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

                                   ----------

                                    FORM 10-K

                                   (MARK ONE)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED JULY 1, 2005

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

                        COMMISSION FILE NUMBER 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.)
</TABLE>

<TABLE>
<S>                                                              <C>
        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 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 the number of shares outstanding of each of the registrant's
classes of stock as of the latest practicable date.

     None

     Documents Incorporated by Reference: See Index to Exhibits.

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<PAGE>
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 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


                                        2
<PAGE>
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.

RECENT DEVELOPMENTS

As previously disclosed on Form 8-K filed September 21, 2005, Tekni-Plex has
identified certain inventory overstatements at its American Gasket & Rubber
Division which resulted in a $6.8 million overstatement of inventory. With the
assistance of outside legal counsel as well as an independent registered public
accounting firm other than BDO Seidman, LLP, the Audit Committee of the Board of
Directors of Tekni-Plex has concluded an internal investigation into this
matter. See Item 9a below.

These inventory overstatements at American Gasket and Rubber Division has
required a non-cash charge to results of operations as follows:

<TABLE>
<S>            <C>
Fiscal 2005   $(2.8) million
Fiscal 2004   $(2.7) million
Fiscal 2003   $(0.5) million
Fiscal 2002   $(0.5) million
Fiscal 2001   $(0.3) million
</TABLE>

Results of operations for the periods prior to fiscal 2005 and fiscal 2005
quarterly results have been restated herein. Management has concluded that the
impact of inventory overstatements on periods prior to the beginning of fiscal
2004 are not material in any one reporting period. In addition, management has
concluded that the impact of these errors on interim reporting periods filed
under Form 10-Q during fiscal 2004 and fiscal 2005 are also not material.
Consequently investors can continue to rely on all financial statements issued
prior to June 28, 2003 as well as the quarterly reports filed during fiscal 2004
and 2005 on Form 10-Q.

Tekni-Plex has terminated the employment of the individual directly responsible
for the inventory restatements at American Gasket & Rubber. It has also improved
training for the accounting staff of this Division. In addition, Tekni-Plex has
improved its internal financial systems and controls across all of its divisions
to, among other things, increase both the frequency by which inventory is
monitored as well as the number of managers responsible for monitoring
inventory. Finally, Tekni-Plex will increase the frequency and depth by which
the inventory of each of our divisions is tested by our independent registered
public accountants during the course of our annual audit as additional audit
procedures.

In July, 2005 Tekni-Plex raised an additional $5.4 million through the issuance
of additional shares of our Series A redeemable preferred stock with terms
identical to the preferred stock issued in June, 2005. (See note 7 of the
audited consolidated financial statements.)

DESCRIPTION OF SEGMENTS

     See footnote 14 of our July 1, 2005 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, 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:


                                        3
<PAGE>
                                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          - Pool and vacuum hose

- Closure Liners

- Aerosol and pump packaging components

- Foam plates
</TABLE>

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 businesses,
          we utilize proprietary formulations and are a low cost 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. Our Senior management team has an average
          of 25 years of experience in the industry. 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 strengths. Current
          management owns more than 20% of the fully diluted common stock of the
          Company..


                                        4
<PAGE>
EMPLOYEES

     We have approximately 3,250 employees. Approximately one-third 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 14.6% of our total revenues. At
          present, we have manufacturing operations with attached sales offices
          in Europe, Canada and Argentina. We have a regional sales office in
          Asia and sales representatives in the Middle East. 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 $348.7 million (50.1%
of total revenues) for the year ended July 1, 2005 and $306.1 million (48.2% of
total revenues) for the year ended July 2, 2004. 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).

PHARMACEUTICAL BLISTER FILMS


                                        5
<PAGE>
     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 two principal competitors
worldwide with resources equal to or greater than ours. However, we believe that
neither of these competitors has 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.

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.


                                        6
<PAGE>
     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 $213.1 million
(30.6% of total revenues) for the year ended July 1, 2005 and $210.2 million
(33.1% of total revenues) for the year ended July 2, 2004. 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 the patented Colorite(R)
Evenflow(R) design and ultra high quality product lines that utilize
medical-grade plastics. We also manufacture specialty hose products such as air
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.

     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.


                                        7
<PAGE>
     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 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 of the Company's offices and facilities, all of which are
owned unless otherwise indicated.

<TABLE>
<CAPTION>
                                                                   APPROXIMATE
             LOCATION                      PRIMARY FUNCTION        SQUARE FEET
----------------------------------   ---------------------------   -----------
<S>                                  <C>                           <C>
Auburn, Maine(1)..................   Manufacturing                    24,000
Belfast, Northern Ireland.........   Manufacturing                    47,580
Blauvelt, New York(5).............   Manufacturing                    56,400
Burlington, New Jersey............   Manufacturing                   124,000
Bucyrus, Ohio.....................   Manufacturing                   587,649
Buenos Aires, Argentina(3)........   Manufacturing and warehouse      12,900
Cambridge, Ontario, Canada........   Manufacturing and warehouse      40,000
City of Industry, California(6)...   Manufacturing                   110,000
Clayton, North Carolina...........   Manufacturing                    99,665
Clinton, Illinois.................   Manufacturing                    69,000
Columbus, Ohio(2).................   Sales Offices                     3,761
Coppell, Texas(3).................   Executive Offices                 3,125
Dallas, Texas.....................   Manufacturing                   139,000
Decatur, Indiana..................   Manufacturing                   187,000
Decatur, Indiana(1)...............   Warehouse                         3,750
East Farmingdale, New York(3).....   Manufacturing                    56,556
East Farmingdale, New York (3)....   Warehouse                        11,000
Erembodegem (Aalst), Belgium......   Manufacturing                   125,667
Erembodegem (Aalst), Belgium(9)...   Warehouse                        64,070
Flemington, New Jersey............   Manufacturing                   145,000
Fullerton, California (8).........   Manufacturing and warehouse      60,250
Harrison, New Jersey(4)...........   Warehouse                       135,501
Lawrenceville, Georgia............   Manufacturing                   150,000
Lawrenceville, Georgia(3).........   Warehouse                        13,000
Livonia, Michigan(1)..............   Warehouse                         7,240
McKenzie, Tennessee...............   Manufacturing and warehouse      60,000
Memphis, Tennessee(5).............   Manufacturing and warehouse     149,800
Memphis, Tennessee(5).............   Warehouse                        50,000
Milan (Gaggiano), Italy(3)........   Warehouse                        12,920
Milan (Gaggiano), Italy...........   Manufacturing                    14,900
Milan (Gaggiano), Italy...........   Manufacturing                    25,800
Milan (Rosate), Italy(5)..........   Manufacturing                    24,000
Mississauga, Ontario, Canada(10)...  Manufacturing                   118,196
Mississauga, Ontario, Canada(4)...   Manufacturing                   100,000
Piscataway, New Jersey(4).........   Manufacturing                   155,000
Ridgefield, New Jersey............   Manufacturing                   330,000
Rockaway, New Jersey..............   Manufacturing                    90,550
Schaumburg, Illinois(11)..........   Manufacturing and warehouse      97,966
Schiller Park, Illinois...........   Manufacturing                    15,232
Shelby, Ohio(6)...................   Warehouse                       350,000
Singapore(1)......................   Sales Office                        550
Somerville, New Jersey............   Manufacturing                   172,000
Sparks, Nevada(7).................   Manufacturing                   448,000
Tonawanda, New York(7)............   Manufacturing                    32,000
Troy, Ohio(5).....................   Manufacturing and warehouse     200,000
Tustin, California(1).............   Sales Office                        414
Waco, Texas.......................   Manufacturing                   104,600
Wenatchee, Washington.............   Manufacturing                    97,000
Wenatchee, Washington(5)..........   Warehouse                        26,200
Wenatchee, Washington(1)..........   Warehouse                         8,000
</TABLE>


                                        8
<PAGE>
(Years relate to calendar years)

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

(2)  Lease expires in 2005.

(3)  Lease expires in 2006.

(4)  Lease expires in 2007.

(5)  Lease expires in 2008.

(6)  Lease expires in 2009.

(7)  Lease expires in 2012.

(8)  Lease expires in 2013.

(9)  Lease expires in 2014.

(10) Lease expires in 2015.

(11) Lease expires in 2030.

ITEM 3. LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS

     We are regularly involved in legal proceedings arising in the ordinary
course of business, none of which are currently expected to have a material
adverse effect on our businesses.

     Like similar companies, our facilities, operations and properties are
subject to foreign, federal, state, provincial and local laws and regulations
relating to, among other things, emissions to air, discharges to water, the
generation, handling, storage, transportation and disposal of hazardous and
non-hazardous materials and wastes and the health and safety of employees.

     Our management includes a Director of Environmental Affairs who is
responsible for compliance with all laws and regulations relating to the
environment, and health and safety. In connection with this duty, this director
performs internal auditing procedures, provides direction to local facility
managers in the compliance areas and retains outside environmental counsel and
outside environmental consulting firms to assist with environmental compliance.

     We are also 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
three 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 cannot assure you that any costs ultimately borne
by us in connection with any of these remediation projects would not be
material.

     We recently voluntarily self-disclosed to regulators certain
non-compliances with the air permit for our Troy, OH facility. While discussions
with the Ohio Regional Air Pollution Control Agency are ongoing, we expect that
we will be required to install pollution controls at this facility in 2006, the
cost of which we estimate should not exceed $1 million, based on current
information. We may also be required to pay a fine, but based on the preliminary
stage of discussions, 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. While we have not received any further communications from the EPA or
NEIC, this matter could lead to findings of noncompliance and result in
additional environmental costs and penalties, which could be substantial. In
2004, we also


                                        9
<PAGE>
received a similar request for information from the EPA concerning air emissions
at our Wenatchee, Washington plant which we do not expect to result in
significant costs or fines or penalties.

     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.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

     Not Applicable.

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.

As previously disclosed on Form 8-K as filed September 21, 2005, Tekni-Plex has
identified certain overstated inventory at its American Gasket & Rubber Division
which resulted in a $6.8 million overstatement of inventory. This inventory
overstatement has required a non-cash charge to results of operations as
follows:

<TABLE>
<S>            <C>
Fiscal 2005   $(2.8) million
Fiscal 2004   $(2.7) million
Fiscal 2003   $(0.5) million
Fiscal 2002   $(0.5) million
Fiscal 2001   $(0.3) million
</TABLE>

<TABLE>
<CAPTION>
                                                                           Year Ended
                                                    --------------------------------------------------------
                                                     June 29,   June 28,    June 27,    July 2,
                                                       2001       2002        2003        2004      July 1,
                                                     Restated   Restated    Restated    Restated      2005
                                                    ---------   --------   ---------   ---------   ---------
<S>                                                 <C>         <C>        <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................   $ 525,837   $577,749   $ 610,663   $ 635,642   $ 695,524
Cost of goods sold...............................     400,156    430,920     459,981     530,372     600,170
Gross profit.....................................     125,681    146,829     150,682     105,270      95,354
Integration Expense..............................          --         --      11,164       7,775      10,478
Selling, general and administrative expenses.....      60,999     69,444      61,600      69,159      60,690
Income from operations...........................      64,682     77,385      77,918      28,336      24,186
Interest expense, net(a).........................      76,569     70,934      71,266      84,451      89,899
Unrealized loss (gain) on derivative contracts...      13,891      7,830       1,997     (10,654)     (8,287)
Other expense (income)...........................         605         (6)       (531)        605      (2,194)
Pre-tax income (loss)............................     (26,383)    (1,373)      5,186     (46,066)    (55,232)
Income tax provision (benefit)...................      (7,069)     5,677       2,306      11,121      26,247
Net income (loss)................................     (19,314)    (7,050)      2,880     (57,187)    (81,479)
BALANCE SHEET DATA (AT YEAR END):
Working capital..................................     198,809   $218,136     248,372     225,857     201,074
Total Assets.....................................     621,174    691,180     783,471     743,663     691,695
Total debt (including current portion)...........     678,150    692,821     729,484     734,007     800,517
Stockholders' (deficit)..........................    (135,017)   (91,894)    (66,104)   (105,054)   (213,327)
OTHER FINANCIAL DATA:
Depreciation and amortization....................      37,670   $ 39,863      28,342      32,304      32,653
Capital expenditures.............................      17,116     24,653      32,232      30,128      18,246
Cash flows:
From (used in) operations........................      (3,266)     7,922      15,029      (7,364)    (24,461)
From (used in) investing.........................     (26,777)   (88,446)    (49,994)    (34,126)    (19,000)
From financing...................................      62,180     64,092      54,203      23,513      32,272
</TABLE>

----------
(a)  Interest expense included a $1,400 reduction in deferred financing costs
     and a $5,000 reduction in deferred financing costs in fiscal 2005 and
     fiscal 2004 respectively.

(b)  Income tax provision contains the write-off of deferred tax assets of
     $23.1 million and $7.0 million in 2005 and 2004, respectively.

                                       10
<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>
                                                     June 27     July 2,
                                                       2003       2004      July 1,
                                                     Restated   Restated      2005
                                                    ---------   --------   ---------
<S>                                                 <C>         <C>        <C>
Net sales........................................     100.0%     100.0%      100.0%
Cost of sales....................................      75.3       83.4        86.3
Gross profit.....................................      24.7       16.6        13.7
Integration Expense..............................       1.8        1.2         1.5
Selling, general and administrative expenses.....      10.1       10.9         8.7
Income from operations...........................      12.8        4.5         3.5
Interest expense.................................      11.7       13.3        12.9
Provision (Benefit) for income taxes.............       0.4        1.7         3.8
Net income (loss)................................       0.5       (9.0)      (11.7)
Depreciation and amortization....................       4.6        5.1         4.7
</TABLE>

YEAR ENDED JULY 1, 2005 COMPARED TO THE YEAR ENDED JULY 2, 2004

Net sales increased to $695.5 million in fiscal 2005 from $635.6 million in
fiscal 2004, representing a 9.4% gain. Net sales in our Packaging Segment grew
13.9% to $348.7 million in the most recent period from $306.1 million in the
comparable period of 2004 due to both higher selling prices and sales volumes.
Net sales in our Tubing Products Segment increased 1.3% to $213.1 million in
fiscal 2005 from $210.2 million in fiscal 2004 primarily due to a 3 to 6 percent
increase in our garden hose prices that generally went into effect in January
2005. Higher garden hose prices were partially offset by lower, weather-related,
garden hose sales volumes during fiscal 2005 compared to the previous year.
Other net sales grew 12.2% to $133.8 million in fiscal 2005 compared to $119.3
million in the previous year due to both higher selling prices and higher
volumes.

Our accruals for rebates, discounts and sales allowances decreased to $43.0
million or 6.2% of net sales in fiscal 2005 compared to $49.1 million or 7.7% of
net sales in fiscal 2004. 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
year.

