds approximately 646 shares or 96% and MST/TP
       Partners LLC holds approximately 25 shares or 4% of the outstanding
       Tekni-Plex common stock as of September 14, 2007. Tekni-Plex Management
       LLC, controlled by Dr. Smith, is the sole managing member of both Tekni-
       Plex Partners LLC and MST/TP Partners LLC and, as such, has sole voting
       and investment power with respect to 100% of the shares of the Company's
       outstanding common stock, subject to the rights of the Series A Preferred
       Stockholders described above under the caption "Arrangements Regarding
       Directors".

(d)    Dr. Smith directly owns these 1,800 preferred shares.


                                       32

<PAGE>

(e)    These are shares that Mr. Condon has the right to acquire within 60 days
       of September 14, 2007 pursuant to options that are substantially "out of
       the money."

(f)    TP Rollover, LLC, an entity controlled by Mr. Cronin and of which Mr.
       Cronin is a 43% owner, owns these shares. Mr. Cronin disclaims beneficial
       ownership of these shares except to the extent of his pecuniary interest
       therein.

(g)    Eastport Operating Partners, L.P. ("Eastport") owns 10,500 preferred
       shares. Each of Mr. McWethy and Dr. Smith is a managing member of
       Eastport Partners LLC, the general partner of Eastport, and thus share
       investment and voting power over the shares owned by Eastport. Mr.
       McWethy, Dr. Smith, Weston Presidio Capital III, L.P. and WPC
       Entrepreneur Fund, L.P. each is an investor in Eastport and each
       disclaims beneficial ownership of the shares owned by Eastport except to
       the extent of his or its pecuniary interest therein. Eastport's address
       is 841 Broadway, Suite 504, New York NY 10003.

(h)    Weston Presidio Capital IV, L.P. owns 26,976 shares, Weston Presidio
       Capital III, L.P. owns 13,907 shares, WPC Entrepreneur Fund II, L.P. owns
       427 shares and WPC Entrepreneur Fund, L.P. owns 690 shares. Mr. Cronin is
       a managing member of the general partners of these entities and as such
       has voting and investment power with respect to these shares. Mr. Cronin
       disclaims beneficial ownership of these shares except to the extent of
       his pecuniary interest therein. The address of the four Weston Presidio
       entities is c/o Weston Presidio, Pier 1, Bay 2, San Francisco, CA 94111.

(i)    Forrest Binkley & Brown L.P., with an address at 19800 MacArthur
       Boulevard, Suite 690, Irvine CA 92612, is the record owner of these
       shares. Messrs. Gregory J. Forrest, Nicholas B. Binkley and Jeffrey J.
       Brown hold voting and dispositive power over all of the shares owned by
       Forrest Binkley & Brown L.P. Messrs. Forrest, Binkley and Brown are
       executive officers, directors and shareholders of Forrest Binkley & Brown
       Venture Co., the general partner of Forrest Binkley & Brown L.P.

(j)    This total includes shares owned by Eastport and by the Weston Presidio
       entities. See footnotes (g) and (h).

EQUITY COMPENSATION PLAN INFORMATION

     In January 1998, the Company's directors and stockholders adopted an
incentive stock plan (the "Stock Incentive Plan") which, as of June 29, 2007, is
the only equity compensation plan under which options, warrants or rights to
acquire the Company's common stock may be issued. The following table provides
information about the Company's common stock that may be issued upon the
exercise of options under the Stock Incentive Plan as of June 29, 2007.

<Table>
<Caption>
                                                                                        NUMBER OF
                                            NUMBER OF                                  SECURITIES
                                         SECURITIES TO BE                          REMAINING AVAILABLE
                                           ISSUED UPON       WEIGHTED-AVERAGE      FOR FUTURE ISSUANCE
                                           EXERCISE OF      EXERCISE PRICE OF         UNDER EQUITY
                                           OUTSTANDING         OUTSTANDING         COMPENSATION PLANS
                                        OPTIONS, WARRANTS   OPTIONS, WARRANTS     (EXCLUDING SECURITIES
                                            AND RIGHTS          AND RIGHTS      REFLECTED IN COLUMN (A))
PLAN CATEGORY                                  (A)                 (B)                     (C)
-------------                           -----------------   -----------------   ------------------------
<S>                                     <C>                 <C>                 <C>
Equity compensation plans approved by
  security holders....................       42.0932             $142,716                3.66174
  TOTAL...............................       42.0932             $142,716                3.66174
</Table>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The de facto policy of our board of directors is that the Company will not
enter into any significant transaction with one of its affiliates unless a
majority of the disinterested directors of the board of directors determines
that the terms of the transaction are at least as favorable as those we could
obtain in a comparable transaction made on an arm's-length basis with
unaffiliated parties. This determination is made in the board's sole discretion.

     See "Compensation Committee Interlocks and Insider Participation" for a
description of related party transactions, including the Company's employment of
Mr. Frank Smith. Mr. Smith's employment status and

                                       33

<PAGE>

compensation level were determined in the ordinary course of the Company's
business and the disinterested directors did not view them as sufficiently
significant to merit independent review.

     The Board is unable to conclude that any of its directors are independent
in accordance with New York Stock Exchange standards.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and
the Audit Committee's charter, all audit and audit-related work and all non-
audit work performed by our independent accountants, BDO Seidman LLP, is
approved in advance by the Audit Committee, including the proposed fees for such
work. The Audit Committee is informed of each service actually rendered.

     Audit and audit-related fees billed or expected to be billed to us by BDO
Seidman, LLP for the audit of the financial statements included in our Annual
Report on Form 10-K and reviews of the financial statements included in our
Quarterly Reports on Form 10-Q, for the fiscal years ended June 29, 2007 and
June 30, 2006 totaled approximately $995,000 and $180,000 and $895,000 and
$110,000, respectively. Audit related fees include reviews of offerings, SEC
comment letters, and employee benefit plan audits.

     Tax preparation, review, and advisory services billed or expected to be
billed to us by BDO for the fiscal years ended June 29, 2007 and June 30, 2006
totaled approximately $326,000 and $336,000, respectively.

     No other services were provided to us by BDO Seidman, LLP during fiscal
2006 and 2005.

                                     PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) (1) Financial Statements and Schedules

     The financial statements listed in the Index to Financial Statements under
Part II, Item 8 and the financial statement schedules listed under Exhibit 27
are filed as part of this annual report.

     (a) (2) Financial Statement Schedule -- Schedule II -- Valuation and
Qualifying Accounts

     (a) (3) Exhibits

     The exhibits listed on the Index to Exhibits following the Signature Page
herein are filed as part of this annual report or by incorporation by reference
from the documents there listed.


                                       34

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                                        TEKNI-PLEX, INC.

                                        By: /s/ F. PATRICK SMITH
                                            ------------------------------------
                                            F. Patrick Smith
                                            Chairman of the Board and Chief
                                            Executive Officer

Dated: September 27, 2007

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

                                        By: /s/ JAMES E. CONDON
                                            ------------------------------------
                                            James E. Condon
                                            Chief Financial Officer

Dated: September 27, 2007

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of Registrant
and in the capacities indicated, on September 27, 2007.

<Table>
<Caption>
           SIGNATURE                                    TITLE
           ---------                                    -----
<S>  <C>                           <C>
/s/ F. PATRICK SMITH               Chairman of the Board and Chief Executive
                                   Officer
-------------------------------
F. Patrick Smith

/s/ JAMES E. CONDON                Vice President and Secretary and Director

-------------------------------
James E. Condon

/s/ EDWARD GOLDBERG                Director

-------------------------------
Edward Goldberg

/s/ JOHN S. GEER                   Director

-------------------------------
John S. Geer

/s/ J. ANDREW MCWETHY              Director

-------------------------------
J. Andrew McWethy

/s/ MICHAEL F. CRONIN              Director

-------------------------------
Michael F. Cronin
</Table>




                                       35

<PAGE>

                                  EXHIBIT INDEX

<Table>
<Caption>
   EXHIBIT
     NO.                                     DESCRIPTION
   -------                                   -----------
<S>            <C>
3.1            Amended and Restated Certificate of Incorporation of Tekni-Plex,
               Inc.(6)
3.2            Amended and Restated By-laws of Tekni-Plex, Inc.(1)
3.3            Certificate of Incorporation of PureTec Corporation.(1)
3.4            By-laws of PureTec Corporation.(1)
3.5            Certificate of Incorporation of Tri-Seal Holdings, Inc.(1)
3.6            By-laws of Tri-Seal Holding, Inc.(1)
3.7            Certificate of Incorporation of Natvar Holdings, Inc.(1)
3.8            By-laws of Natvar Holdings, Inc.(1)
3.9            Certificate of Incorporation of Plastic Specialties and Technologies,
               Inc.(1)
3.10           By-laws of Plastic Specialties and Technologies, Inc.(1)
3.11           Certificate of Incorporation of Plastic Specialties and Technologies
               Investments, Inc.(1)
3.12           By-laws of Plastic Specialties and Technologies Investments, Inc.(1)
3.13           Certificate of Incorporation of Burlington Resins, Inc.(1)
3.14           By-laws of Burlington Resins, Inc.(1)
3.15           Certificate of Incorporation of TPI Acquisition Subsidiary, Inc.(2)
3.16           By-laws of TPI Acquisition Subsidiary, Inc.(2)
3.17           Certificate of Incorporation of Distributors Recycling, Inc.(1)
3.18           By-laws of Distributors Recycling, Inc.(1)
3.19           Certificate of Incorporation of Tekni-Plex-Elm Acquisition Subsidiary,
               Inc.(2)
3.20           By-laws of TP-Elm Acquisition Subsidiary, Inc.(2)
4.1            Indenture, dated as of June 21, 2000 among Tekni-Plex, Inc., the
               Guarantors listed therein and HSBC Bank USA, as Trustee.(1)
4.2            First Supplemental Indenture, dated as of May 6, 2002 among Tekni-
               Plex, Inc., TPI Acquisition Subsidiary, Inc. and HSBC Bank USA, as
               Trustee.(2)
4.3            Second Supplemental Indenture, dated as of August 22, 2002 among
               Tekni-Plex, Inc., TP-Elm Acquisition Subsidiary, Inc. and HSBC Bank
               USA, as Trustee.(2)
4.4            Third Supplemental Indenture, dated as of April 25, 2005 among Tekni-
               Plex, Inc., the Guarantors listed therein and HSBC Bank USA, National
               Association, as Trustee.(5)
4.5            Indenture, dated as of November 21, 2003 among Tekni-Plex, Inc., the
               Guarantors listed therein and HSBC Bank USA, as Trustee.(3)
4.6            Indenture, dated as of June 10, 2005 among Tekni-Plex, Inc., the
               guarantors party thereto and HSBC Bank USA, National Association, as
               Trustee.(5)
4.7            Amended and Restated Investors' Agreement dated as of May 13, 2005
               among Tekni-Plex, Inc. and its stockholders (12)
10.1           Second Amended and Restated Employment Agreement between Tekni-Plex,
               Inc. and F. Patrick Smith dated May 13, 2005 (the "Employment
               Agreement").(4)
10.1.1         Extension of Employment Agreement dated May 10, 2007.(8)
10.1.2         Extension of Employment Agreement dated July 13, 2007.(9)
10.1.3         Extension of Employment Agreement dated July 30, 2007. (10)
10.1.4         Extension of Employment Agreement dated August 9, 2007. (11)
10.2           Credit Agreement, dated as of June 10, 2005 among the Company, the
               lenders and issuers party thereto, Citicorp USA, Inc., as
               Administrative Agent and General Electric Capital Corporation, as
               Syndication Agent.(5)
10.3           Tekni-Plex, Inc. Stock Incentive Plan (12)
10.3.1         Form of Option Grant under the Tekni-Plex, Inc. Stock Incentive Plan
               (12)
21             List of Subsidiaries (12)
</Table>

<PAGE>

<Table>
<Caption>
   EXHIBIT
     NO.                                     DESCRIPTION
   -------                                   -----------
<S>            <C>
31.1           Certification of Chief Executive Officer, as required by Section 302
               of the Sarbanes-Oxley Act of 2002 (12)
31.2           Certification of Chief Financial Officer, as required by Section 302
               of the Sarbanes-Oxley Act of 2002 (12)
32.1           Certification of Chief Executive Officer and Chief Financial Officer,
               pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
               of the Sarbanes-Oxley Act of 2002. (12)
</Table>


--------

    (1) Filed previously as an Exhibit to our Registration Statement on Form S-4
        (File No. 333-43800) filed on August 15, 2000.

    (2) Filed previously as an Exhibit to our Registration Statement on Form S-4
        (File No. 333-98561) filed on August 22, 2002.

    (3) Filed previously as an Exhibit to our Registration Statement on Form S-4
        (File No. 333-111778) filed on January 8, 2004.

    (4) Filed previously as an Exhibit to our Form 8-K filed on May 19, 2005.

    (5) Filed previously as an Exhibit to our Form 8-K filed on June 16, 2005.

    (6) Filed previously as an Exhibit to our Registration Statement on Form S-
        4/A (File No. 333-111778) filed on July 13, 2005.

    (7) Filed previously as an Exhibit to our Registration Statement on Form S-4
        (File No. 333-127404) filed on August 10, 2005.

    (8) Filed previously as an Exhibit to our Form 8-K filed on May 14, 2007.

    (9) Filed previously as an Exhibit to our Form 8-K filed on July 20, 2007.

   (10) Filed previously as an Exhibit to our Form 8-K filed on August 3, 2007.

   (11) Filed previously as an Exhibit to our Form 8-K filed on August 14, 2007.

   (12) Filed herewith.

