<PAGE> 1
As filed with the Securities and Exchange Commission on August 11, 1997.
REGISTRATION NO. 333-6711
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
LAMINATING TECHNOLOGIES, INC.
(Name of Small Business Issuer in Its Charter)
DELAWARE 2671 58-2044990
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Code Number)
Organization)
1160 HIGHTOWER TRAIL
ATLANTA, GEORGIA 30350-2910
(770) 518-6010
(Address and Telephone Number of Principal Executive Offices)
MICHAEL E. NOONAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
1160 HIGHTOWER TRAIL
ATLANTA, GEORGIA 30350-2910
(770) 518-6010
(Name, Address and Telephone Number of Agent for Service)
---------------
COPIES TO:
DAVID S. COOPER, ESQ.
SCHNADER HARRISON SEGAL & LEWIS LLP
303 PEACHTREE STREET, N.E. / SUITE 2800
ATLANTA, GEORGIA 30308-3252
(404) 215-8100
---------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |X|
Pursuant to Rule 416, there are also being registered such additional
shares as may become issuable pursuant to anti-dilution provisions of Class A
Warrants and Class B Warrants, as defined herein.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
LAMINATING TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM
NUMBER
FORM SB-2 ITEM CAPTION FORM SB-2 LOCATION IN PROSPECTUS
--------- ---------------------- ----------------------
<S> <C> <C>
1. Front of Registration Statement and Outside Front Outside Front Cover Page of Prospectus
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages of
Prospectus Prospectus; Additional Information
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Plan of Distribution
6. Dilution Not Applicable
7. Selling Security Holders Concurrent Offering by Selling Security
Holders
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Business -- Legal Proceedings
10. Director, Executive Officers, Promoters and Management
Control Persons
11. Security Ownership of Certain Beneficial Owners Principal Stockholders
and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Not Applicable
14. Disclosure of Commission Position on Management -- Limitation of Liability and
Indemnification for Securities Act Liabilities Indemnification Matters
15. Organization within Last Five Years Certain Transactions
16. Description of Business Business
17. Management's Discussion and Analysis of Plan or Management's Discussion and Analysis of
Operation Financial Condition and Results of Operations
18. Description of Property Business -- Property
19. Certain Relationships and Related Transactions Certain Transactions
20. Market for Common Equity and Related Price Range of Common Stock; Dividend
Stockholder Matters Policy
21. Executive Compensation Management
22. Financial Statements Selected Financial Data; Financial Statements
23. Changes in and Disagreements with Accountants Not Applicable
on Accounting and Financial Disclosure
</TABLE>
<PAGE> 3
EXPLANATORY NOTE
This Post Effective Amendment No. 1 to Form SB-2 Registration Statement
covers the registration of (i) the offer and sale of Common Stock, $.01 par
value ("Common Stock") of LAMINATING TECHNOLOGIES, INC., a Delaware corporation
(the "Company") and redeemable Class B Warrants of the Company ("Class B
Warrants"), pursuant to outstanding redeemable Class A Warrants of the Company
("Class A Warrants") and Common Stock pursuant to Class B Warrants of the
Company, both of which Class A Warrants and Class B Warrants were issued in the
Company's underwritten initial public offering in October 1996 ("1996 IPO" or
"1996 Offering"); and (ii) the resale of Class A Warrants by certain holders
thereof who acquired such securities in a private transaction, which occurred
concurrently with the 1996 Offering, Class B Warrants underlying such Class A
Warrants, and Common Stock issuable upon the exercise of such Class A and Class
B Warrants.