Cost of goods sold increased to $600.2 million in fiscal 2005 from $530.4
million in fiscal 2004. Expressed as a percentage of net sales, cost of goods
sold increased to 86.3% in the current period compared to 83.4% in the prior
period, primarily due to higher raw


                                       11
<PAGE>
material costs. 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 and natural gas 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. Consequently,
in recent fiscal years, the increase in raw material costs at our garden hose
operations during a 12-month time period has reduced our profitability. In
fiscal 2005, the two primary raw materials for our garden hose business, PVC and
plasticizers, rose an average of 12% and 38% respectively. To mitigate the
impact of expected increases in the cost of our raw materials and in contrast to
previous years, we have not guaranteed garden hose pricing for the 2006 selling
season.

As previously discussed, our cost of goods sold reflects a $2.8 million
inventory write-down (0.5% of net sales) in fiscal 2005 and a $2.7 million
inventory write-down (0.4% of net sales) in fiscal 2004 to correct inventory
restatements at our American Gasket and Rubber Division.

Gross profit, as a result of the above, decreased to $95.4 million in the
current period compared to $105.3 million in the prior period. Expressed as a
percentage of net sales, gross profit declined to 13.7% in fiscal 2005 from
16.6% in comparable period of last year.

Our Packaging Segment gross profit increased to $83.1 million in fiscal 2005
from $80.1 million for fiscal 2004 as we were largely able to pass on higher raw
material costs to our Packaging Segment customers during the year. Expressed as
a percentage of net sales, Packaging Segment gross profit decreased to 23.8% in
the current period from 26.2% in the previous period.

Our Tubing Products Segment gross profit decreased to $7.1 million in fiscal
2005 from $20.6 million in fiscal 2004. Expressed as a percentage of net sales,
our Tubing Products Segment gross profit decreased to 3.3% in the current period
from 9.8% in the previous period as significantly higher raw material cost,
particularly for plasticizers, more than offset the 3 to 6 percent price
increases that went into effect in January at our garden hose unit.

Other gross profit increased to $5.2 million in fiscal 2005 from $4.5 million in
fiscal 2004. Expressed as a percentage of net sales, other gross profit remained
flat at 3.8%.

Selling, general and administrative expenses decreased to $60.7 million in the
most recent fiscal year from $69.2 million last year, primarily due to the
inclusion of a $10 million reduction in goodwill in fiscal 2004. Measured as a
percentage of net sales, selling, general and administrative expenses decreased
to 8.7% in the current period from 10.9% in the previous period.

Integration expenses increased to $10.5 million or 1.5% of net sales in fiscal
2005 from $7.8 million or 1.2% of net sales in fiscal 2004. The increase was
largely related to the closing of our Rockaway, New Jersey facility and
consolidating its operations at our Clinton, Illinois and Clayton, North
Carolina 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:

<TABLE>
<CAPTION>
                    2005   2004
                    ----   ----
<S>                 <C>    <C>
Elm Packaging
   Material        $ 3.8   $2.7
   Labor             1.5    1.6
   Overhead          2.5    2.6
Rockaway closing
   Material          1.5    0.1
   Labor             0.1    0.1
   Overhead          0.9    0.3
   SG&A              0.2    0.2
                    ----    ---
Total              $10.5   $7.8
                    ====    ===
</TABLE>

We expect the closing of our Rockaway facility to result in approximately $1
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 $24.2 million in fiscal
2005 from $28.3 million in fiscal 2004. Expressed as a percentage of net sales,
operating profit decreased to 3.5% in the most recent period from 4.5% in the
comparable period of last year.

Our Packaging Segment operating profit decreased to $49.0 million (14.0% of net
sales) in the current period compared to $51.3


                                       12
<PAGE>
million (16.8% of net sales) in the previous period. Our Tubing Products Segment
reported an operating loss of ($6.5) million or (3.0%) of net sales in the
current period compared to profit of $6.5 million or 3.1% of net sales in the
previous year. Other operating profit improved to a ($1.2) million loss or
(0.9%) of net sales in the current period compared to a ($11.8) million loss or
(9.9%) of net sales in the previous period.

Interest expense increased to $89.9 million (12.9% of net sales) in fiscal 2005
from $84.5 million (13.3% of net sales) in fiscal 2004 due to an increase of
$11.7 of debt as well as higher average interest rates. Interest expense also
included a reduction in deferred financing costs of $1.4 million in fiscal 2005
and $5.0 million in fiscal 2004 resulting from repaying certain outstanding debt
obligations through the issuance of new senior secured notes (see Note 7 of the
audited consolidated financial statements).

Unrealized gain on derivative transactions was $8.3 million or 1.2% of net sales
in fiscal 2005 compared to $10.7 or 1.7% of net sales in the previous year due
to the various movements of the interest rates embedded in our derivative
contracts.

Income (loss) before income taxes, as a result, was a loss of ($55.2) million or
(7.9%) of net sales for fiscal 2005 compared to a loss of (46.1) million or
(7.2%) of net sales for fiscal 2004.

Income tax expense was $26.2 million for fiscal 2005 compared to $11.1 million
for fiscal 2004 as we reserved $23.1 million against our deferred tax asset in
fiscal 2005 and $15.0 million in fiscal 2004. Given our continued pre-tax losses
in recent years, we decided to reserve fully against our deferred tax assets at
the end of fiscal 2005. (See Note 8 of the audited consolidated financial
statements.)

Net income (loss), as a result, was a loss of ($81.5) million for fiscal 2005 or
(11.7%) of net sales compared with a loss of ($57.2) million for fiscal 2004 or
(9.0%) of net sales.

YEAR ENDED JULY 2, 2004 COMPARED TO THE YEAR ENDED JUNE 27, 2003

     Net sales, increased to $635.6 million for the year ended July 2, 2004 from
$610.7 million for the year ended June 27, 2003, representing an increase of
$25.0 million or 4.1%. Our Packaging Segment reported a 4.9% increase in net
sales to $306.1 million in the fiscal year ended July 2, 2004 compared to $291.8
million in the fiscal year ended June 27, 2003. Our Tubing Products Segment's
net sales increased 0.3%, to $210.2 million from $209.7 million last year. Net
Sales for our other products increased to $119.3 million in the current year
from $109.2 million in the previous year, which represents a 9.2% increase.

At the end of fiscal 2004, we increased by $8.0 million our accruals for
rebates, discounts and sales allowances at our garden hose operations in order
to properly reflect changes in our underlying sales programs. These accruals
were $49.1 million or 7.7% of net sales in fiscal 2004 compared to $39.5 million
or 6.5% of net sales in fiscal 2003.

     Cost of goods sold, increased to $530.4 million for the year ended July 2,
2004 from $460 million for the year ended June 27, 2003. Expressed as a
percentage of net sales, cost of goods sold increased to 83.4% of net sales for
the year ended July 2, 2004 compared to 75.3% for the year ended June 27, 2003,
primarily due to significantly higher raw material costs. Generally higher oil
and natural gas prices, coupled with strong global demand for commodity
chemicals and tight supplies, have resulted in generally higher costs for all of
our key raw material costs. In most of our business lines we have been able to
pass along higher material costs to our customers in a relatively short time
period, with one notable exception, garden hose, where we have traditionally
agreed to hold prices constant for a 12 month period. In fiscal 2004, the two
main raw materials for our garden hose business, PVC and plasticizers rose an
average of 28% and 31% respectively. Due to our existing agreements with our
garden hose customers, we were unable to pass along these increased costs during
the fiscal year.

     As previously discussed, our cost of goods sold reflects a $2.7 million
inventory write-down (0.4% of net sales) in fiscal 2004 and a $0.5 million
inventory write-down (0.1% of net sales) in fiscal 2003 to correct inventory
restatements at our American Gasket and Rubber Division.

     Gross profit, as a result, decreased to $105.3 million for the year ended
July 2, 2004 from $150.7 million for the year ended June 27, 2003. The ratio of
gross profit to net sales decreased to 16.6% for the year ended July 2, 2004
from 24.7% for the year ended June 27, 2003. Our Packaging Segment gross profit
decreased by $7.6 million to $80.1 million from $87.1 million in the fiscal year
ended July 2, 2004 primarily due to a lower margin product mix for our foam
products as well as significantly higher raw material costs. Measured as a
percentage of net sales our Packaging Segment gross profit decreased to 26.2%
for the year ended July 2, 2004 from 30.1% for the year ended June 27, 2003. Our
Tubing Products Segment gross profit decreased to $20.6 million for the year
ended July 2, 2004 from $52.9 million in the fiscal year ended June 27, 2003.
Measured as a percentage of Net Sales our Tubing Products Segment Gross Profit
decreased to 9.8% for the year ended July 2, 2004 from 25.2% for the year ended
June 27, 2003. This decline was largely due to higher raw material cost at our
garden hose unit which, as discussed above, could not be passed through to our
customers during the fiscal year. In addition, we wrote-down our inventory by
$4.6 million to reflect market values for some garden hoses that were less than
our cost and, as previously discussed, we adjusted our estimates of accruals for
rebates, discounts and sales


                                       13
<PAGE>
allowances resulting in an $8.0 million increase in our reserves. Gross profit
for our other products declined to $4.5 million in the current fiscal year from
$10.0 million in the previous year. Measured as a percentage of net sales, other
gross profit decreased to 3.8% in the current fiscal year from 9.2% in the
previous year primarily due to our inability to fully pass through significantly
higher raw material costs.

     Selling, general and administrative expenses increased to $69.2 million for
the year ended July 2, 2004 from $61.6 million for the year ended June 27, 2003
primarily due to a charge of $10 million from a write-off in goodwill associated
with our specialty resin operations. The resultant ratio to net sales increased
to 10.9% for the year ended July 2, 2004 from 10.1% for the year ended June 27,
2003.

Integration expense decreased to $7.8 million or 1.2% of net sales in fiscal
2004 from $11.2 million or 1.8% of net sales for the comparable period of fiscal
2003. These costs, which are typically cash expenses, relate to reconfiguring
and realignment of acquired facilities to conform to the Company's current
production and product standards and are composed of the following.

<TABLE>
<CAPTION>
                2004   2003
                ----   ----
<S>             <C>    <C>
Elm Packaging
   Material     $2.7  $ 2.2
   Labor         1.6    0.2
   Overhead      2.6    2.8
Swan Hose
   Material       --    1.0
   Labor          --    0.7
   Overhead       --    4.2
Rockaway closing
   Material      0.1     --
   Labor         0.1     --
   Overhead      0.3     --
   SG&A          0.2     --
                ----  -----
Total           $7.8  $11.2
                ====  =====
</TABLE>

We expect the closing of our Rockaway facility to result in approximately $1
million of annual cost savings. We also expect the reconfiguring and realignment
of our Swan and Elm facilities to result in significant cost reductions as well
as enable us to produce higher value added products at our Elm locations;
however, we cannot currently quantify these benefits.

     Operating profit, as a result of the above, decreased to $28.3 million in
the current fiscal year compared to $77.9 million in the previous year. Measured
as a percentage of net sales, operating profit decreased to 4.5% in fiscal 2004
from 12.8% in fiscal 2003. Our Packaging Segment operating profit decreased to
$51.3 million from $59.7 million last year. Measured as a percentage of net
sales, Packaging Segment operating profit decreased to 16.8% in the year ended
July 2, 2004 compared to 20.4% in the previous year. Our Tubing Products Segment
operating profit decreased to $6.5 million from $36.4 million in the year ended
July 2, 2004. Measured as a percentage of net sales, Tubing Products Segment
operating profit decreased to 3.1% from 17.3% last year. Operating profit for
our other products declined to a ($11.8) million loss in the current year from a
$3.5 million gain in the previous year largely due to a $10.0 million write-down
of goodwill associated with our Specialty Resin operations. Measured as a
percentage of net sales, other operating profit declined to a (9.9%) loss in the
current fiscal year from a 3.2% gain in the previous fiscal year.

     Interest expense, increased to $84.5 million for the fiscal year ending
July 2, 2004 from $71.3 million for the fiscal year ending June 27, 2003
primarily due to higher interest rates as well as the write-off of $5.0 million
of deferred financing costs resulting from the early retirement of some of our
term loans. The unrealized (gain) loss on derivative obligations reflected a
($10.7) million gain in the current fiscal year compared to a $2.0 million loss
in the previous fiscal year.

The provision for income taxes increased to $11.1 million in the current fiscal
year from $2.3 million in the previous year primarily due to $7.0 million
reduction in our deferred tax asset. In addition, the company increased its
reserve on deferred taxes by approximately 15.0 million to reserve for deferred
taxes generated by 4th Quarter losses. (See Note 8 of the Audited Consolidated
Financial Statements.)

     Net income (loss), as a result, was a loss of ($57.2) million or (9.0%) of
net sales for the fiscal year ending July 2, 2004 compared to income of $2.9
million or 0.5% of net sales for the year ending June 27, 2003.

LIQUIDITY AND CAPITAL RESOURCES


                                       14
<PAGE>
     For the year ended July 1, 2005, net cash used in operating activities was
$24.5 million compared to $7.4 million of cash used in operating activities in
the prior year. The $17.1 million increase was due primarily to lower earnings
caused by rapidly rising raw material costs that we were unable to fully pass
along to our customers, particularly in our garden hose operations where
historically we have sold our products under agreements which held prices
constant for a 12 month period. 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 will continue to rise rapidly in
fiscal 2006, we also believe the prices we have secured to date for our garden
hose products will help restore our 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.

     In addition to lower earnings, a reduction in accounts payable and other
liabilities contributed to the increase in cash used in operations . These uses
of cash were partially offset by lower inventory levels across all of our
businesses. Other various year-over-year changes in operating assets, accrued
expenses, and liabilities are generally due to offsetting timing differences

     Significant increases in raw material costs, combined with soft demand in
our garden hose business brought about by unfavorable weather conditions, have
negatively impacted our financial performance in the last two fiscal years. As a
result, we were not in compliance with the minimum consolidated EBITDA and
minimum fixed charge coverage ratio covenants contained in our credit agreement
for the fiscal quarters ended December 31, 2004 and April 1, 2005. In exchange
for a waiver fee equaling 0.25% multiplied by the sum of the outstanding
loans thereunder, the lenders under our credit agreement waived compliance with
these covenants through June 10, 2005, by which time we were required to deliver
to the lenders thereunder evidence that we have raised $30 million of equity
financing. The waiver became permanent on June 10, 2005 when we issued $31.8
million of preferred stock. In addition, our liquidity position had been
constrained, causing us to draw down substantially all of our revolving credit
capacity. In response, we have entered into a series of transactions intended to
improve our financial flexibility and address our covenant and liquidity
constraints.

     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 (See Note 7(e) of the
audited Consolidated Financial Statements.)

     In June, 2005 we issued $150 million senior secured notes due 2012 and
arranged a new $65 million asset backed credit facility. The proceeds from these
offerings, combined with the new equity described above, were used to repay and
cancel our previous credit agreement. As of July 1, 2005, we had an outstanding
balance of $12.0 million under our new $65.0 million asset backed credit
facility. As of November 1, 2005 our outstanding revolver balance has dropped to
zero.