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Tekni-Plex, Inc.
Somerville, New Jersey

     We have audited the accompanying consolidated balance sheets of Tekni-Plex,
Inc. and its subsidiaries (the "Company") as of June 29, 2007 and June 30, 2006,
and the related consolidated statements of operations, stockholders' deficit and
cash flows for each of the three years in the period ended June 29, 2007. 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 auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tekni-Plex,
Inc. and its subsidiaries as of June 29, 2007 and June 30, 2006, and the results
of their operations and their cash flows for each of the three years in the
period ended June 29, 2007, in conformity with accounting principles generally
accepted in the United States of America.

     As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for defined benefit postretirement
plans when it adopted SFAS No. 158, "Employers' Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment to FASB Statements No. 87,
88, 106, and 132(R)" as of June 29, 2007.

/s/ BDO Seidman, LLP

Woodbridge, New Jersey
September 26, 2007


                                       F-1

<PAGE>

                                TEKNI-PLEX, INC.

                           CONSOLIDATED BALANCE SHEETS


<Table>
<Caption>
                                                               JUNE 29,    JUNE 30,
                                                                 2007        2006
                                                              ---------   ---------
                                                                   (DOLLARS IN
                                                                THOUSANDS, EXCEPT
                                                               SHARE AND PER SHARE
                                                                     AMOUNTS)
<S>                                                           <C>         <C>
                                       ASSETS
CURRENT:
  Cash......................................................  $  22,345   $  20,689
  Accounts receivable, net of allowances of $2,928 and
     $7,070 respectively....................................    129,500     145,699
  Inventories...............................................    131,884     135,758
  Prepaid expenses and other current assets.................      5,129       5,363
                                                              ---------   ---------
     Total current assets...................................    288,858     307,509
Property, plant and equipment, net..........................    164,027     167,787
Goodwill....................................................    167,284     167,284
Intangible assets, net of accumulated amortization of $8,116
  and $6,806 respectively...................................      4,117       4,096
Deferred charges, net of accumulated amortization of $17,653
  and $15,229 respectively..................................     11,944      14,618
Other assets................................................      3,063       2,061
                                                              ---------   ---------
                                                              $ 639,293   $ 663,355
                                                              =========   =========

                       LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Current portion of long term debt.........................  $     876   $   1,241
  Accounts payable -- trade.................................     51,670      39,532
  Accrued payroll and benefits..............................      9,639      16,057
  Accrued interest..........................................     11,453      11,427
  Accrued liabilities -- other..............................     25,442      17,787
  Income taxes payable......................................      6,259       6,050
                                                              ---------   ---------
     Total current liabilities..............................    105,339      92,094
Long-term debt..............................................    786,385     772,907
Series A redeemable preferred stock.........................     86,033      74,495
Other liabilities...........................................      9,163      12,790
                                                              ---------   ---------
     Total liabilities......................................    986,920     952,286
                                                              ---------   ---------
Commitments and Contingencies
Stockholders' deficit:
  Common stock..............................................         --          --
  Additional paid-in capital................................    188,018     188,018
  Accumulated other comprehensive (loss) gain...............      1,031      (1,587)
  Accumulated deficit.......................................   (316,153)   (254,839)
  Less treasury stock.......................................   (220,523)   (220,523)
                                                              ---------   ---------
     Total stockholders' deficit............................   (347,627)   (288,931)
                                                              ---------   ---------
                                                              $ 639,293   $ 663,355
                                                              =========   =========

</Table>



          See accompanying notes to consolidated financial statements.


                                       F-2

<PAGE>

                                TEKNI-PLEX, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<Table>
<Caption>
                                                       JUNE 29,   JUNE 30,    JULY 1,
YEARS ENDED                                              2007       2006       2005
-----------                                            --------   --------   --------
                                                           (DOLLARS IN THOUSANDS)
<S>                                                    <C>        <C>        <C>
Net sales............................................  $773,337   $742,683   $695,524
Cost of sales........................................   656,150    621,983    600,170
                                                       --------   --------   --------
     Gross profit....................................   117,187    120,700     95,354
Operating expenses:
  Selling, general and administrative................    64,469     96,490     60,690
  Integration expenses...............................     1,715      5,250     10,478
                                                       --------   --------   --------
     Income from operations..........................    51,003     18,960     24,186
Other expenses (income):
  Interest...........................................   104,468    104,831     89,899
  Unrealized gain on derivative contracts............      (243)    (3,800)    (8,287)
  Other expense (income).............................     2,307     (2,737)    (2,194)
                                                       --------   --------   --------
     (Loss) before provision for income taxes........   (55,529)   (79,334)   (55,232)
Provision for income taxes...........................     5,785      4,977     26,247
                                                       --------   --------   --------
Net loss.............................................  $(61,314)  $(84,311)  $(81,479)
                                                       ========   ========   ========

</Table>



          See accompanying notes to consolidated financial statements.


                                       F-3

<PAGE>

                                TEKNI-PLEX, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT


<Table>
<Caption>
                                                       ACCUMULATED
                                          ADDITIONAL      OTHER
                                  COMMON    PAID-IN   COMPREHENSIVE  ACCUMULATED   TREASURY
                                   STOCK    CAPITAL        LOSS        DEFICIT      STOCK      TOTAL
                                  ------  ----------  -------------  -----------  ---------  ---------
                                                         (DOLLARS IN THOUSANDS)
<S>                               <C>     <C>         <C>            <C>          <C>        <C>
BALANCE, JULY 2, 2004...........    --     $210,518      $ (6,000)    $ (89,049)  $(220,523) $(105,054)
Net loss........................    --           --            --       (81,479)         --    (81,479)
Foreign currency translation....    --           --            (4)           --          --         (4)
Unrealized loss on pension
  plan..........................    --           --        (4,290)           --          --     (4,290)
                                                                                             ---------
  Comprehensive loss............    --           --            --            --          --    (85,773)
Exchange of Capital for Series A
  redeemable preferred stock
  (see Note 7E).................    --      (22,500)           --            --          --    (22,500)
                                    --     --------      --------     ---------   ---------  ---------
BALANCE, JULY 1, 2005...........    --      188,018       (10,294)     (170,528)   (220,523)  (213,327)
                                    ==     ========      ========     =========   =========  =========
Net loss........................    --           --            --       (84,311)         --    (84,311)
Foreign currency translation....    --           --         3,680            --          --      3,680
Unrealized gain on pension
  plan..........................    --           --         5,027            --          --      5,027
                                                                                             ---------
  Comprehensive loss............    --           --            --            --          --    (75,604)
                                    --     --------      --------     ---------   ---------  ---------
BALANCE, JUNE 30, 2006..........    --      188,018        (1,587)     (254,839)   (220,523)  (288,931)
                                    ==     ========      ========     =========   =========  =========
Net loss........................    --           --            --       (61,314)         --    (61,314)
Foreign currency translation....    --           --         2,240            --          --      2,240
Unrealized gain on pension
  plan..........................    --           --        (7,520)           --          --     (7,520)
                                                                                             ---------
  Comprehensive loss............    --           --            --            --          --    (66,594)
Adjustment to initially apply
  FASB 158......................    --           --         7,898            --          --      7,898
                                    --     --------      --------     ---------   ---------  ---------
BALANCE, JUNE 29, 2007..........    --     $188,018      $  1,031     $(316,153)  $(220,523) $(347,627)
                                           ========      ========     =========   =========  =========

</Table>



          See accompanying notes to consolidated financial statements.


                                       F-4

<PAGE>

                               TEKNI -- PLEX, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<Table>
<Caption>
YEARS ENDED                                         JUNE 29, 2007   JUNE 30, 2006   JULY 1, 2005
-----------                                         -------------   -------------   ------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                 <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss........................................     $(61,314)       $(84,311)      $ (81,479)
  Adjustments to reconcile net loss to cash
     provided by (used in) operating activities:
     Depreciation.................................       23,278          26,191          25,857
     Amortization.................................        5,736           5,805           6,796
     Goodwill impairment..........................           --          35,131              --
     Fixed assets disposal........................        2,026              --              --
     Unrealized gain on derivative contracts......         (243)         (3,800)         (8,287)
     Provision for bad debts......................        4,826           1,044           1,970
     Interest accretion...........................       11,538          15,228
     Deferred income taxes........................           59              30          21,247
     Gain on sale of assets.......................           --          (2,856)             --
     Changes in assets and liabilities
       Accounts receivable........................       11,537          (7,117)         (2,328)
       Inventories................................        3,954          (5,606)         20,601
       Prepaid expenses and other current assets..          327             678             960
       Other assets...............................           --              --            (561)
       Accounts payable and other current
          liabilities.............................       12,559          (8,139)         (6,491)
       Income taxes payable.......................          206            (341)          4,538
       Other liabilities..........................         (301)         16,864          (7,284)
                                                       --------        --------       ---------
Net cash provided by (used in) operating
  activities......................................       14,188         (11,199)        (24,461)
                                                       --------        --------       ---------
Cash flows from investing activities:
  Capital expenditures............................      (21,544)        (19,082)        (18,246)
  Additions to intangibles........................       (1,654)         (3,638)           (754)
  Proceeds from sale of assets....................           --           4,142              --
  Deposits and other assets.......................         (982)           (296)             --
                                                       --------        --------       ---------
Net cash (used in) investing activities...........      (24,180)        (18,874)        (19,000)
                                                       --------        --------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments under line of credit.................      (41,000)        (25,000)       (113,200)
  Borrowings under line of credit.................       53,000          52,000          49,200
  Proceeds from long-term debt....................         (390)             --         146,318
  Proceeds from issue of Series A redeemable
     preferred stock..............................           --           5,423          32,322
  Repayments of long-term debt....................           --             (17)        (71,648)
  Debt financing costs............................          250             192         (10,720)
                                                       --------        --------       ---------
Net cash provided by financing activities.........       11,860          32,598          32,272
                                                       --------        --------       ---------
Effect of exchange rate changes on cash...........         (212)           (420)             38
                                                       --------        --------       ---------
Net increase (decrease) in cash and cash
  equivalents.....................................        1,656           2,105         (11,151)
Cash, and cash equivalents beginning of year......       20,689          18,584          29,735
                                                       --------        --------       ---------
Cash, and cash equivalents end of year............     $ 22,345        $ 20,689       $  18,584
                                                       ========        ========       =========

</Table>



          See accompanying notes to consolidated financial statements.


                                       F-5

<PAGE>

                                TEKNI-PLEX, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          (DOLLARS IN THOUSANDS, EXCEPT PERCENTAGES AND SHARE AMOUNTS)

1.  SUMMARY OF ACCOUNTING POLICIES

  NATURE OF BUSINESS

     Tekni-Plex, Inc. and its subsidiaries ("Tekni-Plex" or the "Company") is a
global, diversified manufacturer of packaging, packaging products, and materials
as well as tubing products. The Company primarily serves the food, healthcare
and consumer markets. The Company has built a leadership position in its core
markets, and focuses on vertically integrated production of highly specialized
products. The Company's operations are aligned under three primary business
groups: Packaging, Tubing Products, and Other.

  CONSOLIDATION POLICY

     The consolidated financial statements include the financial statements of
Tekni-Plex, Inc. and its wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.

  ACCOUNTS RECEIVABLE AND ALLOWANCE FOR POSSIBLE LOSSES

     Accounts receivable are customer obligations due under normal trade terms.
The Company sells its products primarily to large manufacturers, retailers, and
pharmaceutical companies. The Company performs continuing credit evaluations of
its customers' financial condition and although the Company generally does not
require collateral, letters of credit may be required from its customers in
certain circumstances.

     Pursuant to SFAS 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities, the Company sold most of its European
accounts receivable for a fee to a third-party factoring Company in fiscal 2007.
The third-party factoring Company assumes the full risk of collection without
recourse to the Company in the event of a loss.

     Management reviews accounts receivable on monthly basis to determine if any
receivables will potentially be uncollectible. The Company includes any accounts
receivable balances that are determined to be uncollectible, along with a
general reserve, in its overall allowance for possible losses. After all
attempts to collect a receivable have failed, the receivable is written off
against the allowance. Based on the information available, the Company believes
its allowance for possible losses as of June 29, 2007 is adequate. However,
actual write-offs might exceed the recorded allowance.

  INVENTORIES

     Inventories are stated at the lower of cost (weighted average) or market.

  PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are stated at cost. Depreciation and
amortization are computed over the estimated useful lives of the assets
primarily on the straight-line method for financial reporting purposes and by
accelerated methods for income tax purposes. The costs of major additions and
improvements are capitalized and maintenance and repairs that do not improve or
extend the life of the respective assets are charged to operations as incurred.

  INTANGIBLE ASSETS (OTHER THAN GOODWILL)

     The cost of acquiring certain patents, trademarks, and customer lists is
amortized using the straight-line method over their estimated useful lives,
ranging from 5 to 17 years.


                                       F-6

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  DEFERRED FINANCING COSTS

     The Company amortizes deferred financing costs incurred in connection with
the Company's borrowings over the life of the related indebtedness utilizing the
straight-line method, which approximates the interest method.

  INCOME TAXES

     Deferred income tax assets and liabilities are recognized for differences
between the financial statement and income tax basis of assets and liabilities
based upon statutory rates enacted for future periods. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.

  REVENUE RECOGNITION

     The Company recognizes revenue when title and risk of loss has transferred
to the customer which is when goods are shipped to customers. The Company
provides for returned goods, discounts and volume rebates on an estimated basis
based upon agreements and past experience.

  SALES ALLOWANCES

     The Company accounts for sales allowances, including volume rebates and
advertising programs, on an accrued basis as a reduction in net revenue in the
period in which the sales are recognized.

  SHIPPING AND HANDLING COSTS

     Shipping and handling costs are included in cost of sales.

  RESEARCH AND DEVELOPMENT

     Research and development expenditures for the Company's projects are
expensed as incurred.

  CASH EQUIVALENTS

     The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents.

  FISCAL YEAR-END

     The Company utilizes a 52/53 week fiscal year ending on the Friday closest
to June 30. The years ended June 29, 2007 and June 30, 2006 and July 1, 2005
each contained 52 weeks.