The first of these transactions involves the registration of (1) up to
1,955,000 units (the "Units"), each Unit consisting of one share of Common Stock
and one Class B Warrant for sale by the Company upon the exercise of Class A
Warrants, and (2) an additional 3,910,000 shares of Common Stock issuable upon
the exercise of outstanding Class B Warrants or the exercise of Class B Warrants
that are issued upon the exercise of Class A Warrants that are contained in the
Units. The second of these transactions involves the registration of an
additional 997,500 Class A Warrants, for resale by the holders thereof (the
"Remaining Selling Securityholder Class A Warrants"), and 997,500 Class B
Warrants (the "Remaining Selling Securityholder Class B Warrants") underlying
the Remaining Selling Securityholder Class A Warrants, and 1,995,000 shares of
Common Stock (the "Remaining Selling Securityholder Stock") underlying the
Remaining Selling Securityholder Class A Warrants and the Remaining Selling
Securityholder Class B Warrants. The Remaining Selling Securityholder Class A
Warrants were issued upon the closing of the 1996 Offering in exchange for
warrants issued in a private placement by the Company completed in April and May
of 1996. The Remaining Selling Securityholder Class A and Class B Warrants
became freely tradeable 270 days from the date of the final Prospectus included
in the Registration Statement of the 1996 Offering. The Remaining Selling
Securityholder Class A Warrants, the Remaining Selling Securityholder Class B
Warrants and the Remaining Selling Securityholder Stock are sometimes
collectively referred to herein as the "Remaining Selling Securityholder
Securities."
Following the Prospectus for the offering made pursuant to outstanding
Class A Warrants and Class B Warrants are the pages of the Prospectus relating
solely to the resale of the Remaining Selling Securityholder Securities:
alternate front and back cover pages and sections entitled "Concurrent Offering"
and "Selling Securityholders and Plan of Distribution," to be used in lieu of
the sections entitled "Concurrent Offering by Selling Securityholders" and "Plan
of Distribution." All other sections of the Prospectus for the offering made
pursuant to the outstanding Warrants are to be used in the Prospectus relating
to the resale of the Remaining Selling Securityholder Securities.
The Registration Statement on Form SB-2 which is amended by this
Post-Effective Amendment also registered the issuance of options issued to the
Company's underwriter in its 1996 Offering, as well as the issuance of
underlying securities upon the exercise of such options. This Post-Effective
Amendment is not intended to deregister any of the securities so registered, and
such Registration Statement, as amended hereby, is intended to continue the
registration of such transactions.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 4
PROSPECTUS
LAMINATING TECHNOLOGIES, INC.
1,955,000 UNITS, EACH CONSISTING OF ONE SHARE OF COMMON
STOCK AND ONE REDEEMABLE CLASS B WARRANT,
ISSUABLE UPON THE EXERCISE OF REDEEMABLE CLASS A WARRANTS
AND
3,910,000 SHARES OF COMMON STOCK,
ISSUABLE UPON THE EXERCISE OF REDEEMABLE CLASS B WARRANTS
Laminating Technologies, Inc., a Delaware corporation (the "Company"),
hereby offers: (i) 1,955,000 Units ("Units") issuable upon the exercise of
1,955,000 Class A Warrants (the "Class A Warrants"), each Unit consisting of one
share of Common Stock, $.01 par value, ("Common Stock") and one redeemable Class
B Warrant (the "Class B Warrants"); and (ii) 3,910,000 shares of Common Stock
issuable upon the exercise of Class B Warrants which are presently outstanding
and the Class B Warrants issuable upon the exercise of the Class A Warrants.
The shares of Common Stock and the Class B Warrants included in the Units will
be immediately separately transferable and the Units will not trade as a
separate security. In October 1996, 1,700,000 of the outstanding Class A
Warrants and Class B Warrants (collectively, the "Warrants") were issued in
connection with the Company's 1996 initial public offering of 1,700,000 Units
("IPO Units"), with each IPO Unit consisting of one share of Common Stock, one
Class A Warrant and one Class B Warrant. Additionally, D.H. Blair Investment
Banking Corp. ("Blair"), as the underwriter of the Company's 1996 initial public
offering, exercised its over-allotment to purchase an additional 255,000 IPO
Units. The Company also registered in the 1996 initial public offering 997,500
Class A Warrants (the "Selling Securityholder Class A Warrants"), 997,500 Class
B Warrants (the "Selling Securityholder Class B Warrants") underlying the
Selling Securityholder Class A Warrants, and 1,995,000 shares of Common Stock
underlying the Selling Securityholder Class A and Class B Warrants, on behalf of
certain selling securityholders (the "Selling Securityholders"). There are
1,955,000 Class A Warrants outstanding and 1,955,000 Class B Warrants
outstanding as of the date of this Prospectus (excluding the 997,500 Selling
Securityholder Class A and Class B Warrants that were originally issued to the
Selling Securityholders and an option to Blair to purchase 170,000 IPO Units for
an exercise price of $6.00 ("Unit Purchase Option")). Assuming the exercise of
all Class A Warrants, there will be 1,955,000 additional Class B Warrants
issuable, for a total of 3,910,000 Class B Warrants. Each Class A Warrant
entitles the holder to purchase one Unit at an exercise price of $6.50, subject
to adjustment. Each Class B Warrant entitles the holder to purchase, at an
exercise price of $8.75, subject to adjustment, one share of Common Stock. The
Class A Warrants and the Class B Warrants are exercisable until October 8, 2001.