Working capital at July 1, 2005 was $200.8 million compared to $225.9 million at
July 2, 2004. The decrease was primarily caused by our operating loss offset by
proceeds received from our issuance of new debt.

     Our principal uses of cash will be debt service, capital expenditures and
working capital requirements. Our capital expenditures for the years ended July
1, 2005, July 2, 2004 and June 27, 2003 were $18.2 million and $29.5 million and
$32.2 million, respectively. Management believes that we will be able to pass
along expected higher raw material costs to our garden hose customers during
fiscal 2006 and consequently, cash generated from operations plus funds
available in the Company's new asset backed facility will be sufficient to meet
its needs and to provide it with the flexibility to make capital expenditures
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 July 1,
2005 the notional amount of the swaps is $290.0 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.

     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 $8.3 million
and $10.7 million in fiscal years 2005 and 2004, respectively.


                                       15
<PAGE>
     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.

     The late filing of our 10-K has caused us to be in violation of certain
covenants contained in our debt agreements. These violations, which have either
been waived or the applicable grace periods have not yet expired, have been
remedied by virtue of this filing.

     At July 1, 2005, the Company's contractual obligations are as follows:

<TABLE>
<CAPTION>                     PENSION
                             AND POST
                            RETIREMENT   INTEREST   LONG-TERM   PREFERRED (2)   PREFERRED STOCK
PAYMENTS DUE BY PERIOD      HEALTHCARE   EXPENSE       DEBT       DIVIDENDS       ACCRETION (3)     LEASES      TOTAL
-------------------------   ----------   --------   ---------   -------------   ----------------   -------     -------
<S>                         <C>          <C>        <C>            <C>             <C>               <C>        <C>
Less than 1 year.........      $ 1.4    $ 83.1       $  1.1         $0.0            $ 12.7          $ 8.3       $106.6
Year 2...................        1.5      83.1          0.2          0.5              12.7            7.7        105.7
Year 3...................        1.6      83.1          0.2          6.6              12.7            6.3        110.5
Year 4...................        2.0      79.1         12.3          6.6              12.7            4.7        117.4
Year 5...................        2.2      78.4        313.6          6.6              12.7            3.8        417.3
After 5 years............       11.1      92.8        473.0 (4)     24.1              46.4           23.4        670.8
</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.

(4)   Includes initial preferred stock value $54.8 million


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 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 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 related to acquired intangibles. 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. As a result of impairment
tests being performed at the end of 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 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


                                       16
<PAGE>
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 2005 we increased our valuation
allowance that reduced our deferred tax asset by approximately $21.3 million.

     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.

NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 153, "Exchanges of
Nonmonetary Assets," which eliminates the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. SFAS No. 153 will
become effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. The Company does not believe the adoption of SFAS
No. 153 will have a material impact on the Company's financial statements.

In December 2004, the FASB issued SFAS No. 123 (R), "Share-Based Payment," which
established standards for transactions in which an entity exchanges its equity
instruments for goods and services. This standard requires a public entity to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award. This
eliminates the exception to account for such awards using the intrinsic method
previously allowed under APB Opinion No. 25. SFAS No 123 (R) will be effective
for fiscal years beginning after June 15, 2005. The statement does not require
restatement of previously issued statements and can be applied on a prospective
basis. The Company is in the process of evaluating the impact the adoption of
this statement will have on its financial statements and believes the effect
should be minimal.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of ARB No. 43, Chapter 4." This Statement amends the guidance in ARB No. 43,
Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts
of idle facility expense, freight, handling costs and wasted material
(spoilage), requiring that those items be recognized as current-period charges.
In addition, this Statement requires that allocation of fixed production
overheads to the costs of conversion be based on the normal capacity of the
production facilities. The provisions of this statement are effective for fiscal
years beginning after June 15, 2005, with early application permitted. The
Company is in the process of evaluating the impact the adoption of this
statement will have on its financial statements.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20 and SFAS No. 3." This Statement
provides guidance on the accounting for and reporting of accounting changes and
error corrections. It establishes, unless impracticable, retrospective
application as the required method for reporting a change in accounting
principle, in the absence of explicit transition requirements specific to the
newly adopted accounting principle. This Statement also provides guidance for
determining whether retrospective application of a change in accounting
principle is impracticable and for reporting a change when retrospective
application is impracticable. The correction of an error in previously issued
financial statements is not an accounting change. However, the reporting of an
error correction involves adjustments to previously issued financial statements
similar to those generally applicable to reporting an accounting change
retrospectively. Therefore, the reporting of a correction of an error by
restating previously issued financial statements is also addressed by this
Statement. This Statement is effective for accounting changes made in fiscal
years beginning after December 15, 2005. The Company does not believe the
adoption of SFAS No. 154 will have a material impact on the Company's financial
statements or results of operations.

In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47, "Accounting
for Conditional Asset Retirement Obligations." FIN No. 47 provides guidance
relating to the identification of and financial reporting for legal obligations
to perform an asset retirement activity. The Interpretation requires recognition
of a liability for the fair value of a conditional asset retirement obligation
when incurred if the liability's fair value can be reasonably estimated. FIN No.
47 also defines when an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. The provision is
effective no later than


                                       17
<PAGE>
the end of fiscal years ending after December 15, 2005. The Company does not
believe the adoption of FIN No. 47 will have a material impact on the Company's
financial statements or results of operations.

INFLATION

     During fiscal 2005, we 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
July 1, 2005 and July 2, 2004 the principal amount of the Company's aggregate
outstanding variable rate indebtedness was $12.0 million and $153.0 million
respectively. A hypothetical 1% adverse change in interest rates would have had
an annualized unfavorable impact of approximately $0.1 million and $1.5 million
respectively, on the Company's earnings and cash flows based upon these year-end
debt levels..

ITEM 8. FINANCIAL STATEMENTS

     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.

As previously disclosed on Form 8-K, in fiscal 2005, management identified
certain overstated inventory valuations at its American Gasket & Rubber Division
("AGR"), totaling approximately $6.8 million, resulting in a $2.8 million
reduction in fiscal 2005 operating profit, a $2.7 million reduction in fiscal
2004 operating profit and a restatement of Tekni-Plex's financial statements for
those periods. Management promptly reported the inventory overstatement at AGR
to the Board, the Audit Committee and BDO Seidman, LLP, our independent
registered public accounting firm. The Audit Committee subsequently engaged
counsel to supervise an internal investigation of the circumstances leading to
the inventory overstatement. Counsel to the Audit Committee, in turn, engaged a
forensic accounting firm to assist it in the investigation. The investigation
determined that prior accounting management at AGR, from at least 2001 through
fourth-quarter 2005, made unsupported adjustments to cost of goods sold that had
the effect both of improving the appearance within Tekni-Plex of the financial
performance of AGR and increasing the value of AGR's ending inventory.
Tekni-Plex has terminated the employment of the accounting manager who made
these adjustments and re-assigned his direct supervisor to functions that do not
include accounting supervision. As part of the internal investigation, the
investigative team made certain remedial recommendations to the Audit Committee,
including that (1) a divisional controller or a manager delegated by a
divisional controller be assigned responsibility, on a regular basis, to conduct
a substantive review of AGR's financial statements, and that a similar structure
of review be instituted with respect to other decentralized businesses of
Tekni-Plex; (2) reporting by AGR accounting management be direct to Tekni-Plex
corporate accounting; (3) notification be distributed to all Tekni-Plex
accounting employees on a periodic basis instructing them that any difficulties
in accounting or the use of the company's accounting systems be reported timely
to Tekni-Plex corporate accounting; (4) in annual performance reviews of
accounting and bookkeeping personnel, all reviewing personnel be required 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)
Tekni-Plex apply additional resources to ensure that all of its site controllers
and staff are trained properly in the use of company accounting systems, (6) in
addition to establishing a hotline through which employees may report problems,
Tekni-Plex publish to its employees a statement of ethics and periodically
circulate written reminders to all employees that the company expects its
employees (a) to perform all functions consistent with established accounting
and legal standards and high ethics, and (b) to report any accounting
difficulties to Tekni-Plex's corporate office. Lastly, the investigative team
recommended that full consideration be given to establishing, or out-sourcing,
an adequately staffed internal audit function. In fiscal 2006, the Audit
Committee adopted these recommendations. In response to the findings above,
Tekni-Plex has:

(1)  terminated the employment of an individual directly responsible for the
     inventory restatements

(2)  improved training for the accounting staff of its American Gasker & Rubber
     Division;

(3)  improved its internal financial reporting systems and related controls
     across all of its divisions to, among other things, increase both the
     frequency by which inventory is monitored as well as increasing the number
     of managers responsible for monitoring inventory; and

(4)  increased the frequency and depth by which the inventory and other
     financial transactions of each of divisions are reviewed by our independent
     registered public accountants during the course of our annual audit.

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 July 1, 2005, 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


                                       18
<PAGE>
considered to be "significant deficiencies", as defined under standards
established by the Public Company Accounting Oversight Board:

     -    Lack of quantity of staff which led to issues related to timeliness of
          financial reporting.

     -    Lack of quantity of staff which led to issues related to the timely
          review of the financial statements of AGR and the calculation of
          inventory. As a result, accounting errors existed in the financial
          statements of this subsidiary resulted in a restatement of inventory
          and cost of sales for certain accounting periods as described within
          this filing.

Significant deficiencies are matters coming to the attention of the independent
auditors that in their judgment, relate to material weaknesses in the design or
operation of internal controls that could adversely affect the Company's ability
to record, process, summarize and report financial data consistent with the
assertions of management in the financial statements. In addition, BDO has
advised the Company that they consider these matters, which are listed above, to
be "material weaknesses" that, by themselves or in a combination, may increase
the possibility that a material misstatement in our financial statements might
not be prevented or detected by our employees in the normal course of performing
their assigned functions.

Prior to the identification of the accounting overstatement at our American
Gasket & Rubber Division, and in response to material weaknesses identified by
BDO last year, Tekni-Plex has committed to increase and reorganize its finance
staff with a strong emphasis on internal audit. This process is ongoing.

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 October 15, 2005 as well as of
July 1, 2005. Based on the foregoing, the Company's Chief Executive Officer and
Chief Financial Officer determined that deficiencies in our internal control
over financial reporting have caused the Company's disclosure controls and
procedures to not have been effective as of July 1, 2005 and they are not
effective today. However, the Chief Executive Officer and Chief Financial
Officer noted that the Company is actively seeking to remedy the deficiencies
identified herein including hiring additional staff to assure the accuracy and
timeliness of financial reporting.

The Company's Chief Executive Officer and Chief Financial Officer did not note
any other material weakness or significant deficiencies in the Company's
disclosure controls and procedures during their evaluation. The Company
continues to improve and refine its internal controls. This process is ongoing.

Except as disclosed above, in the fourth quarter of fiscal 2005 and thereafter,
there were no significant changes in the Company's internal control over
financial reporting or in other factors that materially affected, or are
reasonably likely to materially affect, the Company's internal controls over
financial reporting.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     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. Each executive officer
holds his office until a successor is chosen and qualified or until his earlier
resignation or removal.

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
certificate of incorporation.

<TABLE>
<CAPTION>
                     NAME                        AGE                   POSITION
----------------------------------------------   ---   -----------------------------------------
<S>                                              <C>   <C>
Dr. F. Patrick Smith..........................    57   Chairman of the Board, Chief Executive
                                                       Officer and President
James E. Condon...............................    44   Chief Financial Officer, Vice President,
                                                       Secretary and Director
Edward Goldberg...............................    56   Senior Vice President and Director
John S. Geer..................................    60   Director
J. Andrew McWethy.............................    64   Director
Michael F. Cronin.............................    51   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. He served as Senior
Chemical Engineer to Texas Eastman Company, a wholly owned chemical and plastics
subsidiary of Eastman Kodak, where he developed new grades of


                                       19
<PAGE>
polyolefin resins and hot melt and pressure sensitive adhesives. In 1979, he
became Technical Manager of the Petrochemicals and Plastics Division of Cities
Service Company, and a Member of the Business Steering Committee of that
division. From 1982 to 1984, Dr. Smith was Vice President of R&D and Marketing
for Guardian Packaging Corporation, a diversified flexible packaging company.
Thereafter, he joined Lily-Tulip, Inc. and managed their research and marketing
functions before becoming Senior Vice President of Manufacturing and Technology.
Following the acquisition of Lily-Tulip by Fort Howard Corporation in 1986, he
became the Corporate Vice President of Fort Howard, responsible for the
manufacturing and technical functions of the combined Sweetheart Products and
Lily-Tulip operations. From 1987 to 1990, Dr. Smith was Chairman and Chief
Executive Officer of WFP Corporation. 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 a Vice President, Secretary and Chief Financial Officer
of Tekni-Plex, Inc. He joined Tekni-Plex in 2001 and became a Director in 2004.
Prior to joining Tekni-Plex Mr. Condon was a Vice President at J.P. Morgan
Securities Inc.

     Edward Goldberg is a Senior Vice President of the Company, and manages five
of its divisions. He has been with the company since June, 2001, and as of
March, 2005 was appointed to serve on the Board of Directors. He received his BS
and MS degrees in Chemical Engineering from Rensselaer Polytechnic Institute in
1971. He worked for P&G and The Scott Paper Company for a total of 25 years, in
diverse roles including Vice President of: Supply Systems; Business Development;
and Strategic Planning. Prior to leaving Scott Paper he was the company's U.S.
V.P. - Consumer Supply System. He subsequently worked for the Nice Pak and the
Lander corporations in senior management positions. His most specific field of
emphasis has been General Management for turn around situations.

     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.
He has invested in emerging growth companies and various industrial and service
businesses since 1978. Since June 1991, Mr. Cronin has been a general partner of
Weston Presidio Capital.

COMPENSATION OF DIRECTORS

     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 outside director is paid an annual fee of $50,000.

COMPENSATION OF EXECUTIVE OFFICERS

     The following table sets forth the remuneration paid by Tekni-Plex to the
Chief Executive Officer and other highly compensated executive officers of
Tekni-Plex.

     SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                      FISCAL                             STOCK      OTHER ANNUAL
             NAME & PRINCIPAL POSITION                 YEAR       SALARY       BONUS    OPTIONS   COMPENSATION(a)
---------------------------------------------------   ------   -----------   --------   -------   -----------------
<S>                                                    <C>     <C>           <C>        <C>       <C>
Dr. F. Patrick Smith...............................    2005    $7,040,000(b) $     --      --         $51,822
   Chairman, Chief Executive Officer and President     2004     6,655,000          --      --          54,941
                                                       2003     6,050,000          --      --          46,384
Mr. James E. Condon................................    2005    $  558,000    $     --      --         $ 7,200
   Vice President and Chief Financial Officer          2004       540,000          --      --           7,200
                                                       2003       500,000     175,000      --           7,200
Mr. Edward Goldberg                                    2005       260,000          --      --           6,900
   Senior Vice President & Director                    2004       215,000      27,313      --           6,900
                                                       2003       191,000      50,000      --           6,900
</TABLE>

(a)  Includes amounts reimbursed during the fiscal year for payment of auto
     expense, membership fees, etc.