  RECLASSIFICATIONS

     Certain items in the prior year financial statements have been reclassified
to conform to the current year presentation.

  FOREIGN CURRENCY TRANSLATION

     Assets and liabilities of international subsidiaries are translated at
year-end exchange rates and related translation adjustments are reported as a
component of accumulated other comprehensive (loss). The statement of operations
accounts are translated at the average rates during the period.


                                       F-7

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  LONG-LIVED ASSETS

     Long-lived assets, including goodwill, are evaluated each fiscal year-end
for impairment or when events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When such
impairments exist, the related assets will be written down to fair value based
on the net present value of estimated future cash flows. The related charge is
included in selling, general and administrative expenses in the Statement of
Operations.

  ENVIRONMENTAL LIABILITIES

     Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated, based on current law and existing technologies. These accruals are
adjusted periodically as assessment and remediation efforts progress or as
additional technical or legal information becomes available. Accruals for
environmental liabilities are included in the consolidated balance sheets as
"Other liabilities" at undiscounted amounts.

  USE OF ESTIMATES

     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.

  COMPREHENSIVE LOSS

     SFAS No. 130, "Reporting Comprehensive Income" requires foreign currency
translation adjustments and certain other items, which were reported separately
in stockholders' deficit, to be included in Accumulated Other Comprehensive
Income (Loss). Included within Accumulated Other Comprehensive Income in 2007
are foreign currency translation adjustments and previously unrecognized
actuarial gains and losses as a result of implementing SFAS No. 158, "Employers'
Accounting for Defined Benefit Pension and other Postretirement Plans". Total
comprehensive loss for the years ended June 29, 2007, June 30, 2006 and July 1,
2005 is included in the Statement of Stockholders' deficit.

     The components of accumulated other comprehensive income (loss) includes:

<Table>
<Caption>
                                                           JUNE 29,   JUNE 30,
                                                             2007       2006
                                                           --------   --------
<S>                                                        <C>        <C>
Cumulative translation adjustment........................   $ 8,551    $ 6,311
Minimum pension liability, net...........................               (7,898)
Actuarial loss not yet recognized in cost (pension),
  net....................................................    (6,578)
Actuarial loss not yet recognized in cost
  (postretirement), net..................................      (942)
                                                            -------    -------
Accumulated other comprehensive income (loss)............   $ 1,031    $(1,587)
                                                            =======    =======

</Table>


  STOCK BASED COMPENSATION

     The Company applies the provisions of SFAS No. 123, "Accounting for Stock-
Based Compensation. Had compensation cost been determined based on the fair
value at the grant dates for these awards consistent with the method of SFAS No.
123, the Company's net loss would not have increased significantly. The
calculations were based on a risk free interest rate of 5.3%, expected
volatility of 100%, a dividend yield of zero, and expected lives of 10 years.


                                       F-8

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  DERIVATIVE INSTRUMENTS

     All derivative instruments, such as interest rate swaps, are recognized in
the financial statements and measured at their fair market value. Changes in the
fair market value of derivative instruments are recognized each period in
current operations or stockholders' equity (as a component of accumulated other
comprehensive income/loss), depending on whether a derivative instrument
qualifies as a hedge transaction.

     In the normal course of business, Tekni-Plex is exposed to changes in
interest rates. The objective in managing its exposure to interest rates is to
decrease the volatility that changes in interest rates might have on operations
and cash flows. To achieve this objective, Tekni-Plex uses interest rate swaps
and caps to hedge a portion of total long-term debt that is subject to variable
interest rates. These derivative contracts are considered to be a hedge against
changes in the amount of future cash flows associated with the interest payments
on variable-rate debt obligations, however, they do not qualify for hedge
accounting. Accordingly, the interest rate swaps are reflected at fair value in
the Consolidated Balance Sheet and the related gains or losses on these
contracts are recorded as an unrealized gain or loss from derivative instruments
in the Consolidated Statements of Operations. These are the only derivative
instruments held by Tekni-Plex as of June 29, 2007. The fair value of derivative
contracts are determined based on quoted market values obtained from a third
party.

     In June 2000, Tekni-Plex had $344,000 of term loans outstanding with
variable rates of interest tied to LIBOR. These loans, which originally had
maturity dates ranging from June 2007 through June 2008, have been repaid.
Concurrent with incurring this debt, Tekni-Plex entered into a series of
interest swap contracts to pay variable rates of interest based on a basket of
LIBOR benchmarks and receive variable rates of interest based on a 3 month
dollar LIBOR on an aggregate of $344,000 amount of indebtedness. The
amortization schedule on the term loans was the same as the amortization
schedule on the swaps. As of June 29, 2007 the notional amount of the swaps is
$143,350.

     Portfolio theory and empirical evidence suggested that the change in value
of a basket of LIBOR benchmarks would be less volatile than the change in value
of a single benchmark. Since 2000, this has generally been our experience.

     In conjunction with its swap contracts Tekni-Plex also purchased an
interest rate cap. Tekni-Plex believes the reduced volatility created by the
interest rate swaps made the interest rate cap less expensive.

     The aggregate fair market value of these interest rate swaps and cap
contracts was $(736) and $(979) on June 29, 2007 and June 30, 2006 respectively,
and is included in other liabilities on the Consolidated Balance Sheet. For the
years ended June 29, 2007, June 30, 2006 and July 1, 2005, Tekni-Plex recognized
unrealized gains of $243, $3,800 and $8,287, respectively.

  GOODWILL AND BUSINESS COMBINATIONS

     The Company no longer amortizes goodwill, but instead tests goodwill for
impairment at least annually. This test is performed every year as of our fiscal
year-end. In addition, the Company identified reporting units for the purposes
of assessing potential future impairments of goodwill, and when necessary,
reassesses the useful lives of other existing recognized intangible assets.

     The Company completed its year-end analysis of goodwill and has concluded
that there is no impairment charge as of June 29, 2007. In fiscal year 2006, we
concluded our annual garden hose contract negotiations. While we were largely
successful in securing our target price increases, we lost meaningful market
share. With this information in mind, in the second quarter of fiscal 2006 we
deemed it appropriate to retest the goodwill in our Tubing segment. Accordingly,
we recorded a $35.1 million impairment charge against the goodwill associated
with our Swan operations.


                                       F-9

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  NEW ACCOUNTING PRONOUNCEMENTS

     SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R)

     In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 158, which requires the Company to (a) recognize in its
statement of financial position the overfunded or underfunded status of a
defined benefit postretirement plan measured as the difference between the fair
value of plan assets and the benefit obligation, (b) recognize as a component of
other comprehensive income, net of tax, the actuarial gains and losses and the
prior service costs and credits that arise during the period, (c) measure
defined benefit plan assets and defined benefit plan obligations as of the date
of the Company's statement of financial position, and (d) disclose additional
information about certain effects on net periodic benefit costs in the upcoming
fiscal year that arise from the delayed recognition of the actuarial gains and
losses and the prior service costs and credits. The Company's adoption of SFAS
No. 158 effective for fiscal year ended June 29, 2007 resulted in an adjustment
of $7,898 to the opening balance of accumulated other comprehensive loss.

     FIN No. 48, Accounting for Uncertain Tax Positions -- An Interpretation of
FASB Statement No. 109

     In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes- an
interpretation of FASB Statement No. 109." FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an entity's financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes, and
prescribes a recognition threshold and measurement attribute for the financial
statement disclosure of a tax position taken or expected to be taken in a tax
return. In addition, this interpretation provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company is currently evaluating the impact the adoption
of FIN No. 48 may have on its statements of operations and financial position.

  SFAS No. 157, Fair Value Measurements

     In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS No. 157"), which
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS No. 157 applies under a number of other accounting
pronouncements that require or permit fair value measurements. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. The Company is currently evaluating the impact the adoption
of SFAS No. 157 may have on its statements of operations and financial position.

     SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities Including an amendment of FASB Statement No. 115

     The FASB issued Statement of Financial Accounting Standards ("SFAS") No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities
Including an amendment of FASB Statement No. 115" ("SFAS No. 159") in February
2007. SFAS No. 159 permits a company to choose to measure many financial
instruments and other items at fair value that are not currently required to be
measured at fair value. The objective is to improve financial reporting by
providing a company with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. A company shall report
unrealized gains and losses on items for which the fair value option has been
elected in earnings at each subsequent reporting. SFAS 159 is effective for
fiscal years beginning after November 15, 2007. Early adoption is permitted as
of the beginning of a fiscal year that begins on or before November 15, 2007,
provided the Company also elects to apply the provisions of FASB

                                      F-10

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


Statement No. 157, Fair Value Measurements. The Company is currently evaluating
the impact the adoption of SFAS No. 159 may have on its statements of operations
and financial position.

2.  RECAPITALIZATION

     In June 2000, the Company entered into a Recapitalization (the
"Recapitalization") with certain of its stockholders, whereby the Company
purchased approximately 51% of its outstanding stock for approximately $220,500
including related transaction fees. This stock has been reflected as treasury
stock in the accompanying balance sheet.

     As a result of provisions in the Company's Senior Debt and Subordinated
Note Agreements, the Company redeemed its $200,000 9 1/4% Senior Subordinated
Notes, its $75,000 11 1/4% Senior Subordinated Notes and repaid its Senior Debt
in the amount of approximately $153,000 during 2000.

     These transactions were funded by $43,101 of new equity, $275,000 12 3/4%
Senior Subordinated Notes (see Note 7(b)) and initial borrowings of $374,000 on
a $444,000 Senior Credit Facility (see Note 7(a)).

3.  ACQUISITIONS

     (a) In July 2004, the Company acquired substantially all the net assets of
the egg carton business of Genpak ("Genpak") for $5,780. Genpak produces a
variety of foam products, including foam egg cartons. The financial results of
the Genpak transaction are included in the Packaging Segment. The acquisition
was recorded under the purchase method, whereby the acquired Genpak net assets
were recorded at estimated fair value, and its operations have been reflected in
the statement of operations since that date.

     (b) In July 2002, the Company acquired substantially all the net assets of
Elm Packaging Company ("ELM") for $16,762. Elm produces polystyrene foam plates,
bowls, and meat and bakery trays. The financial results of Elm are included in
the Packaging segment. The acquisition was recorded under the purchase method.
In connection with the acquisition, the Company incurred an integration reserve
of $4.5 million. The components of the Integration reserve and activity through
June 29, 2007 was as follows:

<Table>
<Caption>
                             BALANCE      COSTS     BALANCE      COSTS      BALANCE      COSTS      BALANCE
                             JULY 2,   CHARGED TO   JULY 1,   CHARGED TO   JUNE 30,   CHARGED TO   JUNE 29,
                               2004      RESERVE      2005      RESERVE      2006       RESERVE      2007
                             -------   ----------   -------   ----------   --------   ----------   --------
<S>                          <C>       <C>          <C>       <C>          <C>        <C>          <C>
Legal and environmental
  liability................   $1,163       $19       $1,144       $26       $1,118        $2        $1,116
                              ------       ---       ------       ---       ------        --        ------
                              $1,163       $19       $1,144       $26       $1,118        $2        $1,116
                              ======       ===       ======       ===       ======        ==        ======

</Table>


     The remaining legal and environmental costs are expected to extend over the
next four years.

     (c) In October 2001, the Company purchased certain assets and assumed
certain liabilities of Swan for approximately $63,600. Swan is a manufacturer of
garden hose. The financial results of Swan are included in the tubing segment.
The acquisition was recorded under the purchase method, whereby Swan's net
assets were recorded at estimated fair value and its operations have been
reflected in the statement of operations since that date.


                                      F-11

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In connection with the acquisition, the Company incurred an integration
reserve of $10 million. The components of the Integration reserve and activity
through June 29, 2007 was as follows:

<Table>
<Caption>
                                            COSTS               COSTS                COSTS
                                 BALANCE   CHARGED   BALANCE   CHARGED    BALANCE   CHARGED    BALANCE
                                 JULY 2,      TO     JULY 1,      TO     JUNE 30,      TO     JUNE 29,
                                   2004    RESERVE     2005    RESERVE     2006     RESERVE     2007
                                 -------   -------   -------   -------   --------   -------   --------
<S>                              <C>       <C>       <C>       <C>       <C>        <C>       <C>
Legal and environmental........   $1,281     $316      $965      $216      $749       $139      $610
                                  ------     ----      ----      ----      ----       ----      ----
                                  $1,281     $316      $965      $216      $749       $139      $610
                                  ======     ====      ====      ====      ====       ====      ====

</Table>


4.  INVENTORIES

     Inventories are summarized as follows:

<Table>
<Caption>
                                                         JUNE 29,   JUNE 30,
                                                           2007       2006
                                                         --------   --------
<S>                                                      <C>        <C>
Raw materials..........................................  $ 56,561   $ 60,715
Work-in-process........................................    13,318     12,834
Finished goods.........................................    62,005     62,209
                                                         --------   --------
                                                         $131,884   $135,758
                                                         ========   ========

</Table>


5.  PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consists of the following:

<Table>
<Caption>
                                               JUNE 29,   JUNE 30,     ESTIMATED
                                                 2007       2006      USEFUL LIVES
                                               --------   --------   -------------
<S>                                            <C>        <C>        <C>
Land.........................................  $ 15,832   $ 15,832
Building and improvements....................    61,959     61,299   25 - 40 years
Machinery and equipment......................   278,636    263,088    5 - 10 years
Furniture and fixtures.......................    11,703     10,937    5 - 10 years
Construction in progress.....................    10,316      8,666
                                               --------   --------
                                                378,446    359,822
Less accumulated depreciation................   214,419    192,035
                                               --------   --------
                                               $164,027   $167,787
                                               ========   ========

</Table>


6.  INTANGIBLE ASSETS

     Intangible assets consist of the following:

<Table>
<Caption>
                                                         JUNE 29,   JUNE 30,
                                                           2007       2006
                                                         --------   --------
<S>                                                      <C>        <C>
Goodwill...............................................  $167,284   $167,284
Customer list and non-compete agreement................     9,340      8,541
Patents................................................     2,893      2,361
                                                         --------   --------
                                                          179,517    178,186
Less accumulated amortization..........................     8,116      6,806
                                                         --------   --------
                                                         $171,401   $171,380
                                                         ========   ========

</Table>




                                      F-12

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Amortization of customer list and non-compete agreement will be $1,765
annually through the first quarter of 2007. Patents will be amortized $280
annually. Amortization is expected to continue at this amount until 2010 when it
will begin to decline. Accumulated amortization for customer list and patents at
June 29, 2007 and June 30, 2006 were $6,569, $5,472, and $1,547, and $1,334,
respectively. A $35,131 impairment charge was recorded related to our Swan
garden hose operations in the second quarter of fiscal 2006. Goodwill was also
increased by $3,883 to reflect the recognition of a tax liability at our Belgian
subsidiary that existed prior to our acquisition of this subsidiary.