The Warrants are subject to redemption by the Company for $.05 per Warrant, upon
30 days' written notice, if the average closing bid price of the Common Stock
exceeds $9.10 per share with respect to the Class A Warrants and $12.25 per
share with respect to the Class B Warrants (subject to adjustment in each case)
for 30 consecutive business days ending within 15 days of the date the Warrants
are called for redemption.
--------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
AND SUBSTANTIAL IMMEDIATE DILUTION. SEE "RISK FACTORS".
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS AUGUST _____, 1997.
(continued on following page)
<PAGE> 5
The Company has agreed to pay to Blair a solicitation fee (the
"Solicitation Fee") equal to 5% of the exercise prices in connection with the
exercise of Warrants under certain conditions. See "Plan of Distribution." The
exercise prices of the Warrants were determined by negotiation between the
Company and Blair, and are not necessarily related to the Company's asset value,
net worth or other criteria of value.
The Company's IPO Units, Common Stock, Class A Warrants and Class B
Warrants are traded on the Nasdaq SmallCap Market under the symbols LAMTU, LAMT,
LAMTW, and LAMTZ, respectively. On July 29, 1997 closing prices of the IPO
Units, Common Stock, Class A Warrants and Class B Warrants were $11.50, $6.25,
$2.625 and $2.125, respectively.
<TABLE>
<CAPTION>
===========================================================================================================
WARRANT EXERCISE PRICE WARRANT SOLICITATION FEE(1) PROCEEDS TO COMPANY
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER CLASS A WARRANT $ 6.50 $ 0.325 $ 6.175
- -----------------------------------------------------------------------------------------------------------
TOTAL(2,3,4) $12,707,500.00 $ 635,375.00 $12,072,125.00
===========================================================================================================
PER CLASS B WARRANT $ 8.75 $ 0.4375 $ 8.3125
- -----------------------------------------------------------------------------------------------------------
TOTAL(2,3,4) $34,212,500.00 $1,710,625.00 $32,501,875.00
===========================================================================================================
</TABLE>
(1) Represents Solicitation Fee payable to Blair pursuant to the Warrant
Agreement between the Company and Blair in certain circumstances. See "Plan of
Distribution."
(2) Assumes the exercise of all Class A Warrants and Class B Warrants.
There can be no assurance that any of the Warrants will be exercised.
(3) Does not include the Unit Purchase Option sold to Blair during the
1996 IPO to purchase 170,000 IPO Units and does not include the Selling
Securityholder Securities.
(4) Excludes miscellaneous legal, accounting, printing and other
expenses in the approximate amount of $16,000.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
-2-
<PAGE> 6
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is
qualified in its entirety by the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Unless otherwise indicated, the information in this Prospectus assumes no
exercise of any other outstanding warrants or options. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, those discussed in the "Risk Factors."
THE COMPANY
Laminating Technologies, Inc. (the "Company") is a development stage
company which has been formed to research, develop, design and market packaging
and specialty display products that are manufactured using the Company's
proprietary processing method ("LTI Processed(TM)"). LTI Processed(TM) is a
procedure by which polyester film is laminated onto single thickness paper
("linerboard") prior to corrugation. The Company believes that the LTI
Processed(TM) method is the only process currently available in which polyester
film can be laminated onto linerboard such that the resulting laminate can
withstand the heat and stress of corrugation. This procedure results in a
packaging material that the Company believes is physically superior, more
attractive and potentially more cost-effective than many currently existing
packaging materials such as polystyrene (styrofoam), plastic, metal and certain
corrugated cardboard products.