(b)  In fiscal 2005, Dr. Smith's employment agreement was amended to provide a
     $4,000,000 annual salary for two years.

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR


                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                                                   POTENTIAL REALIZABLE
                                                                                     VALUE AT ASSUMED
                                             PERCENT OF                               ANNUAL RATES OF
                               NUMBER OF        TOTAL      EXERCISE                     STOCK PRICE
                              SECURITIES    OPTIONS/SARS    OR BASE                  APPRECIATION FOR
                              UNDERLYING     GRANTED TO      PRICE                      OPTION TERM
                             OPTIONS/SARS   EMPLOYEES IN      PER     EXPIRATION   --------------------
           NAME                 GRANTED      FISCAL YEAR     SHARE       DATE            5%    10%
--------------------------   ------------   ------------   --------   ----------        ---   ----
<S>                          <C>            <C>            <C>        <C>               <C>   <C>
Dr. F. Patrick Smith......        --             --%          --          --             --    --
Mr. James E. Condon.......        --             --%          --          --             --    --
Mr. Edward Goldberg.......        --             --%          --          --             --    --
</TABLE>

               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                          AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                                  NUMBER OF
                                                                  SECURITIES     VALUE ($000)
                                                                  UNDERLYING    OF UNEXERCISED
                                                                 UNEXERCISED    IN-THE-MONEY
                                                                 OPTIONS/SARS    OPTIONS/SARS
                                                                  AT FY-END       AT FY-END
                             SHARES ACQUIRED                     EXERCISABLE/    EXERCISABLE/
           NAME                ON EXERCISE     VALUE REALIZED   UNEXERCISABLE    UNEXERCISABLE
--------------------------   ---------------   --------------   -------------   --------------
<S>                          <C>               <C>              <C>             <C>
Dr. F. Patrick Smith......           --              --               --             --/--
Mr. James E. Condon.......           --              --               --             --/--
Mr. Edward Goldberg.......           --              --               --             --/--
</TABLE>

EMPLOYMENT AGREEMENTS

     In May 2005, Dr. Smith entered into amended and restated employment
agreement. The two year agreement provides for a $4,000,000 annual salary.

     The employment agreement provides that the executive may be terminated for
cause or upon death or disability. Dr. Smith is entitled to severance benefits
if he is terminated. The employment agreement also contain certain non-compete
provisions.

COMPENSATION COMMITTEE

     The board of directors maintains a two-member compensation committee
comprised of Dr. Smith, and Mr. Cronin. 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 our stock incentive plan. No
member of the compensation committee is allowed to vote on issues pertaining to
that member's compensation (including option grants). The board may also
delegate additional duties to the compensation committee in the future.

     Changes in Mr. Condon's compensation are subject to approval by Mr. Cronin.
Compensation levels and bonus awards for all other employees are controlled by
Dr. Smith.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Tekni-Plex Partners LLC holds approximately 96.3% and MST/TP Partners LLC
holds approximately 3.6% of Tekni-Plex's outstanding common stock.

     Tekni-Plex Management LLC, controlled by Dr. Smith, is the sole managing
member of both Tekni-Plex Partners LLC and MST/TP Partners LLC.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CONSULTING ARRANGEMENTS


                                       21
<PAGE>
     Our policy is not to enter into any significant transaction with one of our
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.

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 July 1, 2005 and July
2, 2004 totaled approximately $882,000 and $200,000 and $780,000 and $65,000,
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 July 1, 2005 and July 2, 2004
totaled approximately $477,000 and $411,000, respectively.

                                     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.



                                       22
<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: November 2, 2005

     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: November 2, 2005

     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 November 2, 2005.

<TABLE>
<CAPTION>
         SIGNATURE                                 TITLE
---------------------------   --------------------------------------------------
<S>                           <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           Senior Vice President and 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>


                                       23
<PAGE>


                                    Exhibit Index


Exhibit No.                          Description
-----------   -----------------------------------------------------------------
3.1           Amended and Restated Certificate of Incorporation of Tekni-Plex,
              Inc.******

3.2           Amended and Restated By-laws of Tekni-Plex, Inc.*

3.3           Certificate of Incorporation of PureTec Corporation.*

3.4           By-laws of PureTec Corporation*

3.5           Certificate of Incorporation of Tri-Seal Holdings, Inc.*

3.6           By-laws of Tri-Seal Holding, Inc.*

3.7           Certificate of Incorporation of Natvar Holdings, Inc.*

3.8           By-laws of Natvar Holdings.*

3.9           Certificate of Incorporation of Plastic Specialties and
              Technologies, Inc.*

3.10          By-laws of Plastic Specialties and Technologies, Inc.*

3.11          Certificate of Incorporation of Plastic Specialties and
              Technologies Investments, Inc.*

3.12          By-laws of Plastic Specialties and Technologies Investments, Inc.*

3.13          Certificate of Incorporation of Burlington Resins, Inc.*

3.14          By-laws of Burlington Resins, Inc.*

3.15          Certificate of Incorporation of TPI Acquisition Subsidiary, Inc.**

3.16          By-laws of TPI Acquisition Subsidiary, Inc.**

3.17          Certificate of Incorporation of Distributors Recycling, Inc.*

3.18          By-laws of Distributors Recycling, Inc.*

3.19          Certificate of Incorporation of TP-Elm Acquisition Subsidiary,
              Inc.**

3.20          By-laws of TP-Elm Acquisition Subsidiary, Inc.**

4.1           Indenture, dated as of June 21, 2000 among Tekni-Plex, Inc., the
              Guarantors listed therein and HSBC Bank USA, as Trustee.*

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**

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**

<PAGE>
Exhibit No.                          Description
-----------   -----------------------------------------------------------------
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*****

4.5           Purchase Agreement, dated as of November 12, 2003 among
              Tekni-Plex, Inc., the Guarantors listed therein, and Lehman
              Brothers Inc. and Citigroup Global Markets Inc.***

4.6           Registration Right Agreement, dated as of November 21, 2003 among
              Tekni-Plex, Inc., the Guarantors listed therein, and Lehman
              Brothers Inc. and Citigroup Global Markets Inc.***

4.7           Indenture, dated as of November 21, 2003 among Tekni-Plex, Inc.,
              the Guarantors listed therein and HSBC Bank USA, as Trustee.***

4.8           Purchase Agreement, dated as of June 7, 2005 among Tekni-Plex,
              Inc., the Guarantors listed therein, and Citigroup Global Markets
              Inc. and Lehman Brothers Inc.*******

4.9           Registration Right Agreement, dated as of June 10, 2005 among
              Tekni-Plex, Inc., the Guarantors listed therein, and Citigroup
              Global Markets Inc. and Lehman Brothers Inc.*******

4.10          Indenture, dated as of June 10, 2005 among Tekni-Plex, Inc., the
              guarantors party thereto and HSBC Bank USA, National Association,
              as Trustee*****

10.1          Credit Agreement, dated as of June 21, 2000, among Tekni-Plex,
              Inc., the Guarantors party thereto, the Lenders party thereto, the
              LC Issuing Banks referred to therein and Morgan Guaranty Trust
              Company of New York.*

10.1.1        First Amendment to the Credit Agreement dated September 26,
              2001***

10.1.2        Second Amendment to the Credit Agreement dated November 1, 2001***

10.1.3        Third Amendment to the Credit Agreement dated September 22,
              2003***

10.2          Second Amended and Restated Employment Agreement dated May 13,
              2005****

10.3          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.*****

31.1          Certification of Chief Executive Officer, as required by Section
              302 of the Sarbanes-Oxley Act of 2002********

31.2          Certification of Chief Financial Officer, as required by Section
              302 of the Sarbanes-Oxley Act of 2002********

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********

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

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

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

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

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

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

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

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

******** Filed herewith.



<PAGE>
                                TEKNI-PLEX, INC.

                                               CONSOLIDATED FINANCIAL STATEMENTS

                           YEARS ENDED JULY 1, 2005, JULY 2, 2004, JUNE 27, 2003


                                       29
<PAGE>
                                                                TEKNI-PLEX, INC.

                                                                        CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED FINANCIAL STATEMENTS:
   Balance sheets
   Statements of operations
   Statements of stockholders' deficit
   Statements of cash flows
   Notes to financial statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SUPPLEMENTAL
   SCHEDULE

SUPPLEMENTAL SCHEDULE:
   Valuation and qualifying accounts and reserves


                                       30
<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 July 1, 2005 and July 2, 2004, and
the related consolidated statements of operations, stockholders' deficit and
cash flows for each of the three years in the period ended July 1, 2005. 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 July 1, 2005 and July 2, 2004, and the results of their
operations and their cash flows for each of the three years in the period ended
July 1, 2005, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying consolidated financial statements as of July 2, 2004 and for
each of the two years then ended have been restated as discussed in Note 1.

/s/ BDO Seidman, LLP
Woodbridge, New Jersey

October 24, 2005


                                       31
<PAGE>
                                                                TEKNI-PLEX, INC.

                                                     CONSOLIDATED BALANCE SHEETS
                      (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                                 July 2, 2004
                                                                                                   Restated
                                                                                  July 1, 2005   (See Note 1)
                                                                                  ------------   ------------
<S>                                                                               <C>            <C>
ASSETS
CURRENT:
   Cash and cash equivalents                                                       $  18,584      $  29,735
   Accounts receivable, net of an allowance of $9,144 and $8,408 for possible
      losses and sales allowances                                                    138,383        138,109
   Inventories                                                                       129,617        149,788
   Prepaid expenses and other current assets                                           5,845          6,355
                                                                                   ---------      ---------
      TOTAL CURRENT ASSETS                                                           292,429        323,987
PROPERTY, PLANT AND EQUIPMENT, NET                                                   176,182        182,749
INTANGIBLE ASSETS, PRIMARILY GOODWILL, NET                                           204,642        207,278
DEFERRED FINANCING COSTS, NET OF ACCUMULATED AMORTIZATION OF $12,817 AND $9,122       16,677          9,652
DEFERRED INCOME TAXES                                                                     --         18,793
OTHER ASSETS                                                                           1,765          1,204
                                                                                   ---------      ---------
                                                                                   $ 691,695      $ 743,663
                                                                                   =========      =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
   Current portion of long term debt                                               $   1,082      $   2,121
   Accounts payable                                                                   48,060         54,312
   Accrued payroll and benefits                                                       12,185         10,945
   Accrued interest                                                                    6,385          6,763
   Accrued integration reserve                                                         2,109          2,444
   Accrued liabilities - other                                                        15,399         19,692
   Income taxes payable                                                                6,391          1,853
                                                                                   ---------      ---------
      TOTAL CURRENT LIABILITIES                                                       91,611         98,130
LONG-TERM DEBT, LESS CURRENT PORTION                                                 744,613        731,886
SERIES A REDEEMABLE PREFERRED STOCK, $.01 PAR VALUE,
   AUTHORIZED 82,500 SHARES, ISSUED 54,300                                            54,822             --
OTHER NON-CURRENT LIABILITIES                                                         13,976         18,701
                                                                                   ---------      ---------
      TOTAL LIABILITIES                                                              905,022        848,717
                                                                                   ---------      ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
   Common stock, $.01 par value, authorized 20,000 shares, issued 1,008 at
      July 1, 2005 and July 2, 2004                                                       --             --
   Additional paid-in capital                                                        188,018        210,518
   Accumulated other comprehensive loss                                              (10,294)        (6,000)
   Accumulated deficit                                                              (170,528)       (89,049)
   Less treasury stock at cost, 431 shares                                          (220,523)      (220,523)
                                                                                   ---------      ---------
      TOTAL STOCKHOLDERS' DEFICIT                                                   (213,327)      (105,054)
                                                                                   ---------      ---------
                                                                                   $ 691,695      $ 743,663
                                                                                   =========      =========
</TABLE>

                    See accompanying notes to consolidated financial statements.


                                       32
<PAGE>
                                                                TEKNI-PLEX, INC.

                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                          (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       July 2, 2004   June 27, 2003
                                                                         Restated        Restated
                     Years ended                         July 1 2005   (See Note 1)   (See Note 1)
------------------------------------------------------   -----------   ------------   -------------
<S>                                                      <C>           <C>            <C>
NET SALES                                                 $695,524       $635,642       $610,663
COST OF SALES                                              600,170        530,372        459,981
                                                          --------       --------       --------
      GROSS PROFIT                                          95,354        105,270        150,682
OPERATING EXPENSES:
   Selling, general and administrative                      60,690         69,159         61,600
   Integration expenses                                     10,478          7,775         11,164
                                                          --------       --------       --------
      INCOME FROM OPERATIONS                                24,186         28,336         77,918
OTHER (INCOME) EXPENSES:
   Interest, net                                            89,899         84,451         71,266
   Unrealized loss (gain) on derivative contracts           (8,287)       (10,654)         1,997
   Other                                                    (2,194)           605           (531)
                                                          ---------      --------       --------
      INCOME (LOSS) BEFORE PROVISION  FOR INCOME TAXES     (55,232)       (46,066)         5,186
PROVISION FOR INCOME TAXES                                  26,247         11,121          2,306
                                                          --------       --------       --------
NET INCOME (LOSS)                                         $(81,479)      $(57,187)      $  2,880
                                                          =========      ========       ========
</TABLE>

                    See accompanying notes to consolidated financial statements.


                                       33
<PAGE>

                                                                TEKNI-PLEX, INC.

                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                                          (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           Accumulated
                                                             Additional       Other
                                                               Paid-In    Comprehensive   Accumulated    Treasury
                                              Common stock     Capital        Loss          Deficit       Stock        Total
                                              ------------   ----------   -------------   -----------   ---------   ---------
<S>                                           <C>            <C>          <C>             <C>           <C>         <C>
Balance, June 28, 2002
   (as originally reported)                      $  --        $ 170,176     $ (6,805)       $ (33,959)  $(220,523)  $ (91,111)
Restatement for inventory
   errors (See note 1)                              --               --           --             (783)         --        (783)
                                                   ---         --------     --------        ---------   ---------   ---------
Balance, June 28, 2002,
   restated                                         --          170,176       (6,805)         (34,742)   (220,523)    (91,894)
Net income, restated                                --               --           --            2,880          --       2,880
Foreign currency translation                        --               --        6,320               --          --       6,320
Unrealized loss on pension plan,
   net of tax                                       --               --       (1,252)              --          --      (1,252)
                                                                                                                    ---------
Comprehensive income                                --               --           --               --          --       7,948
Capital contributions                               --           17,842           --               --          --      17,842
                                                   ---         --------     --------        ---------   ---------   ---------
BALANCE, JUNE 27, 2003                              --          188,018       (1,737)         (31,862)   (220,523)    (66,104)
Net loss, restated                                  --               --           --          (57,187)         --     (57,187)
Foreign currency translation                        --               --         (771)              --          --        (771)
Unrealized loss on pension plan,                    --               --       (3,492)              --          --      (3,492)
    net of tax
                                                                                                                    ---------
   Comprehensive (loss)                             --               --           --               --          --     (61,450)
Capital Contributions                               --           22,500           --               --          --      22,500
                                                   ---         --------     --------        ---------   ---------   ---------
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, net of tax         --               --       (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)
                                                 =====        =========     ========        =========   =========   =========
</TABLE>

                    See accompanying notes to consolidated financial statements.