7.  LONG-TERM DEBT

     Long-term debt consists of the following:

<Table>
<Caption>
                                                               JUNE 29,   JUNE 30,
SENIOR DEBT (A):                                                 2007       2006
----------------                                               --------   --------
<S>                                                            <C>        <C>
Revolving line of credit Term notes..........................  $ 51,000   $ 39,000
  Senior Subordinated Notes issued June 21, 2000 at 12- 3/4%,
     due June 15, 2010 (less unamortized discount of $1,129
     and $1,506)(B)..........................................   273,871    273,494
Senior Subordinated Notes issued May 2002 at 12- 3/4%, due
  June 15, 2010 (less unamortized premium of $212 and
  $287)(B)...................................................    40,212     40,287
Senior Secured Notes issued November 21, 2003 at 8- 3/4% ,
  due November 15, 2013 (less unamortized discount of $4,853
  and $5,609)(C).............................................   270,080    269,391
Senior Secured Notes issued June 10, 2005 at 10.875% due
  August 15, 2012 (less unamortized discount of $2,433 and
  $2,904)(D).................................................   147,530    147,096
Series A Redeemable Preferred Stock(E).......................    86,033     75,473
Other, primarily foreign term loans, with interest rates
  ranging from 4.44% to 5.44% and maturities from 2007 to
  2013.......................................................     4,568      4,880
                                                               --------   --------
                                                                873,294    849,621
Less: Current maturities.....................................       876      1,241
                                                               --------   --------
                                                               $872,418   $848,380
                                                               ========   ========

</Table>


(A)  SENIOR DEBT

     In June 2005, we entered into a new asset based facility with Citicorp USA,
Inc., as administrative agent, and the other agents and lenders named therein.
Our asset based facility consists of a four-year, asset-based revolving credit
facility in the maximum amount of $75,000. Availability under the asset based
facility equals (i) the lesser of (A) the borrowing base (as defined in the new
asset based facility) and (B) the then effective commitments under the new asset
based facility minus (ii) such availability reserves as the administrative
agent, in its sole discretion, deems appropriate.

     The asset based facility includes a $25,000 letter of credit sub facility.
As of September 21, 2007 we have $10.8 million of letters of credit outstanding
related to workmen's compensation insurance. Amounts borrowed under our new
asset based facility will be used for general corporate and working capital
purposes. The commitments under our asset based facility will terminate on the
fourth anniversary of the closing date, at which time all loans outstanding
under the new asset based facility will become due and payable.

     Loans under the asset based facility are guaranteed by each of our domestic
subsidiaries. Loans under the asset based facility are secured on a first
priority basis by all of our domestic subsidiaries' assets.

     Loans under our asset based facility bear interest by reference to a base
rate or a reserve adjusted Eurodollar rate, at our option, in each case, plus an
applicable margin, as each such term is defined in the asset based facility.


                                      F-13

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In addition, the asset based facility includes a provision permitting, at
our option, an increase in the aggregate amount of the asset based facility by
up to an additional $60,000, subject to certain conditions. In fiscal 2006 we
used $10,000 of this capacity to upsize our asset backed revolver from $65,000
to $75,000.

     The asset based facility imposes certain restrictions on us and our
subsidiaries. As part of these covenants, we are restricted or limited in our
ability to, among other things:

     - incur and voluntarily prepay certain of our and our subsidiaries' debt;

     - grant liens on our and our subsidiaries' assets;

     - undertake certain mergers, consolidations and sales / purchases of
       assets;

     - pay certain dividends or distributions and redeem, purchase, retire or
       make other acquisitions of our equity interests;

     - make certain investments and acquisitions;

     - transact with our affiliates; and

     - make capital expenditures.

     The asset based facility provides that certain events will constitute
events of default under the new asset based facility. These events include,
among other things;

     - our failure to pay when due amounts owed under the asset based facility;

     - our or our subsidiaries' failure to observe or perform the covenants set
       forth in the asset based facility;

     - the inaccuracy of the representations and warranties set forth in the
       asset based facility;

     - the imposition of certain judgments against us or our subsidiaries;

     - our or our subsidiaries' failure to pay certain other of our or our
       subsidiaries' debt;

     - the acceleration of the maturity of material debt;

     - the occurrence of certain bankruptcy or insolvency proceedings or events;

     - the invalidity or unenforceability of any lien or guarantee securing our
       obligations under the asset based facility; and

     - the occurrence of a change of control.

(B)  SENIOR SUBORDINATED NOTES

     In June 2000 and May 2002, we respectively issued $275.0 million and $40.0
million aggregate principal amount of 12 3/4% senior subordinated notes due June
15, 2010. These notes are our senior subordinated unsecured obligations and are
guaranteed by each of our existing and future domestic restricted subsidiaries
with assets or stockholders' equity in excess $25,000. The senior subordinated
notes bear interest at an annual rate of 12 3/4%, payable semiannually on each
June 15 and December 15.

     The senior subordinated notes are subject to redemption, in whole or in
part, at our option, at any time on or after June 15, 2005 at the redemption
prices described below if redeemed during the twelve month period commencing
June 15 in the years set forth below:

<Table>
<Caption>
                                                                REDEMPTION
PERIOD                                                             PRICE
------                                                          ----------
<S>                                                             <C>
2007..........................................................    102.125%
2008 and thereafter...........................................    100.000%
</Table>




                                      F-14

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Holders of the senior subordinated notes have the option of requiring us to
repurchase their notes in cash upon a change of control at a repurchase price
equal to 101% of the principal amount of the notes plus accrued interest, if
any, to the date of the repurchase.

     The indenture governing the senior subordinated notes restricts our ability
and the ability of our restricted subsidiaries to:

     - incur additional indebtedness and issue preferred stock;

     - pay dividends or make other distributions;

     - create liens;

     - incur restrictions on the ability of our restricted subsidiaries to pay
       dividends or other payments to us;

     - sell assets;

     - merge or consolidate with other entities;

     - enter into transactions with affiliates;

     - issue capital stock of restricted subsidiaries; and

     - effect acquisitions.

     However, these limitations are subject to a variety of exceptions and
qualifications.

     The senior subordinated notes include customary events of default,
including failure to pay principal and interest on the notes, a failure to
comply with covenants, a failure by us or our subsidiaries to pay material
judgments or indebtedness and bankruptcy and insolvency events with respect to
us and our material subsidiaries.

     In April, 2005, we received the consents required to amend certain
covenants in the indenture governing our senior subordinated notes including our
debt incurrence covenant. The amendments allow us, among other things, to incur
incremental debt, not to exceed $90.0 million at any one time outstanding, in
ratio of 1.5:1.0 for every dollar of equity received after April 1, 2005. Since
that date, we have raised $37.2 million of additional equity through the
issuance of our Series A redeemable preferred stock.

(C)  SENIOR SECURED NOTES DUE 2013

     We issued $275,000 senior secured notes on November 21, 2003. Interest on
those senior secured notes accrues at the rate of 8 3/4% per annum and is
payable semi-annually in arrears on May 15 and November 15 of each year,
beginning May 15, 2004. The 2013 Notes will mature on November 15, 2013.

     We may redeem all or part of those senior secured notes on or after
November 15, 2008. Prior to November 15, 2006, we may redeem up to 35% of the
aggregate principal amount of the senior secured notes at a premium of 8.75%
with the proceeds of certain equity offerings.

     The senior secured notes are secured by second priority liens on the
collateral securing our existing credit facility. The collateral includes, but
is not limited to, the following property of us and the guarantors party to the
indenture:

     - all of the stock and equity interests of certain of our domestic
       subsidiaries and 65% of the capital stock and equity interests of certain
       of the our foreign subsidiaries;

     - all accounts, inventory, general intangibles, equipment and insurance
       policies;

     - all documents of title covering, evidencing or representing goods;


                                      F-15

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     - all instruments and chattel paper;

     - commercial tort claims;

     - certain Company-owned real property;

     - rights under certain railcar leases;

     - patents, trademarks, copyrights and other intellectual property;

     - all letter of credit rights;

     - all supporting obligations;

     - certain deposit accounts; and

     - all proceeds of, and all other profits, products, rents or receipts,
       arising from the collection, sale, lease, exchange, assignment, licensing
       or other disposition or realization upon the collateral described in (1)
       through (11) above.

     Pursuant to a registration rights agreement that we and our subsidiary
guarantors entered into in connection with our existing senior secured notes, we
and our subsidiary guarantors have filed a registration agreement with the SEC
relating to an offer to exchange or register the senior secured notes and
guarantees for publicly tradable notes and guarantees having substantially
identical terms. The registration statement has been declared effective by the
SEC. As a result, we are no longer required to pay liquidated damages in an
amount equal to 1.0% of the principal amount of the senior secured notes per
annum.

(D)  SENIOR SECURED NOTES DUE 2012

     We issued $150,000 senior secured notes on June 7, 2005. Interest on those
senior secured notes accrues at the rate of 10 7/8% per annum and is payable
semi-annually in arrears on August 15 and February 15 of each year, beginning
February 15, 2006. The 2013 Notes will mature on August 15, 2012. The proceeds
were used primarily to refinance existing bank debt.

     We may redeem all or part of those senior secured notes on or after August
15, 2009. Prior to August 15, 2008, we may redeem up to 35% of the aggregate
principal amount of the senior secured notes with the proceeds of certain equity
offerings.

     The senior secured notes are secured by second priority liens on the
collateral securing our existing credit facility. The collateral includes, but
is not limited to, the following property of us and the guarantors party to the
indenture:

     - all of the stock and equity interests of certain of our domestic
       subsidiaries and 65% of the capital stock and equity interests of certain
       of the our foreign subsidiaries;

     - all accounts, inventory, general intangibles, equipment and insurance
       policies;

     - all documents of title covering, evidencing or representing goods;

     - all instruments and chattel paper;

     - commercial tort claims;

     - certain Company-owned real property;

     - rights under certain railcar leases;

     - patents, trademarks, copyrights and other intellectual property;

     - all letter of credit rights;


                                      F-16

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     - all supporting obligations;

     - certain deposit accounts; and

     - all proceeds of, and all other profits, products, rents or receipts,
       arising from the collection, sale, lease, exchange, assignment, licensing
       or other disposition or realization upon the collateral described in (1)
       through (11) above.

(E)  SERIES A REDEEMABLE PREFERRED STOCK

     On May 13, 2005 we issued 31,800 shares of Series A redeemable Preferred
Stock for $1,000 per share. In July 2005 we issued an additional 5,423 shares at
$1,000 per share. In addition, we issued 22,500 shares to certain investors in
consideration for capital contributions made in 2004. In accordance with SFAS
150, the Series A redeemable preferred stock is being characterized as a
liability. Dividends and accretion to maturity are classified as interest
expense.

     The following summary of certain provisions of our Series A Redeemable
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, our Amended and Restated Certificate of Incorporation.

     Liquidation Event.  Upon the occurrence of a sale of the Company or its
subsidiaries, whether by merger, asset sale or change in equity control, or a
liquidation of the Company, the Series A Preferred Stock shall be redeemed at an
amount per share equal to (i) 115% of the purchase price of the Series A
Preferred Stock prior to October 31, 2005, and (ii) three times the purchase
price thereafter (such amount determined in (i) or (ii) hereinafter referred to
as the "Liquidation Value").

     Mandatory Redemption.  Upon the earlier of (i) February 15, 2014 or (ii) to
the extent such redemption is permitted under the Company's new asset based
facility, the payment in full of the Company's senior subordinated notes and
existing senior secured notes, the Series A Redeemable Preferred Stock shall be
redeemed in full in cash at the price equal to 115% of the purchase price of the
Series A Preferred Stock prior to October 31, 2005 and three times the purchase
price thereafter.

     Dividends.  From and after Trigger Event, the Series A Preferred Stock
shall be entitled to receive out of any assets legally available cumulative
dividends at a rate of 12% per annum, compounded quarterly, on the original
purchase price. The dividends shall begin to accrue on the Trigger Event and
shall be paid quarterly in arrears. However, if the Company is prevented from
paying such dividends in cash for certain reasons, the dividend will accumulate
at the rate of 12% per annum, compounded quarterly.