The LTI Processed(TM) method can be utilized to produce a wide variety
of packaging products and specialty displays. To date, the Company has produced
a number of prototype products, including bakery dessert boxes, coolers, frozen
food shippers, point of purchase displays, pizza delivery boxes, medical
product/specimen shippers and microwavable food disks used as pie plates and
pizza slice trays. The Company believes that these products, together with other
potential LTI Processed(TM) products, are capable of improving upon existing
packaging products by reducing or eliminating certain limitations associated
with such products. For example, the Company believes that LTI Processed(TM)
products may be leakproof, resistant to a variety of solvent and petroleum-based
chemicals, thermally insulating, stronger and may have a higher bursting
strength than conventional corrugated products. The Company also believes that
the LTI Processed(TM) method permits higher quality printing and results in more
attractive packaging than corrugated materials printed with traditional printing
processes. Such aesthetic qualities have become more important in recent years
as retailers have significantly increased the extent to which they display and
sell products in the same packaging in which they are shipped. In addition to
the LTI Processed(TM) products, on April 17, 1997, the Company announced "BAKE'N
SHIP(TM)", a new product line, which is available for sale to the baking
industry. BAKE'N SHIP(TM) utilizes the Company's proprietary (patent pending)
process, resulting in a new material which is ovenable and freezable with the
strength and structure of corrugated material. This is the Company's first
commercial product. The new product line can streamline the process by which
bakery products are produced by allowing the baker to bake, freeze, ship and
display in one package. In addition, certain versions of the product line
provide an appealing presentation media for baked goods.
In addition, the Company believes that while LTI Processed(TM) material
may be more costly to produce than traditional corrugated board, it is generally
less expensive than certain other non-corrugated packaging products, including
styrofoam, metal and plastic. Moreover, because LTI Processed(TM) containers
often can be reused, and can be collapsed and stored pending reuse (thereby
requiring less storage space than containers made from materials such as
styrofoam, metal and plastic), they may be more cost-effective than other
packaging materials, including traditional corrugated materials. Based on these
potential performance advantages and cost savings, the Company believes that LTI
Processed(TM) packaging materials may be preferred to many packaging products
currently marketed by other suppliers.
The Company's strategy is to focus principally on: (i) designing,
developing and marketing value-added, niche LTI Processed(TM) products directly
to end-users; and (ii) leveraging its resources by establishing strategic
alliances with vertically integrated corrugators ("converters") for whom the
Company intends to supply LTI
-3-
<PAGE> 7
Processed(TM) linerboard for further manufacture (i.e., printing, die-cutting,
etc.) and sale by such converters. The Company may in the future also seek to
license its LTI Processed(TM) technology to manufacturers. With the exception of
design activities and certain printing operations, the Company currently intends
to out-source production to laminators or converters with whom the Company
expects to establish informal relationships.
Since its inception, the Company has focused primarily on research and
development, has had only limited sales and has only recently begun to focus on
broader-based marketing. Most of such sales did not involve significant orders
and the Company believes that these customers were primarily evaluating the
commercial application of LTI Processed(TM) products. Moreover, further
development of the LTI Processed(TM) method may be necessary to satisfy the
requirements of specific end-users or strategic partners.
The Company was incorporated in Georgia in March 1993 as New Cooler
Corp. and subsequently changed its name to Laminating Technologies, Inc. In
April 1996, the Company was merged into Laminating Merger Corporation, a
Delaware corporation, which changed its name to Laminating Technologies, Inc.
The Company's executive offices are located at 1160 Hightower Trail, Atlanta,
Georgia 30350-2910 and its telephone number is (770) 518-6010.
THE OFFERING
Securities Offered
by the Company: 1,955,000 Units, issuable upon the exercise of
1,955,000 Class A Warrants, each Unit consisting of
one share of Common Stock and one Class B Warrant;
3,910,000 shares of Common Stock, issuable upon
the Exercise of outstanding Class B Warrants and
Class B Warrants issuable upon the exercise of the
Class A Warrants. Each Class A Warrant is
exercisable at any time on or before October 8, 2001
to purchase one share of Common Stock and one Class
B Warrant at an exercise price of $6.50, subject to
adjustment. Each Class B Warrant is exercisable any
time on or before October 8, 2001 to purchase one
share of Common Stock for $8.75, subject to
adjustment. The Warrants are subject to redemption
in certain circumstances. The Common Stock and
Class A and Class B Warrants will be separately
tradable immediately upon issuance. Blair may
exercise its Unit Purchase Option for 170,000 IPO
Units for $6.00 per unit during the three year period
beginning October 9, 1998. Each IPO Unit consists of
one share of Common Stock, one Class A Warrant and
one Class B Warrant of the Company. See "Description
of Securities."