                                       34
<PAGE>
                                                                TEKNI-PLEX, INC.

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                          (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                 July 2, 2004   June 27, 2003
                          Years ended                                              Restated       Restated
                                                                  July 1, 2005   (See Note 1)   (See Note 1)
---------------------------------------------------------------   ------------   ------------   -------------
<S>                                                               <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                $(81,479)     $ (57,187)      $  2,880
   Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
      Depreciation                                                    25,857         25,377         24,615
      Amortization                                                     6,796          6,927          3,727
      Goodwill impairment                                                 --         10,000             --
      Unrealized (gain) loss on derivative contracts                  (8,287)       (10,654)         1,997
      Provision for bad debts                                          1,970          2,316          2,350
      Deferred income taxes                                           21,247          7,290         (2,547)
      Loss on sale of assets                                              --            177             --
      Changes in assets and liabilities, net of acquisitions:
         Accounts receivable                                          (2,328)        (4,806)         4,388
         Inventories                                                  20,601         10,031        (39,862)
         Prepaid expenses and other current assets                       960            129           (567)
         Other assets                                                   (561)            76           (202)
         Accounts payable and other current liabilities               (6,491)         2,600         13,630
         Income taxes payable                                          4,538         (2,318)         4,625
         Other liabilities                                            (7,284)         2,678             (5)
                                                                    --------      ---------       --------
            NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES      (24,461)        (7,364)        15,029
                                                                    --------      ---------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisitions                                                          (93)        (5,780)       (16,762)
   Capital expenditures                                              (18,246)       (29,472)       (32,232)
   Cash proceeds from sale of assets                                      --          1,346             --
   Additions to intangibles                                             (661)          (220)        (1,000)
                                                                    --------      ---------       --------
            NET CASH USED IN INVESTING ACTIVITIES                    (19,000)       (34,126)       (49,994)
                                                                    --------      ---------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net borrowings (repayments) under line of credit                  (64,000)       (15,000)        45,000
   Proceeds from long-term debt                                      146,318        267,438          1,116
   Proceeds from issue of Series A redeemable preferred stock         32,322             --             --
   Repayments of long-term debt                                      (71,648)      (248,658)        (9,755)
   Proceeds from capital contributions                                    --         22,500         17,842
   Debt financing costs                                              (10,720)        (2,767)            --
                                                                    --------      ---------       --------
            NET CASH PROVIDED BY FINANCING ACTIVITIES                 32,272         23,513         54,203
                                                                    --------      ---------       --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                   38           (350)           625
                                                                    --------      ---------       --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 (11,151)       (18,327)        19,863
CASH, BEGINNING OF YEAR AND CASH EQUIVALENTS                          29,735         48,062         28,199
                                                                    --------      ---------       --------
CASH, END OF YEAR AND CASH EQUIVALENTS                              $ 18,584      $  29,735       $ 48,062
                                                                    ========      =========       ========

                                                                                         --             --
</TABLE>

                    See accompanying notes to consolidated financial statements.


                                       35
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
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.

                                 Restatement

                                 The Company identified a $6.8 million
                                 overstatement of inventory at its American
                                 Gasket and Rubber Division. The Company
                                 restated the interim periods in fiscal 2005
                                 (See Note 16) and its consolidated financial
                                 statements as of July 2, 2004 and for each of
                                 the two previous years then ended. The effect
                                 of these adjustments on the financial
                                 statements of the Company are summarized below.
                                 The tax effect of these adjustments has not
                                 been reflected as the amount would be either
                                 immaterial or would have been offset by an
                                 increase in the deferred tax valuation reserve.

                                 The following table sets forth selected line
                                 items from the Company's historical
                                 consolidated statements of operations that are
                                 affected by the restatement on a restated basis
                                 and as previously reported.

                             Year-end July 2, 2004         Year-end June 27, 2003       Year-end June 28, 2002
                          As restated    As reported      As restated   As reported    As restated    As reported
<Caption>
<S>                        <C>          <C>              <C>            <C>            <C>           <C>

Cost of Sales..........   $530,372      $527,646        $459,981       $459,471       $430,920        $430,457
Net (Loss) income......   $(57,187)     $(54,461)       $  2,880       $  3,390       $ (7,050)       $ (6,587)


                                 The following table sets forth selected line
                                 items from the Company's historical
                                 consolidated balance sheets that are affected
                                 by the restatement on a restated basis and as
                                 previously reported.

                            Year-end July 2, 2004         Year-end June 27, 2003       Year-end June 28, 2002
                         As restated    As reported      As restated   As reported    As restated    As reported
<Caption>
<S>                     <C>           <C>               <C>            <C>            <C>           <C>
Inventory.............. $149,788      $153,807         $160,040       $161,333        $116,849      $117,632
Accumulated deficit.... $(89,049)     $(85,030)        $(31,862)      $(30,569)       $(34,742)     $(33,959)
                                 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.

                                 Management reviews accounts receivable on a
                                 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 July 1,
                                 2005 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.
                                 Repairs and maintenance are charged to expense
                                 as incurred.

                                 Intangible Assets (other than goodwill)

                                 The cost of acquiring certain patents,
                                 trademarks, and customer lists is amortized
                                 over their estimated useful lives.
</TABLE>


                                       36
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
                                 Deferred Financing Costs

                                 The Company amortizes the deferred financing
                                 costs incurred in connection with the Company's
                                 borrowings over the life of the related
                                 indebtedness (4-10 years).

                                 Income Taxes

                                 The Company accounts for income taxes under the
                                 provisions of Statement of Financial Accounting
                                 Standards No. 109 ("SFAS 109"), "Accounting for
                                 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 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 according to Emerging, Task Force
                                 Issue ("EITF") 01-09 "Accounting for
                                 consideration given by a vendor to a customer
                                 or a reseller of the vendor's products" in the
                                 period in which the sales are recognized.

                                 Shipping and Handling Costs

                                 Shipping and handling costs are recorded to
                                 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 debt
                                 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 27, 2003 and July 1, 2005 each
                                 contained 52 weeks, and July 2, 2004 contained
                                 53 weeks.
</TABLE>


                                       37
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
                                 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 income (loss).
                                 The statement of operations accounts are
                                 translated at the average rates during the
                                 period.

                                 Long-Lived Assets

                                 Long-lived assets, excluding 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 which would be determined based on the
                                 net present value of estimated future cash
                                 flows. No impairment losses have been recorded
                                 through July 1, 2005.

                                 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.

                                 Stock Based Compensation

                                 The Company applies the provisions of SFAS No.
                                 123, "Accounting for Stock-Based Compensation,"
                                 as amended by SFAS No. 148, "Accounting for
                                 Stock Based Compensation - Transition and
                                 Disclosure," which allows the Company to apply
                                 APB Opinion 25 and related interpretations in
                                 accounting for its stock options and present
                                 pro forma effects of the fair value of such
                                 options. 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 income (loss) would
                                 have been reduced to the pro forma amounts
                                 indicated below. The calculations were based on
                                 a risk free interest rate of 4.0%, expected
                                 volatility of zero, a dividend yield of zero,
                                 and expected lives of 8 years.

          Years ended                July 1, 2005   July 2, 2004   June 27, 2003
                                                      Restated       Restated
-------------------------------      ------------   ------------   -------------
Net income (loss):
   As reported                         $(81,222)      $(57,187)       $2,880
   Adjustment for fair value of
      stock options,                   $    (12)      $    (88)       $ (124)
                                       --------       --------        ------
   Pro forma                           $(81,234)      $(57,275)       $2,756
                                       ========       ========        ======
</TABLE>


                                       38
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
                                 Derivative Instruments

                                 The Company applies the provision of Financial
                                 Accounting Standards No. 133, "Accounting for
                                 Derivative Instruments and Hedging Activities,"
                                 as amended and interpreted by SFAS 149
                                 "Amendment of Statement 133 on Derivative
                                 Instruments and Hedging Activities." SFAS 133
                                 requires that all derivative instruments, such
                                 as interest rate swaps, be 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 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 under SFAS 133. 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
                                 July 1, 2005. The fair value of derivative
                                 contracts are determined based on quoted market
                                 values obtained from a third party.

                                 In June 2000, Tekni-Plex had $344,000 of term
                                 loans outstanding with variable rates of
                                 interest tied to US$ 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 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 July
                                 1, 2005 the notional amount of the swaps is
                                 $290,000.

                                 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 swap and cap contracts was
                                 $(4,779), $(13,065) and $(23,719) on July 1,
                                 2005, July 2, 2004 and June 27, 2003,
                                 respectively, and is included in other
                                 liabilities on the Consolidated Balance Sheet.
                                 For the years ended July 1, 2005, July 2, 2004
                                 and June 27, 2003, Tekni-Plex incurred realized
                                 gain (losses) of $8,287, $10,654, and $(8,677),
                                 respectively, which have been reflected in
                                 interest expense.
</TABLE>


                                       39
<PAGE>
<TABLE>
<S>                              <C>
                                 Goodwill and Business Combinations

                                 On June 29, 2002 the Company adopted SFAS 142
                                 which requires, among other things, that
                                 companies no longer amortize goodwill, but
                                 instead test goodwill for impairment at least
                                 annually. This test was performed every year as
                                 of our fiscal year-end. In addition, SFAS 142
                                 requires that the Company identify reporting
                                 units for the purposes of assessing potential
                                 future impairments of goodwill, reassess the
                                 useful lives of other existing recognized
                                 intangible assets, and cease amortization of
                                 intangible assets with an indefinite useful
                                 life. An intangible asset with an indefinite
                                 useful life should be tested for impairment in
                                 accordance with the guidance in SFAS 142.

                                                                TEKNI-PLEX, INC.

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

                                 The Company completed its year-end analysis of
                                 goodwill in accordance with SFAS 142 and has
                                 concluded that there is no impairment charge
                                 for the year ended July 1, 2005. An impairment
                                 charge of $10.0 million was required for the
                                 year ended July 2, 2004. The impaired goodwill
                                 resulted from the recent losses of our
                                 Specialty Resin operations of our Other
                                 Segment.

                                 New Accounting Pronouncements

                                 In December 2004, the Financial Accounting
                                 Standards Board ("FASB") issued Statement of
                                 Financial Accounting Standards ("SFAS") No.
                                 153, "Exchanges of Nonmonetary Assets," which
                                 eliminates the exception for nonmonetary
                                 exchanges of similar productive assets and
                                 replaces it with a general exception for
                                 exchanges of nonmonetary assets that do not
                                 have commercial substance. SFAS No. 153 will
                                 become effective for nonmonetary asset
                                 exchanges occurring in fiscal periods beginning
                                 after June 15, 2005. The Company does not
                                 believe the adoption of SFAS No. 153 will have
                                 a material impact on the Company's financial
                                 statements.

                                 In December 2004, the FASB issued SFAS No. 123
                                 (R), "Share-Based Payment," which established
                                 standards for transactions in which an entity
                                 exchanges its equity instruments for goods and
                                 services. This standard requires a public
                                 entity to measure the cost of employee services
                                 received in exchange for an award of equity
                                 instruments based on the grant-date fair value
                                 of the award. This eliminates the exception to
                                 account for such awards using the intrinsic
                                 method previously allowed under APB Opinion No.
                                 25. SFAS No 123 (R) will be effective for
                                 fiscal years beginning after June 15, 2005. The
                                 statement does not require restatement of
                                 previously issued statements and can be applied
                                 on a prospective basis. The Company is in the
                                 process of evaluating the impact the adoption
                                 of this statement will have on its financial
                                 statements and believes its impact to be
                                 minimal.

                                 In November 2004, the FASB issued SFAS No. 151,
                                 "Inventory Costs, an amendment of ARB No. 43,
                                 Chapter 4." This Statement amends the guidance
                                 in
</TABLE>


                                       40
<PAGE>
<TABLE>
<S>                              <C>
                                 ARB No. 43, Chapter 4, "Inventory Pricing," to
                                 clarify the accounting for abnormal amounts of
                                 idle facility expense, freight, handling costs
                                 and wasted material (spoilage), requiring that
                                 those items be recognized as current-period
                                 charges. In addition, this Statement requires
                                 that allocation of fixed production overheads
                                 to the costs of conversion be based on the
                                 normal capacity of the production facilities.
                                 The provisions of this statement are effective
                                 for fiscal years beginning after June 15, 2005,
                                 with early application permitted. The Company
                                 is in the process of evaluating the impact the
                                 adoption of this statement will have on its
                                 financial statements.

                                 In May 2005, the FASB issued SFAS No. 154,
                                 "Accounting Changes and Error Corrections, a
                                 replacement of APB Opinion No. 20 and SFAS No.
                                 3." This Statement provides guidance on the
                                 accounting for and reporting of accounting
                                 changes and error corrections. It establishes,
                                 unless impracticable, retrospective application
                                 as the required method for reporting a change
                                 in accounting principle, in the absence of
                                 explicit transition requirements specific to
                                 the newly adopted accounting principle. This
                                 Statement also provides guidance for
                                 determining whether retrospective application
                                 of a change in accounting principle is
                                 impracticable and for reporting a change when
                                 retrospective application is impracticable. The
                                 correction of an error in previously issued
                                 financial statements is not an accounting
                                 change. However, the reporting of an error
                                 correction involves adjustments to previously
                                 issued financial statements similar to those
                                 generally applicable to reporting an accounting
                                 change retrospectively. Therefore, the
                                 reporting of a correction of an error by
                                 restating previously issued financial
                                 statements is also addressed by this Statement.
                                 This Statement is effective for accounting
                                 changes made in fiscal years beginning after
                                 December 15, 2005. The Company does not believe
                                 the adoption of SFAS No. 154 will have a
                                 material impact on the Company's financial
                                 statements or results of operations.

                                 In March 2005, the FASB issued FASB
                                 Interpretation ("FIN") No. 47,"Accounting for
                                 Conditional Asset Retirement Obligations." FIN
                                 No. 47 provides guidance relating to the
                                 identification of and financial reporting for
                                 legal obligations to perform an asset
                                 retirement activity. The Interpretation
                                 requires recognition of a liability for the
                                 fair value of a conditional asset retirement
                                 obligation when incurred if the liability's
                                 fair value can be reasonably estimated. FIN No.
                                 47 also defines when an entity would have
                                 sufficient information to reasonably estimate
                                 the fair value of an asset retirement
                                 obligation. The provision is effective no later
                                 than the end of fiscal years ending after
                                 December 15, 2005. The Company does not believe
                                 the adoption of FIN No. 47 will have a material
                                 impact on the Company's financial statements or
                                 results of operations.