     Trigger Event.  A Trigger Event shall mean:

          (i) the failure of the Company to redeem any shares of the Series A
     Preferred Stock in cash when required to do so;

          (ii) the failure by the Company or Dr. Smith, the Company's CEO, to
     perform or observe any other covenant in the Series A Preferred Stock
     Purchase Agreement or any ancillary documents that is continued for more
     than sixty (60) days and that reasonably expected to have a material
     adverse effect on the Company or the holders of the Series A Preferred
     Stock;

          (iii) any false or misleading representations or warranty by the
     Company in the Series A Preferred Stock Purchase Agreement that is
     reasonably expected to have a material adverse effect on the Company or the
     holders of the Series A Preferred Stock;

          (iv) the failure by the Company or any Significant Subsidiary (as
     defined in Rule 1-02(w) of Regulation S-X) to make payments when due (which
     failure is continued beyond the cure period contained in the documents
     governing such payments or which has not been waived by the Lender):

                                      F-17

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


     (A) of the principal amount of any indebtedness or other security (whether
     at maturity, upon a scheduled amortization date or any other mandatory
     prepayment date) having an aggregate principal amount in Excess of $10
     million; or (B) which failure results in the acceleration of indebtedness
     which aggregates in excess of $10 million;

          (v) the Company or any Significant Subsidiary pursuant to or within
     the meaning of Title 11 of the United States Code or any other Federal,
     state or foreign bankruptcy, insolvency or similar law ("Bankruptcy Law")
     (A) commences a voluntary case or proceeding, (B) consents to the entry of
     an order for relief against it in an involuntary case or proceeding, (C)
     consents to the appointment of a custodian of it or for all or
     substantially all of its property, (D) makes a general assignment for the
     benefit of its creditors, or (E) generally is not paying its debts as they
     become due;

          (vi) a court of competent jurisdiction enters an order or decree under
     any Bankruptcy Law that (A) is for relief against the Company or any of its
     Significant Subsidiaries in an involuntary case, appoints a custodian of
     the Company or any of its Significant Subsidiaries or for all or
     substantially all of the property of the Company or any of its Significant
     Subsidiaries, or (C) orders the liquidation of the Company or any of its
     Significant Subsidiaries, and in each case, the order or decree remains
     unstayed and in effect for sixty (60) consecutive days;

          (vii) an unsatisfied judgment against the Company or any of its
     Significant Subsidiaries in excess of $10,000 which remains undischarged or
     unstayed (including stays pending appeal) for a period of 60 days;

          (viii) the failure of Dr. Smith to serve as Chief Executive Officer as
     a result of his death or disability or for any other reason except
     voluntary resignation if a replacement, acceptable to the holders of a
     majority of the Series A Preferred Stock in their sole and absolute
     discretion, is not found within six months after such death or disability;

          (ix) the failure of Dr. Smith to serve as Chief Executive Officer as a
     result of a voluntary resignation of employment;

          (x) April 30, 2007; or

          (xi) closing of an underwritten registered initial offering of the
     Company's equity any Liquidation Event or any repayment in full of the
     Notes, in each case upon which the Company does not redeem the Series A
     Preferred Stock in full in cash in an amount equal to the Liquidation
     Value.

     Voting Rights.  Holders of shares of Series A Preferred Stock will have no
voting rights except as described below. In such case, each such holder shall be
entitled to one vote for each share held.

     The board of directors of the Company consists of six directors, one of
whom shall be elected by the holders of the Series A Preferred Stock. After the
occurrence of certain Trigger Events (as defined in the Company's Amended and
Restated Certificate of Incorporation) the Series A Preferred Stockholders shall
have the right to increase the vote of the director elected by Series A
Preferred Stockholders from one vote to six votes for all matters considered by
the Company's board of directors.

     Protective Provisions.  As long as shares of Series A Preferred Stock are
issued and outstanding, without first obtaining the approval of the Series A
Preferred Stockholders, the Company Shall not, and shall not permit its
subsidiaries to, either directly or indirectly, through a merger, consolidation
or otherwise:

     - Create, authorize or issue any securities of the Company or any
       significant subsidiary other than common stock or options to purchase
       common stock not to exceed 45.75206 shares of common stock and (ii)
       certain refinancing securities as defined in the Amended and Restated

     Certificate of Incorporation;

     - Amend the Amended and Restated Certificate of Incorporation or the by-
       laws of the Company;


                                      F-18

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     - Except where the proceeds are used to redeem the Series A Preferred
       Stock, consummate any sale of the Company or any significant subsidiary
       or sale of substantially all of the assets of the Company or any
       significant subsidiary;

     - Liquidate or dissolve the Company or any significant subsidiary;

     - Declare or pay any dividend or other distribution of the Company or its
       significant subsidiaries' securities or redeem or repurchase any
       securities of the Company or any significant subsidiaries other than
       Series A Preferred Stock;

     - Increase or decrease the authorized number of directors of the Company;

     - Enter into any related party transactions in excess of $1,000 in the
       aggregate;

     - Incur any indebtedness other than indebtedness the terms of which do not
       prohibit the Redemption of the Series A Preferred Stock in full in cash
       on February 15, 2014;

     - Amend the Company's agreements relating to indebtedness that would
       prohibit the redemption of the Series A Preferred Stock in full in cash
       on February 15, 2014;

     - Hire or terminate the Chief Executive Officer, the Chief Financial
       Officer or the Chief Operating Officer or making any modifications to
       their compensation arrangements; or

     - Report a distribution on the Series A Preferred Stock for tax purposes
       except to the extent such Distribution is paid in cash or to the extent
       that the Company has received consent from the Representative chosen by a
       majority of the Series A Preferred Stockholder, which consent shall not
       be unreasonably withheld.

     Scheduled principal payments on debt over the next five years and
thereafter are as follows:

<Table>
<S>                                                              <C>
2008...........................................................  $    876
2009...........................................................    51,440
2010...........................................................   314,426
2011...........................................................       324
2012...........................................................       317
Thereafter.....................................................   505,911
                                                                 --------
                                                                 $873,294
</Table>


     The Company believes the recorded value of long-term debt approximates fair
value.


                                      F-19

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8.  INCOME TAXES

     The provision for income taxes is summarized as follows:

<Table>
<Caption>
                                                    JUNE 29,   JUNE 30,   JULY 1,
YEARS ENDED                                           2007       2006       2005
-----------                                         --------   --------   -------
<S>                                                 <C>        <C>        <C>
Current:
  Federal.........................................   $   --     $ (102)   $    --
  Foreign.........................................    4,253      4,408      4,652
  State and local.................................      150        106        348
                                                     ------     ------    -------
                                                     $4,403     $4,412    $ 5,000
                                                     ------     ------    -------
Deferred:
  Federal.........................................       --         --     21,530
  Foreign.........................................    1,382        565       (283)
  State and local.................................       --         --         --
                                                     ------     ------    -------
                                                      1,382        565     21,247
                                                     ------     ------    -------
Provision (benefit) for income taxes..............   $5,785     $4,977    $26,247
                                                     ======     ======    =======

</Table>


     The components of income (loss) before income taxes are as follows:

<Table>
<Caption>
                                                  JUNE 29,   JUNE 30,    JULY 1,
YEARS ENDED                                         2007       2006       2005
-----------                                       --------   --------   --------
<S>                                               <C>        <C>        <C>
Domestic........................................  $(73,170)  $(91,860)  $(66,900)
Foreign.........................................    17,641     12,526     11,668
                                                  --------   --------   --------
                                                  $(55,529)  $(79,334)  $(55,232)
                                                  ========   ========   ========

</Table>


     The provision (benefit) for income taxes differs from the amounts computed
by applying the applicable Federal rates due to the following:

<Table>
<Caption>
                                                  JUNE 29,   JUNE 30,    JULY 1,
YEARS ENDED                                         2007       2006       2005
-----------                                       --------   --------   --------
<S>                                               <C>        <C>        <C>
Provision (benefit) for Federal income taxes at
  statutory rate................................  $(18,880)  $(26,974)  $(18,779)
State and local income taxes,...................        99         --
  net of Federal benefit........................        --     (3,142)    (2,187)
Non-deductible goodwill impairment..............        --     11,945         --
Non-deductible preferred stock interest
  accretion.....................................     3,256      4,845         --
Foreign tax rates in excess of Federal tax
  rate..........................................      (363)       714        402
Increase in Valuation Allowance.................     2,941     15,373     47,459
Foreign Dividends...............................     4,896
Expiration of NOLs..............................    12,170
Other, net......................................     1,666      2,216       (648)
                                                  --------   --------   --------
Provision (benefit) for income taxes............  $  5,785   $  4,977   $ 26,247
                                                  ========   ========   ========

</Table>




                                      F-20

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Significant components of the Company's deferred tax assets and liabilities
are as follows:

<Table>
<Caption>
                                                          JUNE 29,   JUNE 30,
                                                            2007       2006
                                                          --------   --------
<S>                                                       <C>        <C>
Current deferred taxes:
  Allowance for doubtful accounts.......................       870      1,416
  Inventory.............................................       724        855
  Net operating loss carryforwards......................     2,421      3,171
  Accrued expenses......................................     3,180      3,251
                                                           -------    -------
     Total current deferred tax assets..................     7,195      8,693
                                                           -------    -------
Long-term deferred taxes:
  Net operating loss carryforwards......................   111,292    104,647
  Accrued pension and post-retirement...................     2,949      2,822
  Unrealized loss on derivative contracts...............       280        372
  Unrealized loss of pension plan.......................     2,858      3,001
  Difference in book and tax basis of assets............      (609)      (609)
  Difference in depreciation............................   (15,570)   (15,633)
  Goodwill -- deductible for tax purposes...............   (12,053)    (9,740)
  Other expenses........................................       722        570
  Other foreign.........................................    (1,637)    (3,019)
                                                           -------    -------
     Total long-term net deferred tax assets............    88,232     82,411
                                                           -------    -------
     Total current and long term deferred tax assets....    95,427     91,104
Valuation allowance.....................................   (97,064)   (94,123)
                                                           -------    -------
Total long-term net deferred tax assets/(liabilities)...    (1,637)    (3,019)
                                                           =======    =======

</Table>


  NET OPERATING LOSSES

     The Company and its U.S. subsidiaries file a consolidated tax return. The
Company and its U.S. subsidiaries have net operating loss ("NOL") carryforwards
of approximately $308,000. These NOL's expire at various dates from 2009 through
2026. Approximately $63,000 of the NOL's are as a result of the acquisition of
PureTec in 1997 (the "PureTec NOL's"). The PureTec NOL's are subject to the
change of ownership annual limitation of approximately $5,600. As a result of
this limitation the Company can utilize a maximum of $63,000 of PureTec NOL's.

     In addition to the domestic NOL balances, the Company has incurred losses
relating to a subsidiary, taxable in Northern Ireland. Through fiscal 2006
losses aggregated $597 which have no expiration date.

     The Company believes that it is more likely than not that this deferred tax
asset will not be realized currenty and has recorded a full valuation allowance
on these amounts.

     No provision was made for U.S. or additional foreign taxes on undistributed
earnings of foreign subsidiaries. Such earnings will continue to be reinvested
but could become subject to additional tax if they were remitted as dividends,
or were loaned to the Company or a U.S. affiliate, or if the Company should sell
its stock in the foreign subsidiaries. It is not practicable to determine the
amount of additional tax, if any, that might be payable on the undistributed
foreign earnings.


                                      F-21

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9.  EMPLOYEE BENEFIT PLANS

     The following disclosures reflect the Company's adoption of SFAS 158
effective for the fiscal year ended June 29, 2007:

  (A)  SAVINGS PLANS

     i. The Company maintains a discretionary 401(k) plan covering all eligible
employees with at least one year of service.

     The Company determines matching contributions to the plan each year, not to
exceed 2% of the employee's eligible compensation. Contributions for the fiscal
years ended June 29, 2007, June 30, 2006 and July 1, 2005, amounted to $1,054,
$1,105 and $1,081, respectively.

  (B)  PENSION PLANS

     Prior to January 1, 2007, the Company had three pension plans as follows:

          i. The Burlington subsidiary had a noncontributory defined benefit
     pension plan that covered substantially all hourly compensated employees
     covered by a collective bargaining agreement, who have completed one year
     of service. The funding policy of the Company was to make contributions to
     this plan based on actuarial computations of the minimum required
     contribution for the plan year.

          ii. The Company also maintained a noncontributory defined benefit
     pension plan that covered substantially all noncollective bargaining unit
     employees of Plastics, Specialties and Technology and Burlington Resins,
     who have completed one year of service and were not participants in any
     other pension plan required by applicable regulations. The funding policy
     of the Company was to make contributions to the plan based on actuarial
     computations of the minimum required contribution for the plan year. On
     September 8, 1998, the Company approved a plan to freeze this defined
     benefit pension plan effective September 30, 1998.

          iii. The Company also had a defined benefit pension plan for the
     benefit of all employees having completed one year of service with Dolco
     Packaging Corporation ("Dolco"). The funding policy of the Company was to
     make the minimum required contribution for the plan year required by
     applicable regulations. Dolco's Board of Directors approved a plan to
     freeze this defined benefit pension plan on June 30, 1987, at which time
     benefits ceased to accrue. The Company has not been required to contribute
     to the plan since 1990.

     On January 1, 2007, the three plans were combined to become the Tekni-Plex,
Inc. Pension Plan ("The Plan").