Securities Offered
Concurrently by
Selling Securityholders: 997,500 Class A Warrants; 997,500 Class B Warrants
issuable upon exercise of these Class A Warrants and
1,995,000 shares of Common Stock issuable upon
exercise of these Class A Warrants and Class B
Warrants. See "Concurrent Offering."
Common Stock
Outstanding
March 31, 1997: 3,185,000 shares(1,2, 3)
Use of Proceeds: The Company intends to use the net proceeds received
upon the exercise of the Warrants, if any, for
general corporate purposes and working capital to
support anticipated growth including research and
development programs and continuing product
development. See "Use of Proceeds."
-4-
<PAGE> 8
Nasdaq Symbols(4)
Units............... LAMTU
Common Stock........ LAMT
Class A Warrants.... LAMTW
Class B Warrants.... LAMTZ
Risk Factors: The securities offered hereby involve a high
degree of risk and immediate substantial
dilution to public investors. An investment
in the Units offered hereby should be made
only after a careful consideration of the
various risks which may affect the Company
and its operations. See "Risk Factors."
- -----------------------
(1) Excludes: (i) an aggregate of 1,995,000 shares of Common Stock
reserved for issuance upon exercise of the Selling Securityholder Warrants; (ii)
250,000 shares of Common Stock reserved for issuance under the Company's Amended
and Restated 1996 Stock Option Plan (the "Plan"), under which, as of March 31,
1997, options to purchase 170,000 shares of Common Stock were outstanding at
exercise prices of $4.00 or $5.00 per share; and (iii) 36,897 shares of Common
Stock issuable upon exercise of warrants exercisable at $2.71 per share issued
to Blair in March 1994. For a description of the voting and other rights of the
Common Stock, see "Description of Securities -- Common Stock."
(2) Includes 410,000 shares of Common Stock (the "Escrow Shares") which
have been deposited into escrow by the holders thereof. The Escrow Shares are
subject to cancellation and will be contributed to the capital of the Company if
the Company does not attain certain earnings levels or the market price of the
Company's Common Stock does not achieve certain levels. If such earnings or
market price levels are met, the Company will record a substantial non-cash
charge to earnings, for financial reporting purposes, as compensation expense
relating to the value of the Escrow Shares released to Company officers and
employees. See "Risk Factors -- Charges and Potential Charges to Earnings,"
"Capitalization" and "Principal Stockholders."
(3) Excludes (i) 5,865,000 shares of Common Stock issuable upon exercise
of the Warrants which are components of the Units offered hereby; and (ii) an
aggregate of 680,000 shares of Common Stock issuable upon exercise of the Unit
Purchase Option and the Warrants included therein. See "Plan of Distribution."
(4) Notwithstanding quotation on the Nasdaq SmallCap Market, there can
be no assurance that an active trading market for the Company's securities will
develop or, if developed, that it will be sustained.
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-5-
<PAGE> 9
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, APRIL 19, 1993(1)
------------------------------ THROUGH
1996 1997 MARCH 31, 1997
================================================
<S> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net Sales...................... $ 119,412 $ 23,918 $ 365,703
Gross (loss) profit............ (158,042) 7,167 (666,821)
Selling, general and
administrative expenses 1,042,290 1,779,339 5,082,384
------------ ------------ ------------
Operating loss................. (1,200,332) (1,772,172) (5,749,205)
Net (loss)..................... (1,228,745) (2,408,710) (6,528,731)
Cumulative dividend on
preferred stock................ 50,000 25,000 150,000
------------ ------------ ------------
Net (loss) attributable to
common stockholders............ $ (1,278,745) $ (2,433,710) $ (6,678,731)
============ ============ ============
Net (loss) per share of
common stock................... $ (2.02) $ (1.47)
============ ============
Weighted average number of
common shares outstanding......