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 the
                                 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 it's $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.
</TABLE>


                                       41
<PAGE>
<TABLE>
<S>                              <C>
                                 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 proforma results of operation
                                      of the Genpak assets as though the
                                      acquisition occurred on June 28, 2002 are
                                      immaterial. 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.
                                      The allocation of purchase price is as
                                      follows:
Assets:
Inventory                                   $  303
Plant property and equipment                 1,044
Customer list and covenant not to compete    4,433
                                            ------
Total Assets                                 5,780
Liabilities                                     --
                                            ------
Net Investment                              $5,780
                                            ======

</TABLE>


                                       42
<PAGE>
<TABLE>
<S>                              <C>
                                 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 July 1, 2005 was
                                 as follows:

                                                          Costs                    Costs                       Costs     Balance
                                            Balance    charged to    Balance    charged to      Balance     charged to   July 1,
                                           July 2002     reserve    July 2003     reserve    July 2, 2004     reserve     2005
                                           ---------   ----------   ---------   ----------   ------------   ----------   -------
Reduction in personnel and related costs     $1,000       1,000       $   --      $   --        $   --          $--       $   --
Legal and environmental liability            $3,500       1,000        2,500       1,337         1,163           19        1,144
                                             ------      ------       ------      ------        ------          ---       ------
                                             $4,500      $2,000       $2,500      $1,337        $1,163          $19       $1,144
                                             ======      ======       ======      ======        =======         ===       ======

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

                                                                TEKNI-PLEX, INC.

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


                                 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.

                                 In connection with the acquisition, the Company
                                 incurred an integration reserve of $10 million.
                                 The components of the Integration reserve and
                                 activity through July 1, 2005 was as follows:

                                              Costs               Cost                           Costs             Costs
                                             charged  Balance   charged                Balance  charged  Balance  charged  Balance
                                    October     to    June 28,     to    Adjustments  June 27,     to    July 2,    to     July 1,
                                      2001   Reserve    2002    Reserve   to Reserve    2003    Reserve    2004   Reserve    2005
                                    -------  -------  --------  -------  -----------  --------  -------  -------  -------  -------
Cost to close duplicate facilities  $ 3,500   $1,340   $2,160    $  101   $(2,059)     $   --    $   --   $   --    $ --     $ --
Reduction in personnel and related
   costs                              2,100      718    1,382        --    (1,382)         --        --       --      --       --
Legal and environmental               1,275       40    1,235     1,360     2,625       2,500     1,219    1,281     316      965
Manufacturing reconfiguration         1,455      175    1,280        --    (1,280)         --        --       --      --       --
Other                                 1,670      972      698       794        96          --        --       --      --       --
                                    -------   ------   ------    ------   -------      ------    ------   ------    ----     ----
                                    $10,000   $3,245   $6,755    $2,255   $(2,000)*    $2,500    $1,219   $1,281    $316     $965
                                    =======   ======   ======    ======   =======      ======    ======   ======    ====     ====
</TABLE>


                                       43
<PAGE>
<TABLE>
<S>                              <C>
                                 *$2,000 adjustment was recorded to beginning
                                 balance Integration reserve as an adjustment to
                                 the original estimates prepared by the Company.
                                 Goodwill was adjusted for the aforementioned
                                 amount.

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

                                                                TEKNI-PLEX, INC.

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


4. INVENTORIES                   Inventories are summarized as follows:

                  July 1, 2005   July 2, 2004
                                  (restated)
                  ------------   ------------
Raw materials       $ 53,450       $ 57,012
Work-in-process       12,466         12,668
Finished goods        63,701         80,108
                    --------       --------
                    $129,617       $149,788
                    ========       ========

5. PROPERTY, PLANT AND
   EQUIPMENT                     Property, plant and equipment consists of the
                                 following:

                                                                Estimated
                                July 1, 2005   July 2, 2004   useful lives
                                ------------   ------------   ------------
Land                              $ 15,870       $ 15,663
Building and improvements           59,258         57,097     25-40 years
Machinery and equipment            238,929        221,552     5 - 10 years
Furniture and fixtures               9,482          9,581     5 - 10 years
Construction in progress            18,048         20,660
                                  --------       --------
                                   341,587        324,553
Less accumulated depreciation      165,405        141,804
                                  --------       --------
                                  $176,182       $182,749
                                  ========       ========

6. INTANGIBLE ASSETS             Intangible assets consist of the following:

                                          July 1, 2005   July 2, 2004
                                          ------------   ------------
Goodwill                                    $198,532       $198,532
Customer list and non-compete agreement        8,756          9,680
Patents                                        2,297          1,966
                                            --------       --------
                                             209,585        210,178
Less accumulated amortization                  4,943          2,900
                                            --------       --------
                                            $204,642       $207,278
                                            ========       ========

                                 Amortization of customer list and non-compete
                                 agreement will be $1,685 annually through the
                                 first quarter of 2007. Patents will be
                                 amortized $439 annually. Amortization is
                                 expected to continue at this amount until 2010
                                 when it will begin to decline. Accumulated
                                 amortization for customer
</TABLE>


                                       44
<PAGE>
<TABLE>
<S>                              <C>
                                 list and Patents at July 1, 2005 and July 2,
                                 2004 were $3,829, $1,114 and $2,144, and $756,
                                 respectively. During the Company's SFAS 142
                                 impairment tests, it was noted that $10,000 of
                                 goodwill related to the Specialty Resin
                                 operation of our Other Segment was impaired due
                                 to this unit's recent performance. This amount
                                 was written off as of July 2, 2004.

                                                                TEKNI-PLEX, INC.

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

7. LONG-TERM DEBT                Long-term debt consists of the following:

                                                                                     July 1, 2005   July 2, 2004
                                                                                     ------------   ------------
Senior Debt (A):
   Revolving line of credit                                                            $ 12,000       $ 76,000
   Term notes                                                                                --         71,263
Senior Subordinated Notes issued June 21, 2000 at 12-3/4%, due June 15, 2010 (less
   unamortized discount of $1,883 and $2,260) (B).                                      273,117        272,740
Senior Subordinated Notes issued May 2002 at 12-3/4%, due June 15, 2010 (less
   unamortized premium of $362 and $437 (B).                                             40,362         40,437
Senior Secured Notes issued November 21, 2003 at 8-3/4 %, due November 15, 2013
   (less unamortized discount of $6,365 and $7,121) (C).                                268,635        267,879
Senior Secured Notes issued June 10, 2005 at 10.875% due August 15, 2012 (less
   unamortized discount of $3,375) (D).                                                 146,625             --
Series A Redeemable Preferred Stock (E).                                                 54,822             --
Other, primarily foreign term loans, with interest rates ranging from 4.44% to
   5.44% and maturities from 2005 to 2010.                                                4,956          5,688
                                                                                       --------       --------
                                                                                        800,517        734,007
Less: Current maturities                                                                  1,082          2,121
                                                                                       --------       --------
                                                                                       $799,435       $731,886
                                                                                       ========       ========
</TABLE>

     Subsequent to year-end, Tekni-Plex raised an additional $5.4 million from
the issuance of preferred stock.

     The late filing of our 10-K has caused us to be in violation of certain
covenants in our debt agreements. These violations, which have either been
waived or the applicable grace periods have not yet expired, have been remedied
by virtue of this filing.

(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 new asset based facility consists of a four-year, asset-based revolving
credit facility in the maximum amount of $65,000. 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.
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 new asset based facility are secured on a first
priority basis by all of our domestic subsidiaries' asset based facility.

     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 new asset based facility.

     In addition, the asset based facility includes a provision permitting, at
our option, an increase in the aggregate amount of the new asset based facility
by up to an additional $60,000, subject to certain conditions.

     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;


                                       45
<PAGE>
     -    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 new 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 new asset based
          facility;

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

     -    the inaccuracy of the representations and warranties set forth in the
          new 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 new 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 the 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>
PERIOD                                                          REDEMPTION PRICE
------                                                          ----------------
<S>                                                             <C>
2005.........................................................       106.375%
2006.........................................................       104.250%
2007.........................................................       102.125%
2008 and thereafter..........................................       100.000%
</TABLE>

     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:


                                       46
<PAGE>
     -    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 are
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;

     -    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;


                                       47
<PAGE>
     -    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 agreed to file 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. We and the guarantors also
     agreed to use all commercially reasonable efforts to cause the registration
     statement to be declared effective by the SEC on or prior to the date
     specified in the registration rights agreement. We have not been able to
     cause the registration statement to be declared effective by the SEC on or
     prior to the date specified in the registration rights agreement, as a
     result, we have been paying liquidated damages in an amount equal to 1.0%
     of the principal amount of the senior secured notes per annum to holders of
     the existing senior secured notes as required by the registration rights
     agreement.

(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 are 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;

     -    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


                                       48
<PAGE>
          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 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 preferred stock is being characterized as a liability.
Dividends and accretion to maturity will be 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 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): (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;


                                       49
<PAGE>
          (v)  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;

                                                                TEKNI-PLEX, INC.

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

          (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;

     -    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;


                                       50
<PAGE>
     -    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>
                                       2006   $ 1,082
                                       2007       246
                                       2008       252
                                       2009    12,259
                                       2010   313,647
                                 Thereafter   473,031
</TABLE>

                                 The Company believes the recorded value of
                                 long-term debt approximates fair value based on
                                 current rates available to the Company for
                                 similar debt.


                                       51
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
8. INCOME TAXES                  The provision for income taxes is summarized as
                                 follows:

                                                  July 1,   July 2,   June 27,
                 Years ended                        2005      2004      2003
------------------------------------------------  -------   -------   --------
Current:
   Federal                                        $    --   $    --    $    --
   Foreign                                          4,652     3,781      4,504
   State and local                                    348        50        349
                                                  -------   -------    -------
                                                    5,000     3,831      4,853
                                                  -------   -------    -------
Deferred:
   Federal                                         21,530     7,000     (2,072)
   Foreign                                           (283)      290        (89)
   State and local                                     --        --       (386)
                                                  -------   -------    -------
                                                   21,247     7,290     (2,547)
                                                  -------   -------    -------
Provision (benefit) for income taxes              $26,247   $11,121    $ 2,306
                                                  =======   =======    =======

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

                                                 July 1,    July 2,   June 27,
                 Years ended                      2005       2004       2003
----------------------------------------------   -------   --------   --------
Domestic                                       $(66,900)   $(51,586)  $(5,918)
Foreign                                          11,668       8,246    11,614
                                               --------    --------   -------
                                               $(55,232)   $(43,340)  $ 5,696
                                               ========    ========   =======

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

                                                                     July 1,   July 2,   June 27,
                       Years ended                                    2005      2004       2003
------------------------------------------------------------------   -------  --------   --------
Provision (benefit) for Federal income taxes at statutory rate     $(18,779)  $(14,736)   $1,937
State and local income taxes, net of Federal benefit                 (2,187)    (1,655)      (24)
Non-deductible goodwill impairment                                       --      3,400        --
Foreign tax rates in excess of Federal tax rate                         402      1,262       406
Increase in Valuation Allowance                                      47,459     23,319        --
Other, net                                                             (648)      (469)      (13)
                                                                   --------   --------    ------
Provision (benefit) for income taxes                               $ 26,247   $ 11,121    $2,306
                                                                   ========   ========    ======
</TABLE>


                                       52
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
                                 Significant components of the Company's
                                 deferred tax assets and liabilities are as
                                 follows:

                                                             July 1,    July 2,
                                                              2005       2004
                                                            --------   --------
Current deferred taxes:
   Allowance for doubtful accounts                          $  2,820   $  1,961
   Inventory                                                     764      2,103
   Net operating loss carryforwards                            2,216      1,009
   Accrued expenses                                            3,264      1,365
                                                            --------   --------
      Total current deferred tax assets                     $  9,064   $  6,438
                                                            --------   --------
Long-term deferred taxes:
   Net operating loss carryforwards                         $ 86,415   $ 54,400
   Accrued pension and post-retirement                         1,904      2,657
   Unrealized loss on derivative contracts                     1,816      4,965
   Unrealized loss of pension plan                             4,896      3,265
   Difference in book and tax basis of assets                   (609)      (609)
   Difference in depreciation                                (17,499)   (16,139)
   Goodwill - deductible for tax purposes                     (7,427)    (5,202)
   Other expenses                                                190        309
   Other foreign                                              (2,454)        --
                                                            --------   --------
      Total long-term net deferred tax assets                 67,232     43,646
                                                            --------   --------
      Total current and long term deferred tax assets         76,296     50,084
Valuation allowance                                          (78,750)   (31,291)
                                                            --------   --------
Total long-term net deferred tax assets/(liabilities)       $ (2,454)  $ 18,793
                                                            ========   ========

                                 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
                                 $239,000. These NOL's expire at various dates
                                 from 2009 through 2025. Approximately $82,000
                                 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 IRC Section 382
                                 change of ownership annual limitation of
                                 approximately $5,600. As a result of this
                                 limitation the Company can utilize a maximum of
                                 $79,600 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 2004 losses aggregated $597
                                 which have no expiration date.

                                 During fiscal 2005, the Company believes that
                                 it is more likely than not that this deferred
                                 tax asset will not be realized 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 have been
                                 and 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.
</TABLE>


                                       53
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
9. EMPLOYEE BENEFIT PLANS        (a)  Savings Plans

                                      i.  The Company maintains a discretionary
                                          401(k) plan covering all eligible
                                          employees (excluding Elm employees
                                          from July, 2004 to mid-December,
                                          2004) with at least one year of
                                          service. As of mid-December, 2004 the
                                          plan included all eligible ELM
                                          employees. Contributions to the plan
                                          are determined annually by the Board
                                          of Directors.

                                          The Company will determine matching
                                          contributions to the plan each year
                                          not to exceed 2% of the employee's
                                          eligible compensation. Contributions
                                          for the fiscal years ended July 1,
                                          2005, July 2, 2004 and June 27, 2003,
                                          amounted to $1,081, $1,043, $1,207,
                                          respectively.

                                      ii. The plan which was discontinued as of
                                          mid-December, 2004 covered all
                                          eligible Elm employees with at least
                                          sixty days of service and who have
                                          attained the age of twenty-one. The
                                          Company matched 50% of employee
                                          contributions up to 6% of the
                                          employee's eligible compensation.
                                          Contributions for the fiscal year
                                          ended July 1, 2005 and July 2, 2004
                                          amounted to $46 and $94.