     The components of net periodic pension costs are as follows:

<Table>
<Caption>
                                                YEAR ENDED   YEAR ENDED   YEAR ENDED
                                                 JUNE 29,     JUNE 30,      JULY 1,
                                                   2007         2006         2005
                                                ----------   ----------   ----------
<S>                                             <C>          <C>          <C>
Service cost..................................    $   129      $   161      $   125
Interest cost on projected benefit
  obligation..................................      1,507        1,379        1,479
Expected actual return on plan assets.........     (1,582)      (1,505)      (1,581)
Amortization of unrecognized:
  Prior service cost..........................         12           12           12
  Net loss....................................        488          823          527
                                                  -------      -------      -------
Net pension cost..............................    $   554      $   870      $   562
                                                  =======      =======      =======

</Table>




                                      F-22

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                        YEAR ENDED   YEAR ENDED
                                                         JUNE 29,     JUNE 30,
                                                           2007         2006
                                                        ----------   ----------
<S>                                                     <C>          <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation, beginning of period.....    $24,732      $28,798
Service cost..........................................        129          161
Interest cost.........................................      1,508        1,380
Actuarial loss(gain)..................................        686       (4,451)
Benefits paid.........................................     (1,461)      (1,156)
                                                          -------      -------
Projected benefit obligation, end of period...........     25,594       24,732

CHANGE IN PLAN ASSETS
Plan assets at fair value, beginning of period........     19,039       18,478
Actual return on plan assets..........................      3,152        1,217
Company contributions.................................      1,479          500
Benefits paid.........................................     (1,461)      (1,156)
                                                          -------      -------
Plan assets at fair value, end of period..............     22,209       19,039
                                                          -------      -------
Funded status of the Plan.............................    $(3,385)     $(5,693)
                                                          =======      =======

</Table>


     Amounts recognized in the consolidated balance sheet as of June 29, 2007

<Table>
<Caption>
                                                                  JUNE 29,
                                                                    2007
                                                                  --------
<S>                                                               <C>
Other non-current liabilities...................................   $(3,385)
                                                                   -------
Net pension liability, end of fiscal year.......................   $(3,385)
                                                                   =======

</Table>


     Amounts recognized in accumulated other comprehensive income

<Table>
<Caption>
                                                                  JUNE 29,
                                                                    2007
                                                                  --------
<S>                                                               <C>
Net actuarial loss..............................................   $6,526
Prior service cost..............................................       52
                                                                   ------
Total...........................................................   $6,578
                                                                   ======

</Table>


     The expected long-term rate of return on the Plan assets were 8.25% and
8.5% at June 29, 2007 and June 30, 2006, respectively, except for the Dolco plan
which had a long-term rate of return of 7.5% at June 30, 2006. The discount
rates were 6.00% and 6.25% for the same periods.

  (C)  POST-RETIREMENT BENEFITS

     In addition to providing pension benefits, the Company also sponsors the
Burlington Retiree Welfare Plan, which provides certain healthcare benefits for
retired employees of the Burlington division who were employed on an hourly
basis, covered under a collective bargaining agreement and retired prior to July
31, 1997. Those employees and their families became eligible for these benefits
after the employee completed five years of service, if retiring at age fifty-
five, or at age sixty-five, the normal retirement age. Post-retirement
healthcare benefits paid for the years ended June 29, 2007, June 30, 2006 and
July 1, 2005 amounted to $217, $211 and $369, respectively, net of retiree
contributions.


                                      F-23

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Net periodic post-retirement benefit costs are as follows:

<Table>
<Caption>
                                                        YEAR ENDED   YEAR ENDED
                                                         JUNE 29,     JUNE 30,
                                                           2007         2006
                                                        ----------   ----------
<S>                                                     <C>          <C>
Service cost..........................................     $198         $221
Interest cost.........................................      312          273
Prior service cost....................................       20           20
Net loss..............................................       72          153
                                                           ----         ----
  Net post-retirement benefit cost....................     $602         $667
                                                           ====         ====

</Table>



<Table>
<Caption>
                                                        YEAR ENDED   YEAR ENDED
                                                         JUNE 29,     JUNE 30,
                                                           2007         2006
CHANGE IN PROJECTED BENEFIT OBLIGATION                  ----------   ----------
<S>                                                     <C>          <C>
Projected benefit obligation, beginning of period.....    $ 5,155      $ 5,584
Service cost..........................................        198          221
Interest cost.........................................        312          273
Retiree contributions.................................          4           15
Actuarial (gain)......................................       (335)        (726)
Benefits paid.........................................       (217)        (211)
                                                          -------      -------
Projected benefit obligation, end of period...........    $ 5,117      $ 5,156
CHANGE IN PLAN ASSETS
Plan assets at fair value, beginning of period........         --           --
Retiree contributions.................................          4           15
Company contributions.................................        213          196
Benefits paid.........................................       (217)        (211)
                                                          -------      -------
Plan assets at fair value, end of period..............         --           --
                                                          -------      -------
Funded status of the Plan.............................    $(5,117)     $(5,156)
                                                          =======      =======

</Table>


     Amounts recognized in the consolidated balance sheet as of June 29, 2007

<Table>
<Caption>
                                                                  JUNE 29,
                                                                    2007
                                                                  --------
<S>                                                               <C>
Current liabilities.............................................   $  (383)
Noncurrent liabilities..........................................    (4,734)
                                                                   -------
Net pension liability, end of fiscal year.......................   $(5,117)
                                                                   =======

</Table>


     Amounts recognized in accumulated other comprehensive income

<Table>
<Caption>
                                                                  JUNE 29,
                                                                    2007
                                                                  --------
<S>                                                               <C>
Net actuarial loss..............................................    $853
Prior service cost..............................................      89
                                                                    ----
Total...........................................................    $942
                                                                    ====

</Table>


     The accumulated post-retirement benefit obligation was determined using a
6.00% and 6.25% discount rate for the periods presented. The healthcare cost
trend rate for medical benefits was changed from a flat

                                      F-24

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.00% as of June 28, 2002 to a graded trend started at 12% for 2003 and
decreasing 1% each year to 6.00% in 2009 and then to an ultimate rate of 5.00%
for 2012 and beyond. The healthcare cost trend rate assumption has a significant
effect on the amounts reported. A 1% increase in healthcare trend rate would
increase the accumulated post-retirement benefit obligation by $321 and $596 and
increase the service and interest components by $70 and $66 at June 29, 2007 and
June 30, 2006, respectively.

     The Company's plan asset allocation at 2007 and 2006 and target allocation
for 2008 are as follows:

<Table>
<Caption>
                                                                      PERCENTAGE
                                                                       OF PLAN
                                                          TARGET        ASSETS
                                                        ALLOCATION   -----------
SECURITY TYPE                                              2008      2007   2006
-------------                                           ----------   ----   ----
<S>                                                     <C>          <C>    <C>
Guaranteed Investment Contract........................        0%        0%     6%
Fixed Income Securities...............................       35%       40%     0%
Equity Securities.....................................       65%       60%    51%
Debt Securities.......................................        0%        0%    43%
                                                            ---       ---    ---
Total Plan Assets.....................................      100%      100%   100%
                                                            ===       ===    ===

</Table>


     The Company's investment policy is to invest in stock and balanced funds of
mutual fund and insurance companies to preserve principal while at the same time
establish a minimum rate of return of approximately 5%. No more than one-third
of the total plan assets are placed in any one fund.

     The expected long-term rate-of-return-on-assets is 8%. This return is based
upon the historical performance of the currently invested funds.

     The benefits expected to be paid for each of the next five years and in the
aggregate for each of the plans for the following five years are:

<Table>
<S>                                                              <C>
2008...........................................................  $ 1,712
2009...........................................................    1,914
2010...........................................................    2,032
2011...........................................................    2,128
2012...........................................................    2,223
2013-2017......................................................   11,635
</Table>


10.  STOCK OPTIONS

     In January 1998, the Company adopted an incentive stock plan (the "Stock
Incentive Plan"). Under the Stock Incentive Plan, 45.8 shares are available for
awards to employees of the Company. Options are granted at fair market value on
the date of grant. As of July 2, 1999 options to purchase 38.2 shares of common
stock were outstanding at weighted-average exercise price of $177 thousand.
During 2001 options were granted to purchase 4.0 shares of common stock at
weighted average exercise prices of $559 thousand per share. During 2003 options
to purchase 2.0 shares of common stock at a weighted average exercise price of
$177 thousand were forfeited and options to purchase 2.0 shares of common stock
at a weighted average exercise price of $680 thousand were issued. In fiscal
2006, options to purchase up to 16.0 shares of common stock with a strike price
of $43 thousand per share were issued and options to purchase 2.0 share with a
strike price of $680 thousand were forfeited 10 options were issued in fiscal
2007 with an average exercise price of $43,681. The Company determined that the
fair value of these options was nominal. The options are subject to vesting
provisions, as determined by the Board of Directors, and generally vest 100%
five years from grant date and expire 10 years from date of grant.


                                      F-25

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At June 29, 2007, 42.1 options were outstanding, 16.1 options were
exercisable and no options have been exercised.

11.  COMMITMENTS AND CONTINGENCIES

  COMMITMENTS

     (a) The Company leases building space and certain equipment in
approximately 33 locations throughout the United States, Canada and Europe. At
June 29, 2007, the Company's future minimum lease payments are as follows:

<Table>
<S>                                                              <C>
2008...........................................................  $12,793
2009...........................................................    9,140
2010...........................................................    6,819
2011...........................................................    5,893
2012...........................................................    5,548
Thereafter.....................................................   13,077
                                                                 -------
                                                                 $53,270
</Table>


     Rent expense, including escalation charges, amounted to approximately
$10,016 and $8,447 for the years ended June 29, 2007 and June 30, 2006,
respectively.

     (b) The Company has an employment contract with one officer, providing a
minimum annual salary of $4.0 million with no mandatory bonuses. The two year
agreement expires in 2007.

  CONTINGENCIES

     (a) The Company is a party to various legal proceedings arising in the
normal conduct of business, including compliance with environmental regulations
and foreign tax matters. Management believes that the final outcome of these
proceedings will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.

     (b) In January 1993 and 1994, our Belgian subsidiary received income tax
assessments aggregating approximately 74.9 million Belgian Francs for the
disallowance of certain foreign tax credits and investment losses claimed for
the years ended July 31, 1990 and 1991. Additionally, in January 1995, the
subsidiary received an income tax assessment of approximately 32.8 million
Belgian francs for the year ended July 31, 1992. By Belgium law, these
assessments are capped at the values above, increased by late payment interest
for a period of 18 months only (approximately 15.5 million Belgian francs) and
do not continue to accrue additional penalties or interest as long as the Tax
Director has not rendered a decision in connection with the tax complaints that
have been filed against these tax assessments. To date, the Tax Director has not
rendered a decision. These liabilities, which total approximately EUR 3,054,000
or $4.2 million at current exchange rates, have been fully accrued for as of
June 29, 2007.

     (c) We are subject to environmental laws requiring the investigation and
cleanup of environmental contamination. In addition to remediation being
undertaken by third parties at a limited number of our locations, we are
currently remediating contamination resulting from past industrial activity at
two of our New Jersey facilities which we acquired from PureTec in 1998. This
remediation is being conducted pursuant to the requirements of New Jersey's
Industrial Site Recovery Act which were triggered by the 1998 PureTec
transaction. If any other events were to occur in the future that would be
deemed to have effected a "change of control" of any of our New Jersey
facilities as defined under New Jersey's Industrial Site Recovery Act, we would
be required to take additional actions to comply with such statute, including
possibly additional

                                      F-26

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


investigations and remediation. We also are conducting remediation at a
formerly-owned New Jersey facility under a voluntary cleanup agreement with the
state.

     We recently voluntarily self-disclosed to regulators certain non-
compliances with the air permit for our Troy, OH facility. We have installed
additional pollution controls at this facility and we are currently in
compliance with our air permit. We may also be required to pay a fine, but we
cannot predict whether such a fine will be imposed, or if so, in what amount.

     In 2004, the National Enforcement Investigation Center (NEIC), on behalf of
the United States Environmental Protection Agency (EPA), conducted an
environmental review of our Burlington, NJ site concerning federal Clean Air Act
requirements. The EPA subsequently issued a request for further information
regarding these air issues under Section 114 of the federal Clean Air Act. In
February and March, 2006 the New Jersey Department of Environmental Protection
(NJDEP) issued administrative orders alleging violations of certain state air
regulations at the Burlington facility. In March, 2006, the United States
Department of Justice (DOJ) contacted Colorite on behalf of the EPA. The DOJ
indicated that certain violations under several federal environmental statutes
had been identified as a result of the EPA's inspection. They discussed the
alleged violations and attempted to negotiate a settlement. Since that date,
representatives of Colorite have met with representatives of EPA, DOJ and NJDEP
on several occasions to discuss the alleged federal and state violations. Tekni-
Plex continues to evaluate the alleged violations and its defenses to them, and
anticipates negotiating with the government agencies to attempt to resolve these
matters.

     As of June 29, 2007 we had a $1.4 million reserve in our financial
statements to reflect our best estimate of the aggregate expenses associated
with these environmental matters. This reserve is in addition to existing
environmental reserves which total $500,000 and the reserves described in Note
14 related to our Elm and Swan acquisitions.

     Although we believe that, based on historical experience, the costs of
achieving and maintaining compliance with environmental laws and regulations are
unlikely to have a material adverse effect on our business, we could incur
significant fines, penalties, capital costs or other liabilities associated with
any confirmed noncompliance or remediation of contamination or natural resource
damage liability at or related to any of our current or former facilities, the
precise nature of which we cannot now predict. Furthermore, we cannot assure you
that future environmental laws or regulations will not require substantial
expenditures by us or significant modifications or our operations.

12.  CONCENTRATIONS OF CREDIT RISKS

     Financial instruments that potentially subject the of Company to
significant concentrations of credit risk consist principally cash deposits and
trade accounts receivable.

     The Company provides credit to customers on an unsecured basis after
evaluating customer credit worthiness. Since the Company sells to a broad range
of customers, concentrations of credit risk are limited. The Company provides an
allowance for bad debts where there is a possibility for loss.

     The Company maintains demand deposits at several major banks throughout the
United States, Canada and Europe. As part of its cash management process, the
Company periodically reviews the credit standing of these banks.