                                 (b)  Pension Plans

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

                                          The components of net periodic pension
                                          costs are as follows:

                                                     Year ended   Year ended   Year ended
                                                       July 1,      July 2,     June 27,
                                                        2005         2004         2003
                                                     ----------   ----------   ----------
Service cost                                            $ 125        $ 127        $ 107
Interest cost on projected benefit obligation             434          421          420
Expected actual return on plan assets                    (469)        (443)        (451)
Amortization of unrecognized:
   Prior service cost                                      12           12           12
   Net loss                                               187          182          105
                                                        -----        -----        -----
Net pension cost                                        $ 289        $ 299        $ 193
                                                        =====        =====        =====
</TABLE>


                                       54
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
                                                    Year ended   Year ended
                                                      July 1,      July 2,
                                                       2005         2004
                                                    ----------   ----------
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation, beginning of period     $7,114       $6,835
Service cost                                             126          127
Interest cost                                            434          421
Actuarial loss                                           988           71
Benefits paid                                           (375)        (340)
                                                      ------       ------
Projected benefit obligation, end of period           $8,287       $7,114
                                                      ======       ======
CHANGE IN PLAN ASSETS
Plan assets at fair value, beginning of period        $5,138       $5,013
Actual return on plan assets                             184          311
Company contributions                                    398          154
Benefits paid                                           (375)        (340)
                                                      ------       ------
Plan assets at fair value, end of period              $5,345       $5,138
                                                      ======       ======

                                 The funded status of the Plan and amounts
                                 recorded in the Company's balance sheets are as
                                 follows:

                                  July 1, 2005   July 2, 2004
                                  ------------   ------------
Funded status of the plan            $(2,942)      $(1,976)
Unrecognized prior service cost           76            87
Unrecognized net loss                  3,402         2,316
                                     -------       -------
Prepaid pension cost                 $   536       $   427
                                     =======       =======

                                           The expected long-term rate of return
                                           on plan assets was 9% for the periods
                                           presented and the discount rates were
                                           5.00% and 6.25% at July 1, 2005 and
                                           July 2, 2004.

                                           The Company recorded an unrecognized
                                           pension liability of $3,402 and
                                           $2,316 at July 1, 2005 and July 2,
                                           2004, respectively, as an accumulated
                                           other comprehensive loss adjustment
                                           to stockholders' equity. These
                                           amounts represent a portion of the
                                           unrecognized net actuarial loss for
                                           the years ending July 1, 2005 and
                                           July 2, 2004 as a result of an
                                           investment return less than the
                                           actuarial assumption.

                                           The Company maintains a
                                           non-contributory defined benefit
                                           pension plan that covers
                                           substantially all non-collective
                                           bargaining unit employees of
                                           Plastics, Specialties and Technology
                                           ("PS&T") and Burlington, who have
                                           completed one year of service and are
                                           not participants in any other pension
                                           plan required by applicable
                                           regulations. The funding policy of
                                           the Company is 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.
</TABLE>


                                       55
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
                                           The components of net periodic
                                           pension cost are as follows:

                                                Year ended   Year ended   Year ended
                                                  July 1,      July 2,     June 27,
                                                   2005         2004         2003
                                                ----------   ----------   ----------
Service cost                                      $  --        $  --        $  --
Interest cost on projected benefit obligation       800          792          790
Expected actual return on plan assets              (848)        (816)        (839)
Amortization of unrecognized Net loss               249          280          178
                                                  -----        -----        -----
Net pension cost                                  $ 201        $ 256        $ 129
                                                  =====        =====        =====

                                                    Year ended   Year ended
                                                      July 1,      July 2,
                                                       2005         2004
                                                    ----------   ----------
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation, beginning of period    $13,210      $12,932
Interest cost                                            800          792
Actuarial loss                                         2,070          (32)
Benefits paid                                           (518)        (482)
                                                     -------      -------
Projected benefit obligation, end of period          $15,562      $13,210
                                                     =======      =======
CHANGE IN PLAN ASSETS
Plan assets at fair value, beginning of period       $ 9,660      $ 9,303
Actual return on plan assets                             314          839
Benefits paid                                           (518)        (482)
                                                     -------      -------
Plan assets at fair value, end of period             $ 9,456      $ 9,660
                                                     =======      =======

                                           The funded status of the Plan and
                                           amounts recorded in the Company's
                                           balance sheets are as follows:

                            July 1, 2005   July 2, 2004
                            ------------   ------------
Funded status of the plan     $(6,107)       $(3,551)
Unrecognized net loss           7,267          4,912
                              -------        -------
Prepaid pension cost          $ 1,160        $ 1,361
                              =======        =======

                                           The expected long-term rate of return
                                           on plan assets was 9% for the periods
                                           presented and the discount rate used
                                           to determine the benefit obligation
                                           was 5.00% and 6.25% at July 1, 2005
                                           and July 2, 2004.

                                           The Company recorded an unrecognized
                                           pension liability of $7,267 and
                                           $4,912 as of July 1, 2005 and July 2,
                                           2004, respectively, as an accumulated
                                           other comprehensive loss adjustment
                                           to stockholders' equity. These
                                           amounts represent a portion of the
                                           unrecognized net actuarial loss for
                                           the years ending July 1, 2005 and
                                           July 2, 2004 as a result of an
                                           investment return less than the
                                           actuarial assumption.

                                      ii.  The Company also has a defined
                                           benefit pension plan for the benefit
                                           of all employees having completed one
                                           year of service with Dolco. The
                                           funding policy of the Company is 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.
</TABLE>


                                       56
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>

                                      The components of net periodic pension
                                      costs are as follows:

                                                Year ended   Year ended   Year ended
                                                  July 1,      July 2,     June 27,
                                                   2005         2004         2003
                                                ----------   ----------   ----------
Service cost                                       $  --        $  --       $  --
Interest cost on projected benefit obligation        245          251         261
Expected actual return on plan assets               (264)        (234)       (285)
Amortization of unrecognized net loss                 91          111          79
                                                   -----        -----       -----
Net pension cost                                   $  72        $ 128       $  55
                                                   =====        =====       =====

                                                    Year ended   Year ended
                                                      July 1,      July 2,
                                                       2005         2004
                                                    ----------   ----------
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation, beginning of period     $3,952       $4,205
Interest cost                                            245          251
Actuarial loss (gain)                                    990         (126)
Benefits paid                                           (238)        (378)
                                                      ------       ------
Projected Benefit Obligation, end of period           $4,949       $3,952
                                                      ======       ======
CHANGE IN PLAN ASSETS
Plan assets at Fair Value, beginning of period        $3,380       $3,144
Actual return on plan assets                             314          271
Company contributions                                    220          343
Benefits paid                                           (237)        (378)
                                                      ------       ------
Plan assets at Fair Value, end of period              $3,677       $3,380
                                                      ======       ======

                                      The funded status of the Plan and amounts
                                      reconciled in the Company's balance sheets
                                      are as follows:

                            July 1, 2005   July 2, 2004
                            ------------   ------------
Funded status of the Plan     $(1,272)        $ (571)
Unrecognized net loss           2,216          1,367
                              -------         ------
Prepaid pension cost          $   944         $  796
                              =======         ======

                                      The expected long term rate of return on
                                      plan assets was 7.5% for the periods
                                      presented. The discount rate used to
                                      determine the benefit obligation was
                                      5.00% for the fiscal year ended July 1,
                                      2005 and 6.25% for the fiscal year ended
                                      July 2, 2004.

                                      The Company recorded an unrecognized
                                      pension liability of $2,216 and $1,367 as
                                      of July 1, 2005 and July 2, 2004,
                                      respectively, an accumulated other
                                      comprehensive loss and adjustment to
                                      stockholders equity. These amounts
                                      represent a portion of the unrecognized
                                      net loss for the years ending July 1, 2005
                                      and July 2, 2004.

                                 (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
</TABLE>


                                       57
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
                                 years ended July 1, 2005, July 2, 2004 and June
                                 27, 2003 amounted to $369, $407 and $337,
                                 respectively, net of retiree contributions.

                                 Net periodic post-retirement benefit costs are
                                 as follows:

                                       Year ended     Year ended     Year ended
                                      July 1, 2005   July 2, 2004   June 27, 2003
                                      ------------   ------------   -------------
Service cost                              $139           $154           $ 82
Interest cost                              338            409            247
Prior service cost                         141            141             --
Net loss                                   103            246             91
                                          ----           ----           ----
   Net post-retirement benefit cost       $721           $950           $420
                                          ====           ====           ====

                                                     Year ended     Year ended
      CHANGE IN PROJECTED BENEFIT OBLIGATION        July 1, 2005   July 2, 2004
-------------------------------------------------   ------------   ------------
Projected benefit obligation, beginning of period      $5,588        $ 6,699
Service cost                                              139            154
Interest cost                                             339            409
Plan amendments                                          (787)             -
Actuarial loss (gain)                                     674         (1,267)
Benefits paid                                            (369)          (407)
                                                       ------        -------
Projected benefit obligation, end of period            $5,584        $ 5,588
                                                       ======        =======
CHANGE IN PLAN ASSETS
Plan assets at fair value, beginning of period         $   --        $    --
Company contributions                                     369            407
Benefits paid                                            (369)          (407)
                                                       ------        -------
Plan assets at fair value, end of period               $   --        $    --
                                                       ======        =======

                                 The funded status of the Plan and amounts
                                 recorded in the Company's balance sheets are as
                                 follows:

                                Year ended     Year ended
                               July 1, 2005   July 2, 2004
                               ------------   ------------
Funded status of the plan        $(5,584)       $(5,588)
Unrecognized loss                  2,140          1,569
Unrecognized service cost            129          1,057
                                 -------        -------
Accrued post retirement cost     $(3,315)       $(2,962)
                                 =======        =======

                                 The accumulated post-retirement benefit
                                 obligation was determined using a 5.00% and
                                 6.25% discount rate for the periods presented.
                                 The healthcare cost trend rate for medical
                                 benefits was changed from a flat 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 $600 and
                                 $378 and increase the service and interest
                                 components by $37 and $47 at July 1, 2005 and
                                 July 2, 2004, respectively.
</TABLE>


                                       58
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
                                 The Company's plan asset allocation at 2005 and
                                 2004 and target allocations for 2006 are as
                                 follows:

                                 Percentage of       Target
                                  Plan Assets      Allocation
                                 -------------     ----------
         Security Type           2005    2004         2006
------------------------------   ----    ----      ----------
Guaranteed Investment Contract     6%      6%           5%
Equity Securities                 58%     57%          55%
Debt Securities                   36%     37%          40%
                                 ---     ---          ---
Total Plan Assets                100%    100%         100%
                                 ===     ===          ===

                                 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 8.5%. 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 over the following five
                                 years are:

                                         2006         $  1,432
                                         2007            1,522
                                         2008            1,622
                                         2009            2,020
                                         2010            2,150
                                         2011-2015      11,098

10. STOCK OPTIONS                In January 1998, the Company adopted an
                                 incentive stock plan (the "Stock Incentive
                                 Plan"). Under the Stock Incentive Plan,
                                 45.75206 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 38.17
                                 shares of common stock were outstanding at
                                 weighted-average exercise price of $177. During
                                 2001 options were granted to purchase 4.02
                                 shares of common stock at weighted average
                                 exercise prices of $559 per share. During 2003
                                 options to purchase 2.01 shares of common stock
                                 at a weighted average exercise price of $177
                                 were forfeited and options to purchase 2.01
                                 shares of common stock at a weighted average
                                 exercise price of $680 were issued. 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.

                                 At July 1, 2005, 18.29 options were
                                 outstanding, 5.49 options were exercisable and
                                 no options have been exercised.
</TABLE>


                                       59
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
11. COMMITMENTS AND
    CONTINGENCIES                Commitments

                                 (a) The Company leases building space and
                                     certain equipment in approximately 20
                                     locations throughout the United States,
                                     Canada and Europe. At July 1, 2005, the
                                     Company's future minimum lease payments are
                                     as follows:

      2006   $ 8,261
      2007     7,697
      2008     6,293
      2009     4,742
      2010     3,762
Thereafter    23,400
             -------
             $54,155

                                     Rent expense, including escalation charges,
                                     amounted to approximately $9,798, $9,830
                                     and $7,247 for the years ended July 1,
                                     2005, July 2, 2004 and June 27, 2003,
                                     respectively.

                                 (b) The Company has an employment contract with
                                     one officer, providing a minimum annual
                                     salary of $4,000 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. 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.

12. CONCENTRATIONS OF CREDIT     Financial instruments that potentially subject
       RISKS                     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.
</TABLE>


                                       60
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
13. SUPPLEMENTAL CASH FLOW       (a)  Cash Paid
    INFORMATION

                                 July 1,   July 2,   June 27,
          Years ended              2005      2004      2003
-----------------------------    -------   -------   --------
Interest                         $86,406   $78,547    $69,642
                                 -------   -------    -------
Income taxes                     $ 4,546   $ 3,880    $ 1,027
                                 =======   =======    =======

Non-Cash Financing Activities:
    Exchange of Capital
    for Series A Redeemable
    Preferred Stock              $22,500        --         --


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 in the United States.
</TABLE>


                                       61
<PAGE>
                                                                TEKNI-PLEX, INC.

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

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

        Year end July 1, 2005           Tubing Products   Packaging     Other     TOTALS
-------------------------------------   ---------------   ---------   --------   --------
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

        Year end July 2, 2004           Tubing Products   Packaging     Other     TOTALS
-------------------------------------   ---------------   ---------   --------   --------
Revenues from external customers            $210,239       $306,131   $119,272   $635,642
Interest expense                              39,633         26,889     17,929     84,451
Depreciation and amortization                  9,426         15,021      6,833     31,280
Segment income(loss) from operations           6,489         51,318    (11,798)    46,009
Goodwill                                     108,593         63,943     25,996    198,532
Segment assets                               326,882        267,413    138,705    733,000
Expenditures for segment fixed assets          4,878         17,226      7,323     29,427

        Year end June 27, 2003          Tubing Products   Packaging     Other     TOTALS
-------------------------------------   ---------------   ---------   --------   --------
Revenues from external customers            $209,655       $291,794   $109,214   $610,663
Interest expense                              33,420         22,698     15,148     71,266
Depreciation and amortization                  6,769         14,243      6,482     27,494
Segment income from operations                35,361         59,665      3,540     98,566
Goodwill                                     108,593         64,600     35,996    209,189
Segment assets                               338,432        280,400    141,638    760,470
Expenditures for segment fixed assets          5,371         18,603      7,460     31,434

             Years ended                July 1, 2005   July 2, 2004   June 27, 2003
-------------------------------------   ------------   ------------   -------------
OPERATING PROFIT
Total operating profit for reportable
   segments before income taxes           $ 41,255      $  46,009       $ 98,566
Corporate and eliminations                 (17,069)       (17,673)       (20,648)
                                          --------      ---------       --------
   Consolidated total                     $ 24,186      $  28,336       $ 77,918
                                          ========      =========       ========
ASSETS
Total assets from reportable segments     $683,169      $ 733,000       $760,470
Other unallocated amounts                    8,526         10,663         23,001
                                          --------      ---------       --------
   Consolidated total                     $691,695      $ 743,663       $783,471
                                          ========      =========       ========
DEPRECIATION AND AMORTIZATION
Segment totals                            $ 31,629      $  31,280       $ 27,494
Corporate                                    1,024          1,024            848
                                          --------      ---------       --------
   Consolidated total                     $ 32,653      $  32,304       $ 28,342
                                          ========      =========       ========
EXPENDITURES FOR SEGMENT FIXED ASSETS
Segment totals                            $ 17,586      $  29,427       $ 31,434
Other unallocated expenditures                 660            701            798
                                          --------      ---------       --------
Consolidated total                        $ 18,246      $  30,128       $ 32,232
                                          ========      =========       ========
REVENUES
GEOGRAPHIC INFORMATION
United States                             $594,089      $ 545,597       $531,556
Canada                                      18,888         17,991         12,361
Europe, primarily Belgium                   82,547         72,054         66,746
                                          --------      ---------       --------
   Total                                  $695,524      $ 635,642       $610,663
                                          ========      =========       ========
LONG-LIVED ASSETS
GEOGRAPHIC INFORMATION
United States                             $364,864      $ 385,120       $390,099
Canada                                       9,552         10,469         11,555
Europe                                      24,850         24,087         23,322
                                          --------      ---------       --------
   Total                                  $399,266      $ 419,676       $424,976
                                          ========      =========       ========
</TABLE>


                                       62
<PAGE>
                                                                TEKNI-PLEX, INC.

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

<TABLE>
<S>                              <C>
                                 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
                                 July 1, 2005 no single customer represented at
                                 least 10% of sales.

                                 Garden hose products represented 25%, 30% and
                                 33% of sales in fiscal years 2005, 2004 and
                                 2003, respectively. Foam egg cartons
                                 represented 15%, 12% and 13% of sales in fiscal
                                 year 2005, 2004 and 2003, 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      Tekni-Plex, Inc. issued 12 3/4% Senior
     CONSOLIDATING FINANCIAL     Subordinated Notes in June 2000 and May 2002
     STATEMENTS                  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 July 1,
2005

                                                                             Non-
                                                   Issuer    Guarantors   Guarantors     TOTAL
                                                  --------   ----------   ----------   --------
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>


                                       63
<PAGE>
                                                                TEKNI-PLEX, INC.

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

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)    (11,005)       2,927             --      (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>

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>


                                       64
<PAGE>
                                                                TEKNI-PLEX, INC.

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

Condensed Consolidating Statement of Operations - For the year ended July 2,
2004, restated

<TABLE>
<CAPTION>
                                                                             Non-
                                                   Issuer    Guarantors   Guarantors     TOTAL
                                                  --------   ----------   ----------   --------
<S>                                               <C>        <C>          <C>          <C>
Sales, net                                        $147,923    $397,674      $90,045    $635,642
Cost of sales                                      109,294     353,557       67,521     530,372
                                                  --------    --------      -------    --------
Gross profit                                        38,629      44,117       22,524     105,270
Selling, general and administrative                 36,056      24,552        8,551      69,159
Integration expense                                  1,717       6,058           --       7,775
                                                  --------    --------      -------    --------
Income from operations                                 856      13,507       13,973      28,336
Interest expense, net                               84,363         (36)         124      84,451
Unrealized loss on derivative contract             (10,654)         --           --     (10,654)
Other expense (income)                                (847)     (1,734)       3,186         605
                                                  --------    --------      -------    --------
Income (loss) before provision for income taxes    (72,006)     15,277       10,663     (46,066)
Provision (benefit) for income taxes                 6,417       1,605        3,099      11,121
                                                  --------    --------      -------    --------
Net income (loss)                                 $(78,423)   $ 13,672      $ 7,564    $(57,187)
                                                  ========    ========      =======    ========
</TABLE>

Condensed Consolidating Balance Sheet - at July 2, 2004, restated

<TABLE>
<CAPTION>
                                                                              Non-
                                                   Issuer     Guarantors   Guarantor    Eliminations     TOTAL
                                                 ----------   ----------   ---------   -------------   ---------
<S>                                              <C>          <C>          <C>         <C>             <C>
CURRENT ASSETS                                   $  214,523    $214,523    $ 71,107     $        --    $ 323,987
Property, plant and equipment, net                   43,178     113,335      26,236              --      182,749
Intangible assets                                   (19,936)    216,404      10,810              --      207,278
Investment in subsidiaries                          560,638          --          --        (560,638)          --
Deferred financing costs, net                         9,536         116          --              --        9,652
Deferred taxes                                       30,032      (9,205)     (2,034)             --       18,793
Other long-term assets                              339,165     257,456        (456)       (594,961)       1,204
                                                 ----------    --------    --------     -----------    ---------
   TOTAL ASSETS                                  $1,000,970    $792,629    $105,663     $(1,155,599)   $ 743,663
                                                 ==========    ========    ========     ===========    =========
CURRENT LIABILITIES                                  26,277      47,577      24,276              --       98,130
Long-term debt                                      727,577          --       4,309              --      731,886
Other long-term liabilities                         343,537     247,947      22,178        (594,961)      18,701
                                                 ----------    --------    --------     -----------    ---------
   TOTAL LIABILITIES                              1,097,391     295,524      50,763        (594,961)     848,717
                                                 ----------    --------    --------     -----------    ---------
Additional paid-in capital                          210,499     296,783      16,765        (313,529)     210,518
Retained earnings (accumulated deficit)             (85,030)    207,550      35,540        (247,109)     (89,049)
Accumulated other comprehensive loss                 (1,367)     (7,228)      2,595              --       (6,000)
Treasury stock                                     (220,523)         --          --              --     (220,523)
                                                 ----------    --------    --------     -----------    ---------
   TOTAL STOCKHOLDERS' DEFICIT                      (96,421)    497,105      54,900        (560,638)    (105,054)
                                                 ----------    --------    --------     -----------    ---------
   TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   $1,000,970    $792,629    $105,663     $(1,155,599)   $ 743,663
                                                 ==========    ========    ========     ===========    =========
</TABLE>


                                       65
<PAGE>
                                                                TEKNI-PLEX, INC.

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

Condensed Consolidating Cash Flows - For the year ended July 2, 2004, restated

<TABLE>
<CAPTION>
                                                                                   Non-
                                                         Issuer    Guarantors   Guarantors     TOTAL
                                                       ---------   ----------   ----------   ---------
<S>                                                    <C>         <C>          <C>          <C>
Net cash provided by (used in) operating activities:   $ (13,327)   $   (942)    $ 6,905     $  (7,364)
                                                       ---------    --------     -------     ---------
Cash flows from investing activities:
   Acquisitions                                               --      (5,780)         --        (5,780)
   Capital expenditures                                   (7,459)    (16,851)     (5,162)      (29,472)
   Additions to intangibles                                   --       1,222         124         1,346
   Cash proceeds on sale of assets                          (220)          --          --         (220)
                                                       ---------    --------     -------     ---------
Net cash used in investing activities                     (7,679)    (21,409)     (5,038)      (34,126)
                                                       ---------    --------     -------     ---------
Cash flows from financing activities:
   Net borrowings (repayment) under line of credit       (15,000)         --          --       (15,000)
   Proceeds from long-term debt                          267,438          --          --       267,438
   Repayment of long-term debt                          (248,511)         --        (147)     (248,658)
   Proceeds from capital contribution                     22,500          --          --        22,500
   Debt financing                                         (2,767)         --          --        (2,767)
Change in intercompany accounts                          (11,664)     11,624          40            --
                                                       ---------    --------     -------     ---------
Net cash provided (used in) by financing activities       11,996      11,624        (107)       23,513
                                                       ---------    --------     -------     ---------
Effect of exchange rate changes on cash                       --          --        (350)         (350)
                                                       ---------    --------     -------     ---------
Net increase (decrease) in cash                           (9,010)    (10,727)      1,410       (18,327)
Cash, beginning of period                                 20,900      19,650       7,512        48,062
                                                       ---------    --------     -------     ---------
Cash, end of period                                    $  11,890    $  8,923     $ 8,922     $  29,735
                                                       =========    ========     =======     =========
</TABLE>

Condensed Consolidating Statement of Operations - For the year ended June 27,
2003, restated

<TABLE>
<CAPTION>
                                                                             Non-
                                                   Issuer    Guarantors   Guarantors     TOTAL
                                                  --------   ----------   ----------   --------
<S>                                               <C>        <C>          <C>          <C>
Sales, net                                        $149,202    $382,354      $79,107    $610,663
Cost of sales                                      104,251     297,029       58,701     459,981
                                                  --------    --------      -------    --------
Gross profit                                        44,951      85,325       20,406     150,682
Selling, general and administrative                 28,709      25,835        7,056      61,600
Integration expense                                     --      11,164           --      11,164
                                                  --------    --------      -------    --------
Income from operations                              16,242      48,326       13,350      77,918
Interest expense, net                               71,168         (61)         159      71,266
Unrealized loss on derivative contract               1,997          --           --       1,997
Other expense (income)                                (825)     (1,851)       2,145        (531)
                                                  --------    --------      -------    --------
Income (loss) before provision for income taxes    (56,098)     50,238       11,046       5,186
Provision (benefit) for income taxes               (22,439)     20,330        4,415       2,306
                                                  --------    --------      -------    --------
Net income (loss)                                 $(33,659)   $ 29,908      $ 6,631    $  2,880
                                                  ========    ========      =======    ========
</TABLE>


                                       66
<PAGE>
                                                                TEKNI-PLEX, INC.

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

Condensed Consolidating Cash Flows - For the year ended June 27, 2003, restated

<TABLE>
<CAPTION>
                                                                     Non-
                                           Issuer    Guarantors   Guarantors     TOTAL
                                          --------   ----------   ----------   --------
<S>                                       <C>         <C>          <C>         <C>
Net cash provided by (used in)
   operating activities:                  $(33,777)   $ 42,558     $ 6,248     $ 15,029
                                          --------    --------     -------     --------
Cash flows from investing activities:
   Acquisitions                                 --     (16,762)         --      (16,762)
   Capital expenditures                    (11,726)    (15,865)     (4,641)     (32,232)
   Additions to intangibles                   (149)         --        (851)      (1,000)
                                          --------    --------     -------     --------
Net cash used in investing activities      (11,875)    (32,627)     (5,492)     (49,994)
                                          --------    --------     -------     --------
Cash flows from financing activities:
   Net borrowings (repayment) under
      line of credit                        45,000          --          --       45,000
   Proceeds from long-term debt                 --          --       1,116        1,116
   Repayment of long-term debt              (9,330)         --        (425)      (9,755)
   Proceeds from capital contribution       17,842          --          --       17,842
   Change in intercompany accounts           4,229        (941)     (3,288)         --
                                          --------    --------     -------     --------
Net cash provided by financing
   activities                               57,741        (941)     (2,597)      54,203
                                          --------    --------     -------     --------
Effect of exchange rate changes on cash         --          --         625          625
                                          --------    --------     -------     --------
Net increase (decrease) in cash             12,089       8,990      (1,216)      19,863
Cash, beginning of year                      9,035      10,660       8,504       28,199
                                          --------    --------     -------     --------
Cash, end of year                         $ 21,124    $ 19,650     $ 7,288     $ 48,062
                                          ========    ========     =======     ========
</TABLE>

16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

In the fourth quarter of 2005, the Company identified certain overstated
inventory at its American Gasket and Rubber Division which resulted in a
non-cash charge to operations of $2.8 million in 2005 and $2.7 million in 2004.
The table below reflects the restatement of the interim periods for these
accounting errors, none of which were material to any specific period.

<TABLE>
<CAPTION>
                                                                            Fourth
                                            First    Second      Third     Quarter
                                           Quarter   Quarter    Quarter     (2004
                                           restated  restated   restated   restated)
                                          --------   --------   --------   ---------
<S>                                       <C>        <C>        <C>        <C>
2005
Net sales                                 $143,461   $138,247   $194,215   $219,601
Gross profit                                28,415     25,123     27,257     14,559
Income (loss) from operations                9,969      8,704      9,750     (4,237)
Net income (loss)                           (9,884)   (11,722)   (10,223)   (49,650)(2)
2004
Net sales                                 $136,058   $122,712   $169,133   $207,739
Gross profit restated                       29,100     28,476     43,774      3,920
Income (loss) from operations restated      12,558     12,952     24,908    (22,082)
Net income (loss) restated                  (1,869)    (6,066)     2,544    (51,796)(1)
                                          ========   ========   ========   ========
</TABLE>

<TABLE>
<S>                              <C>
                                 Fluctuations in net sales are due primarily to
                                 seasonality in a number of product lines,
                                 particularly garden hose and irrigation hose
                                 products. Income from operations in the fourth
                                 quarter of 2004 was adversely impacted by
                                 rapidly rising raw material costs, particularly
                                 at our garden hose operations where we could
                                 not pass these increased costs through to our
                                 customers. As a result, we recorded a $4.6
                                 million write-off of garden hose inventory to
                                 reflect market values that were below cost at
                                 year-end. In addition, the Company increased
                                 its reserve on deferred taxes by approximately
                                 $15,000 to reserve for deferred taxes generated
                                 by 4th quarter losses in 2004.

                                 (1)  The fourth quarter of 2004 includes
                                      certain fourth quarter adjustments
                                      including the following;

                                      (a)  a $10.0 million impairment of
                                           goodwill associated with our other
                                           operations; and

                                      (b)  a change in our estimates of our
                                           sales allowances that increased our
                                           allowances by $8.0 million;

                                      (c)  a $7.0 million reduction in our
                                           deferred tax asset.

                                 (2)  The fourth quarter of 2005 includes a
                                      $23.1 million reduction in our deferred
                                      tax asset.


</TABLE>


                                       67
<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 October 24, 2005 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 July 1, 2005, July 2, 2004, and June 27, 2003 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
October 24, 2005


                                       68
<PAGE>
                                                                TEKNI-PLEX, INC.

                                  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                                          (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                              Charged to
                                                            Balance at         Costs and                     BALANCE AT END
                                                       Beginning of Period   Expenses (1)   Deductions (2)    OF PERIOD(3)
                                                       -------------------   ------------   --------------   --------------
<S>                                                    <C>                   <C>            <C>              <C>
YEAR ENDED JUNE 27, 2003
   Accounts receivable allowance for possible losses          $1,671            $2,350          $  223           $3,798
                                                              ======            ======          ======           ======
YEAR ENDED JULY 2, 2004
   Accounts receivable allowance for possible losses          $3,798            $2,316          $  786           $5,328
                                                              ======            ======          ======           ======
YEAR ENDED JULY 1, 2005
   Accounts receivable allowance for possible losses          $5,328            $1,970          $1,234           $6,064
                                                              ======            ======          ======           ======
</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.


                                       69