                                      F-27

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13.  SUPPLEMENTAL CASH FLOW INFORMATION

  CASH PAID

<Table>
<Caption>
                                                   JUNE 29,   JUNE 30,   JULY 1,
YEARS ENDED                                          2007       2006       2005
-----------                                        --------   --------   -------
<S>                                                <C>        <C>        <C>
Interest.........................................   $89,544    $82,054   $86,406
                                                    -------    -------   -------
Income taxes.....................................     5,417      3,129   $ 4,546
                                                    =======    =======   =======
Non-Cash Financing Activities:
Exchange of Capital for Series A Redeemable
  Preferred Stock................................        --         --   $22,500
</Table>


14.  SEGMENT INFORMATION

     Tekni-Plex management reviews its operating plants to evaluate performance
and allocate resources. Tekni-Plex has aggregated its operating plants into
three primary industry segments: Tubing Products, Packaging and Other. The
Tubing Products segment principally produces garden and irrigation hose, medical
tubing and pool hose. The Packaging segment principally produces foam egg
cartons, pharmaceutical blister films, poultry and meat processor trays, closure
liners, aerosol and pump packaging components and foam plates. Products that do
not fit in either of these segments, including recycled PET, vinyl compounds and
specialty resins, have been reflected in Other. The Tubing Products and
Packaging segments have operations in the United States, Europe and Canada. The
Other segment has operations only in the United States.

     Financial information concerning the Company's business segments and the
geographic areas in which it operates are as follows:

<Table>
<Caption>
                                           TUBING
YEAR END JUNE 29, 2007                    PRODUCTS   PACKAGING     OTHER     TOTALS
----------------------                    --------   ---------   --------   --------
<S>                                       <C>        <C>         <C>        <C>
Revenues from external customers........  $205,632    $405,429   $162,276   $773,337
Interest expense........................    49,013      33,310     22,145    104,468
Depreciation and amortization...........     5,573      15,309      7,112     27,994
Segment income (loss) from operations...     4,588      66,331       (988)    69,931
Goodwill................................    70,099      78,641     18,544    167,284
Segment assets..........................   239,110     275,214    121,877    636,201
Expenditures for segment fixed assets...     4,276      13,050      3,605     20,931
</Table>



<Table>
<Caption>
                                           TUBING
YEAR END JUNE 30, 2006                    PRODUCTS   PACKAGING     OTHER     TOTALS
----------------------                    --------   ---------   --------   --------
<S>                                       <C>        <C>         <C>        <C>
Revenues from external customers........  $215,801    $374,063   $152,819   $742,683
Interest expense........................    49,139      33,524     22,168    104,831
Depreciation and amortization...........     9,039      14,344      7,590     30,973
Segment income (loss) from operations...   (30,538)     63,569      3,015     36,046
Goodwill................................    70,099      78,641     18,544    167,284
Segment assets..........................   248,532     263,843    142,606    654,981
Expenditures for segment fixed assets...     3,959      10,247      4,275     18,481
</Table>




                                      F-28

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                           TUBING
YEAR END JULY 1, 2005                     PRODUCTS   PACKAGING     OTHER     TOTALS
---------------------                     --------   ---------   --------   --------
<S>                                       <C>        <C>         <C>        <C>
Revenues from external customers........  $213,052    $348,675   $133,797   $695,524
Interest expense........................    42,188      28,662     19,049     89,899
Depreciation and amortization...........     9,311      15,255      7,063     31,629
Segment income(loss) from operations....    (6,473)     48,967     (1,239)    41,255
Goodwill................................   108,593      63,943     25,996    198,532
Segment assets..........................   295,176     255,827    132,166    683,169
Expenditures for segment fixed assets...     2,481      10,886      4,219     17,586
</Table>




                                      F-29

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                 JUNE 29,   JUNE 30,    JULY 1,
YEARS ENDED                                        2007       2006       2005
-----------                                      --------   --------   --------
<S>                                              <C>        <C>        <C>
OPERATING PROFIT
Total operating profit for reportable segments
  before
  income taxes.................................  $ 69,931   $ 36,046   $ 41,255
Corporate and eliminations.....................   (18,928)   (17,086)   (17,069)
                                                 --------   --------   --------
  Consolidated total...........................  $ 51,003   $ 18,960   $ 24,186
                                                 ========   ========   ========
ASSETS
Total assets from reportable segments..........  $636,201   $654,981   $683,169
Other unallocated amounts......................     3,092      8,374      8,526
                                                 --------   --------   --------
  Consolidated total...........................  $639,293   $663,355   $691,695
                                                 ========   ========   ========
DEPRECIATION AND AMORTIZATION
Segment totals.................................  $ 27,994   $ 30,973   $ 31,629
Corporate......................................     1,020      1,024      1,024
                                                 --------   --------   --------
  Consolidated total...........................  $ 29,014   $ 31,997   $ 32,653
                                                 ========   ========   ========
EXPENDITURES FOR SEGMENT FIXED ASSETS
Segment totals.................................  $ 20,931   $ 18,481   $ 17,586
Other unallocated expenditures.................       613        601        660
                                                 --------   --------   --------
Consolidated total.............................  $ 21,544   $ 19,082   $ 18,246
                                                 ========   ========   ========
REVENUES GEOGRAPHIC INFORMATION
United States..................................  $642,029   $641,661   $594,145
Canada.........................................    17,328     13,603     18,832
China & Argentina..............................     8,557      4,333      2,805
Europe, primarily Belgium......................   105,423     83,086     79,742
                                                 --------   --------   --------
  Total........................................  $773,337   $742,683   $695,524
                                                 ========   ========   ========
LONG-LIVED ASSETS GEOGRAPHIC INFORMATION
United States..................................  $302,687   $320,630   $364,864
Canada.........................................     8,483      9,582      9,552
China & Argentina..............................     4,028      2,466        427
Europe.........................................    35,237     23,168     24,423
                                                 --------   --------   --------
  Total........................................  $350,435   $355,846   $399,266
                                                 ========   ========   ========

</Table>


     Income from operations is total net sales less cost of goods sold and
operating expenses of each segment before deductions for general corporate
expenses not directly related to an individual segment and interest.
Identifiable assets by industry are those assets that are used in the Company's
operation in each industry segment, including assigned value of goodwill.
Corporate identifiable assets consist primarily of cash, prepaid expenses,
deferred income taxes and fixed assets.

     For each of the three years in the period ended June 29, 2007 no single
customer represented at least 10% of sales.


                                      F-30

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Garden hose products represented 24%, 25% and 30% of sales in fiscal years
2006, 2005 and 2004, respectively. Foam egg cartons represented 15%, 15% and 12%
of sales in fiscal year 2006, 2005 and 2004, respectively. It is impractical for
the Company to provide further product line information. However, no other
product lines represented 10% or more of revenues in any years presented.

15.  SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

     Tekni-Plex, Inc. issued 12 3/4% Senior Subordinated Notes in June 2000 and
May 2002 and 8 3/4% Senior Secured Notes in November 2003. These notes are
guaranteed by all domestic subsidiaries of Tekni-Plex. The guarantor
subsidiaries are 100% owned by the issuer. The guaranties are full and
unconditional and joint and several. There are no restrictions on the transfer
of funds from guarantor subsidiaries to the issuer. The following condensed
consolidating financial statements present separate information for Tekni-Plex
(the "Issuer") and its domestic subsidiaries (the "Guarantors") and the foreign
subsidiaries (the "Non-Guarantors").

  CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS -- FOR THE YEAR ENDED JUNE 29,
  2007

<Table>
<Caption>
                                                                    NON-
                                          ISSUER    GUARANTORS   GUARANTORS     TOTAL
                                         --------   ----------   ----------   --------
<S>                                      <C>        <C>          <C>          <C>
Sales, net.............................  $198,203    $443,826     $131,308    $773,337
Cost of sales..........................   147,572     411,218       97,360     656,150
                                         --------    --------     --------    --------
Gross profit...........................    50,631      32,608       33,948     117,187
Selling, general and administrative....    26,072      26,766       11,631      64,469
Integration expense....................       712       1,003           --       1,715
                                         --------    --------     --------    --------
Income (loss) from operations..........    23,847       4,839       22,317      51,003
Interest expense, net..................   104,282          (1)         187     104,468
Unrealized loss (gain) on derivative
  contract.............................      (243)         --           --        (243)
Other expense (income).................    (1,650)       (532)       4,489       2,307
                                         --------    --------     --------    --------
Income (loss) before provision for
  income taxes.........................   (78,542)      5,372       17,641     (55,529)
Provision for income taxes.............       150          --        5,635       5,785
                                         --------    --------     --------    --------
Net income (loss)......................  $(78,692)   $  5,372     $ 12,006    $(61,314)
                                         ========    ========     ========    ========

</Table>




                                      F-31

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CONDENSED CONSOLIDATING BALANCE SHEET -- AT JUNE 29, 2007

<Table>
<Caption>
                                                                 NON-
                                      ISSUER     GUARANTORS   GUARANTORS   ELIMINATIONS     TOTAL
                                    ----------   ----------   ----------   ------------   ---------
<S>                                 <C>          <C>          <C>          <C>            <C>
CURRENT ASSETS....................  $   37,002    $185,019     $ 66,837     $        --   $ 288,858
Property, plant and equipment,
  net.............................      39,203      97,873       26,951              --     164,027
Intangible assets.................      16,995     145,793        8,613              --     171,401
Investment in subsidiaries........     568,642          --           --        (568,642)         --
Deferred financing costs, net.....      11,944          --           --              --      11,944
Other long-term assets............     438,409     424,167          844        (860,357)      3,063
                                    ----------    --------     --------     -----------   ---------
  TOTAL ASSETS....................  $1,112,195    $852,852     $103,245     $(1,428,999)  $ 639,293
                                    ==========    ========     ========     ===========   =========
CURRENT LIABILITIES...............      37,916      30,642       36,781                     105,339
Long-term debt....................     782,693          29        3,663              --     786,385
Preferred stock...................      86,033          --           --              --      86,033
Other long-term liabilities.......     569,565     298,846        1,109        (860,357)      9,163
                                    ----------    --------     --------     -----------   ---------
  Total Liabilities...............   1,476,207     329,517       41,553        (860,357)    986,920
                                    ----------    --------     --------     -----------   ---------
Additional paid-in capital........     188,018     296,764       20,251        (317,015)    188,018
Retained earnings (accumulated
  deficit)........................    (316,154)    215,546       36,082        (251,627)   (316,153)
Accumulated other comprehensive
  (income) loss...................      (1,216)     (6,460)       8,707              --       1,031
Treasury stock....................    (220,523)         --           --              --    (220,523)
                                    ----------    --------     --------     -----------   ---------
  Total stockholders' deficit.....    (349,875)    505,850       65,040        (568,642)   (347,627)
                                    ----------    --------     --------     -----------   ---------
  Total liabilities and
     stockholders' deficit........  $1,126,332    $835,367     $106,593     $(1,428,999)  $ 639,293
                                    ==========    ========     ========     ===========   =========

</Table>




                                      F-32

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CONDENSED CONSOLIDATING CASH FLOWS -- FOR THE YEAR ENDED JUNE 29, 2007


<Table>
<Caption>
                                                                    NON-
                                          ISSUER    GUARANTORS   GUARANTORS     TOTAL
                                         --------   ----------   ----------   --------
<S>                                      <C>        <C>          <C>          <C>
Net cash provided by (used in)
  operating activities:................  $(51,860)   $ 41,310     $ 24,738    $ 14,188
                                         --------    --------     --------    --------
Cash flows from investing activities:
  Capital expenditures.................    (4,614)    (11,487)      (5,443)    (21,544)
  Additions to intangibles.............    (2,342)      1,119         (431)     (1,654)
  Deposits and other assets............        --         417       (1,399)       (982)
                                         --------    --------     --------    --------
Net cash used in investing activities..    (6,956)     (9,951)      (7,273)    (24,180)
                                         --------    --------     --------    --------
Cash flows from financing activities:
  Repayments under line of credit......   (41,000)         --           --     (41,000)
  Borrowings under line of credit......    53,000          --           --      53,000
  Proceeds from long-term debt.........        --          --         (390)       (390)
  Debt financing.......................       250          --           --         250
  Change in intercompany accounts......    47,765     (30,051)     (17,714)         --
Net cash flows provided by (used in)
  financing activities.................    60,015     (30,051)     (18,104)     11,860
                                         --------    --------     --------    --------
Effect of exchange rate changes on
  cash.................................        --          --         (212)       (212)
                                         --------    --------     --------    --------
Net increase (decrease) in cash........     1,199       1,308         (851)      1,656
Cash, beginning of year................     4,250       4,895       11,544      20,689
                                         --------    --------     --------    --------
Cash, end of year......................  $  5,449    $  6,203     $ 10,693    $ 22,345
                                         ========    ========     ========    ========

</Table>


  CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS -- FOR THE YEAR ENDED JUNE 30,
  2006

<Table>
<Caption>
                                                                    NON-
                                          ISSUER    GUARANTORS   GUARANTORS     TOTAL
                                         --------   ----------   ----------   --------
<S>                                      <C>        <C>          <C>          <C>
Sales, net.............................  $196,727    $444,934     $101,022    $742,683
Cost of sales..........................   143,386     403,692       74,905     621,983
                                         --------    --------     --------    --------
Gross profit...........................    53,341      41,242       26,117     120,700
Selling, general and administrative....    25,798      60,444       10,248      96,490
Integration expense....................     1,494       3,756           --       5,250
                                         --------    --------     --------    --------
Income (loss) from operations..........    26,049     (22,958)      15,869      18,960
Interest expense, net..................   104,552         144          135     104,831
Unrealized loss (gain) on derivative
  contract.............................    (3,800)         --           --      (3,800)
Other (income) expense.................    (4,921)     (1,024)       3,208      (2,737)
                                         --------    --------     --------    --------
Loss (income) before provision for
  income taxes.........................   (69,782)    (22,078)      12,526     (79,334)
Provision for income taxes.............       (67)         71        4,973       4,977
                                         --------    --------     --------    --------
Net income (loss)......................  $(69,715)   $(22,149)    $  7,553    $(84,311)
                                         ========    ========     ========    ========

</Table>




                                      F-33

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CONDENSED CONSOLIDATING BALANCE SHEET -- AT JUNE 30, 2006

<Table>
<Caption>
                                                               NON-
                                    ISSUER     GUARANTORS   GUARANTORS   ELIMINATIONS     TOTAL
                                  ----------   ----------   ----------   ------------   ---------
<S>                               <C>          <C>          <C>          <C>            <C>
CURRENT ASSETS.................   $   36,233    $203,580     $ 67,696     $        --   $ 307,509
Property, plant and equipment,
  net..........................       40,641     101,724       25,422              --     167,787
Intangible assets..............       14,929     147,109        9,342              --     171,380
Investment in subsidiaries.....      547,778          --           --        (547,778)         --
Deferred taxes.................        8,502      (8,502)          --                          --
Deferred financing costs, net..       14,502         116           --              --      14,618
Other long-term assets.........      418,403     283,922          452        (700,716)      2,061
                                  ----------    --------     --------     -----------   ---------
  TOTAL ASSETS.................   $1,080,988    $727,949     $102,912     $(1,248,494)  $ 663,355
                                  ==========    ========     ========     ===========   =========
CURRENT LIABILITIES............       33,085      28,800       30,209                      92,094
Long-term debt.................      769,268          --        3,639              --     772,907
Preferred stock................       74,495          --                           --      74,495
Other long-term liabilities....      492,811     205,765       14,930        (700,716)     12,790
                                  ----------    --------     --------     -----------   ---------
  Total Liabilities............    1,369,659     234,565       48,778        (700,716)    952,286
                                  ----------    --------     --------     -----------   ---------
Additional paid-in capital.....      188,011     294,585       18,951        (313,529)    188,018
Retained earnings (accumulated
  deficit).....................     (254,840)    205,381       28,869        (234,249)   (254,839)
Accumulated other comprehensive
  (income) loss................       (1,319)     (6,582)       6,314              --      (1,587)
Treasury stock.................     (220,523)         --           --              --    (220,523)
                                  ----------    --------     --------     -----------   ---------
  Total stockholders' deficit..     (288,671)    493,384       54,134        (547,778)   (288,931)
                                  ----------    --------     --------     -----------   ---------
  Total liabilities and
     stockholders' deficit.....   $1,080,988    $727,949     $102,912     $(1,248,494)  $ 663,355
                                  ==========    ========     ========     ===========   =========

</Table>




                                      F-34

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CONDENSED CONSOLIDATING CASH FLOWS -- FOR THE YEAR ENDED JUNE 30, 2006

<Table>
<Caption>
                                                                    NON-
                                          ISSUER    GUARANTORS   GUARANTORS     TOTAL
                                         --------   ----------   ----------   --------
<S>                                      <C>        <C>          <C>          <C>
Net cash provided by (used in)
  operating activities:................  $(49,790)   $ 27,864      $10,727    $(11,199)
                                         --------    --------      -------    --------
Cash flows from investing activities:
  Capital expenditures.................    (3,406)    (10,835)      (4,841)    (19,082)
  Cash proceeds from sale of assets....        --       4,142           --       4,142
  Additions to intangibles.............       263      (3,898)          (3)     (3,638)
  Deposits and other assets............        (3)       (260)         (33)       (296)
                                         --------    --------      -------    --------
Net cash used in investing activities..    (3,146)    (10,851)      (4,877)    (18,874)
                                         --------    --------      -------    --------
Cash flows from financing activities:
  Net borrowings (repayment) under line
     of credit.........................    27,000          --           --      27,000
  Proceeds from long-term debt.........        --          --          (17)        (17)
  Repayment of long-term debt..........        --          --           --          --
  Debt financing.......................      (237)         --          429         192
  Change in intercompany accounts......    18,029     (19,850)       1,821          --
  Proceeds from issuance of Series A
     redeemable preferred stock........     5,423          --           --       5,423
                                         --------    --------      -------    --------
Net cash flows provided by (used in)
  financing activities.................    50,215     (19,850)       2,233      32,598
                                         --------    --------      -------    --------
Effect of exchange rate changes on
  cash.................................        --          --         (420)       (420)
                                         --------    --------      -------    --------
Net increase (decrease) in cash........    (2,721)     (2,837)       7,663       2,105
Cash, beginning of year................     6,971       7,732        3,881      18,584
                                         --------    --------      -------    --------
Cash, end of year......................  $  4,250    $  4,895      $11,544    $ 20,689
                                         ========    ========      =======    ========

</Table>




                                      F-35

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS -- FOR THE YEAR ENDED JULY 1,
  2005

<Table>
<Caption>
                                                                    NON-
                                          ISSUER    GUARANTORS   GUARANTORS     TOTAL
                                         --------   ----------   ----------   --------
<S>                                      <C>        <C>          <C>          <C>
Sales, net.............................  $180,687    $413,458     $101,379    $695,524
Cost of sales..........................   136,358     387,452       76,360     600,170
                                         --------    --------     --------    --------
Gross profit...........................    44,329      26,006       25,019      95,354
Selling, general and administrative....    25,872      25,289        9,529      60,690
Integration expense....................     2,399       8,079           --      10,478
                                         --------    --------     --------    --------
Income (loss) from operations..........    16,058      (7,362)      15,490      24,186
Interest expense, net..................    89,762          --          137      89,899
Unrealized loss (gain) on derivative
  contract.............................    (8,287)         --           --      (8,287)
Other expense (income).................    (4,021)     (1,858)       3,685      (2,194)
                                         --------    --------     --------    --------
Income (loss) before provision for
  income taxes.........................   (61,396)     (5,504)      11,668     (55,232)
Provision for income taxes.............    21,820          58        4,369      26,247
                                         --------    --------     --------    --------
Net income (loss)......................  $(83,216)   $ (5,562)    $  7,299    $(81,479)
                                         ========    ========     ========    ========

</Table>


  CONDENSED CONSOLIDATING BALANCE SHEET -- AT JULY 1, 2005

<Table>
<Caption>
                                                               NON-
                                      ISSUER    GUARANTORS  GUARANTORS  ELIMINATIONS    TOTAL
                                    ----------  ----------  ----------  ------------  ---------
<S>                                 <C>         <C>         <C>         <C>           <C>
CURRENT ASSETS....................  $   38,998   $192,614     $60,817    $        --  $ 292,429
Property, plant and equipment,
  net.............................      42,397    109,750      24,035             --    176,182
Intangible assets.................      15,268    179,210      10,164             --    204,642
Investment in subsidiaries........     562,374         --          --       (562,374)        --
Deferred financing costs, net.....      16,561        116          --             --     16,677
Other long-term assets............     379,589    214,261         203       (592,288)     1,765
                                    ----------   --------     -------    -----------  ---------
  TOTAL ASSETS....................  $1,055,187   $695,951     $95,219    $(1,154,662) $ 691,695
                                    ==========   ========     =======    ===========  =========
CURRENT LIABILITIES...............      27,709     39,040      24,862             --     91,611
Long-term debt....................     740,739         --       3,874             --    744,613
Preferred stock...................      54,822         --                         --     54,822
Other long-term liabilities.......     437,185    148,101      20,978       (592,288)    13,976
                                    ----------   --------     -------    -----------  ---------
  TOTAL LIABILITIES...............   1,260,455    187,141      49,714       (592,288)   905,022
                                    ----------   --------     -------    -----------  ---------
Additional paid-in capital........     187,999    296,783      16,765       (313,529)   188,018
Retained earnings (accumulated
  deficit)........................    (170,528)   222,736      26,109       (248,845)  (170,528)
Accumulated other comprehensive
  (income) loss...................      (2,216)   (10,709)      2,631             --    (10,294)
Treasury stock....................    (220,523)        --          --             --   (220,523)
                                    ----------   --------     -------    -----------  ---------
  TOTAL STOCKHOLDERS' DEFICIT.....    (205,268)   508,810      45,505       (562,374)  (213,327)
                                    ----------   --------     -------    -----------  ---------
  TOTAL LIABILITIES AND
     STOCKHOLDERS' DEFICIT........  $1,055,187   $695,951     $95,219    $(1,154,662) $ 691,695
                                    ==========   ========     =======    ===========  =========

</Table>




                                      F-36

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CONDENSED CONSOLIDATING CASH FLOWS -- FOR THE YEAR ENDED JULY 1, 2005

<Table>
<Caption>
                                                                    NON-
                                          ISSUER    GUARANTORS   GUARANTORS     TOTAL
                                         --------   ----------   ----------   --------
<S>                                      <C>        <C>          <C>          <C>
Net cash provided by (used in)
  operating activities:................  $(74,070)   $ 42,357     $  7,252    $(24,461)
                                         --------    --------     --------    --------
Cash flows from investing activities:
  Acquisitions.........................       (93)         --           --         (93)
  Capital expenditures.................    (3,826)    (13,027)      (1,393)    (18,246)
  Additions to intangibles.............      (331)       (241)         (89)       (661)
                                         --------    --------     --------    --------
Net cash used in investing activities..    (4,250)    (13,268)      (1,482)    (19,000)
                                         --------    --------     --------    --------
Cash flows from financing activities:
  Net borrowings (repayment) under line
     of credit.........................   (64,000)         --           --     (64,000)
  Proceeds from long-term debt.........   178,640          --           --     178,640
  Repayment of long-term debt..........   (70,943)         --         (705)    (71,648)
  Debt financing.......................   (10,720)         --           --     (10,720)
  Change in intercompany accounts......    40,424     (30,280)     (10,144)         --
                                         --------    --------     --------    --------
Net cash flows provided by (used in)
  financing activities.................    73,401     (30,280)     (10,849)     32,272
                                         --------    --------     --------    --------
Effect of exchange rate changes on
  cash.................................        --          --           38          38
                                         --------    --------     --------    --------
Net increase (decrease) in cash........    (4,919)     (1,191)      (5,041)    (11,151)
Cash, beginning of year................    11,890       8,923        8,922      29,735
                                         --------    --------     --------    --------
Cash, end of year......................  $  6,971    $  7,732     $  3,881    $ 18,584
                                         ========    ========     ========    ========

</Table>


16.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<Table>
<Caption>
                                            FIRST         SECOND          THIRD     FOURTH
                                           QUARTER        QUARTER        QUARTER    QUARTER
                                          --------       --------       --------   --------
<S>                                       <C>            <C>            <C>        <C>
2007
Net sales...............................  $172,005       $156,106       $211,681   $233,545
Gross profit............................    26,935         26,163         34,098     29,991 (3)
Income (loss) from operations...........    11,036         11,236         17,169     11,562 (3)
Net (loss)..............................  $(14,872)(2)   $(15,661)      $(12,158)  $(18,623)(3)
                                          ========       ========       ========   ========
2006
Net sales...............................  $162,751       $152,396       $194,568   $232,968
Gross profit............................    18,508         22,474         36,914     42,804
Income (loss) from operations...........     1,437        (27,987)(1)     19,830     25,680
Net (loss)..............................  $(24,299)      $(54,528)(1)   $ (4,564)  $   (920)
                                          ========       ========       ========   ========

</Table>


--------

   (1) In September 2005, we concluded our annual garden hose contract
       negotiations. While we were largely successful in securing our target
       price increases, we lost meaningful market share. With this information
       in mind, in the second quarter of fiscal 2006 we deemed it appropriate to
       retest the goodwill in our Tubing segment. Accordingly, we recorded a
       $35.1 million impairment charge against the goodwill associated with our
       Swan operations as we anticipate reducing the capacity of this operation,
       eliminating much of its fixed costs, to reflect our reduced market
       position.


                                      F-37

<PAGE>

                                TEKNI-PLEX, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



(2)    The first quarter of fiscal 2007 included a $2.4 million reduction in
       interest expense due to a change in the methodology used to accrete our
       preferred stock to its mandatory redemption value from the straight-line
       method to the effective interest method.

(3)    The fourth quarter of fiscal 2007 includes certain fourth quarter
       adjustments, including the following:

     (1) $1.1 million reduction in inventory to correct a misstated inventory
         count at our Action Technology unit in Clinton, IL.

     (2) $2.8 million increase in fixed assets to correct excess depreciation
         charged in prior years.


                                      F-38

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                            ON SUPPLEMENTAL SCHEDULE

Board of Directors
Tekni-Plex, Inc.
Somerville, New Jersey

     The audits referred to in our report dated September 26, 2007 relating to
the consolidated financial statements of Tekni-Plex, Inc. and its subsidiaries
(the "Company"), included the audits of the financial statement schedule for the
years ended June 29, 2007, June 30, 2006 and July 1, 2005 listed in the
accompanying index. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based upon our audits.

     In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.

/s/ BDO Seidman, LLP

Woodbridge, New Jersey
September 26, 2007


                                      F-39

<PAGE>

                                TEKNI-PLEX, INC.

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


<Table>
<Caption>
                                                BALANCE AT    CHARGED TO
                                               BEGINNING OF   COSTS AND                  BALANCE AT END
                                                  PERIOD     EXPENSES(1)  DEDUCTIONS(2)   OF PERIOD(3)
                                               ------------  -----------  -------------  --------------
                                                                (DOLLARS IN THOUSANDS)
<S>                                            <C>           <C>          <C>            <C>
YEAR ENDED JULY 1, 2005
  Accounts receivable allowance for possible
     losses..................................     $5,328        $1,970        $1,234         $6,064
                                                  ======        ======        ======         ======
YEAR ENDED JUNE 30, 2006
  Accounts receivable allowance for possible
     losses..................................     $6,064        $1,044        $4,156         $2,952
                                                  ======        ======        ======         ======
YEAR ENDED JUNE 29, 2007
  Accounts receivable allowance for possible
     losses..................................     $2,952        $4,826        $4,850         $2,928
                                                  ======        ======        ======         ======

</Table>



--------

   (1) To increase accounts receivable allowance.

   (2) Uncollectible accounts written off, net of recoveries.

   (3) Amounts do not include certain accounts receivable reserves that are
       disclosed as "allowances" on the Consolidated Balance Sheets since they
       are not valuation reserves.


                                      F-40