632,719 1,667,821
============ ============
</TABLE>
- --------------------------
(1) Commencement of Operations
<TABLE>
<CAPTION>
BALANCE SHEET DATA: MARCH 31, 1997
--------------
<S> <C>
Working capital.......................................... $ 4,746,548
Total assets............................................. 5,303,006
Total liabilities........................................ 347,234
Deficit accumulated during development stage............. (6,784,683)
-----------
Total stockholders' equity .............................. 4,955,772
</TABLE>
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-6-
<PAGE> 10
RISK FACTORS
The securities offered hereby are speculative in nature and an
investment in the securities offered hereby involves a high degree of risk. In
addition to the other information contained in this Prospectus, prospective
investors should carefully consider the following risk factors in evaluating
whether to purchase the securities offered hereby. Moreover, prospective
investors are cautioned that the statements in this Prospectus that are not
descriptions of historical facts may be forward looking statements that are
subject to risks and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors.
History of Operating Losses; Anticipated Future Losses; Working Capital
Deficit. At March 31, 1997, the Company had an accumulated deficit of
$6,784,683, is continuing to incur significant operating losses and expects to
incur substantial and increasing operating losses for the foreseeable future.
Such losses and deficit have been and will continue to be principally the result
of costs associated with the Company's research, development, design, sales and
marketing activities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation" and the financial statements included
elsewhere in this Prospectus.
Development Stage Company; Limited History of Operations. The Company
was organized in March 1993 and is currently in the development stage. While it
has conducted limited research and development and sales and marketing
activities, it has not generated significant revenues and may experience many of
the problems, delays, expenses and difficulties commonly encountered by early
stage companies, many of which are beyond the Company's control. These include,
but are not limited to, unanticipated problems relating to product development,
testing, manufacturing, marketing, competition and regulatory compliance,
included but not limited to possible regulations governing food packaging and
recyclability, as well as additional costs and expenses that may exceed current
estimates. There can be no assurance that the Company will successfully develop
and commercialize any products, generate any revenues or ever achieve profitable
operations. Additionally, the Company has never produced LTI Processed(TM)
materials under the conditions and in the volume that will be required to be
profitable and cannot predict all of the manufacturing difficulties that may
arise. Given the particular properties of LTI Processed(TM) materials, the
Company has in the past been forced to modify package construction to
accommodate unforeseen design problems, including those associated with excess
heat and cold retention in food service packaging. Thus, the Company's proposed
products may require significant further research, development, design and
testing, as well as regulatory clearances, prior to larger-scale
commercialization. There can be no assurance that the Company's products will be
successfully marketed, prove to be safe and practical, receive regulatory
approvals if required (including, but not limited to, possible domestic or
foreign requirements regarding packaging used in food service as well as
possible domestic or foreign requirements regarding the recyclability of the
Company's materials), or be capable of being produced in commercial quantities
at reasonable costs.
Need for Significant Additional Funds. The Company's cash requirement
may vary materially from those currently anticipated due to product development
programs, relationships with strategic partners, if any, changes in the
direction of the Company's activities and other factors. The Company has no
commitments for any future funding and there can be no assurance that the
Company will be able to obtain additional financing in the future from either
debt or equity financings, collaborative arrangements or other sources on
acceptable terms. Any future financing may result in significant dilution to
investors. If the Company is unable to obtain the necessary financing, it will
be required to significantly curtail its activities or cease operations.
Uncertainty of Market Acceptance. The success of LTI Processed(TM)
products will require the Company to secure production and marketing alliances
within the highly competitive corrugated packaging market, which is
characterized by manufacturers who operate at very low profit margins and by end
users who often seek the lowest packaging and material costs possible.
Additionally, much of the corrugated packaging industry is characterized by
long-standing business relationships between manufacturer and end users. The
Company will likely encounter resistance from end users reluctant to incur
possible additional costs associated with LTI Processed(TM) products (compared
to non-laminated corrugated products and other materials). In addition, the use
of LTI Processed(TM) products may require that end users change both their
packaging material and their source of packaging material, and
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<PAGE> 11
perhaps incur the further cost and inconvenience of interrupting their
production line to accommodate these changes. The Company has not conducted any
market studies as to the commercial viability of LTI Processed(TM) products and
there can be no assurance that the Company will be able to successfully
demonstrate to manufacturers and end users that the properties of LTI
Processed(TM) products justify the additional costs and/or burdens associated
with such products.
Need for Independent Laboratory Testing. The Company currently has no
independent laboratory studies or test results to verify its claims as to the
physical properties of LTI Processed(TM) materials. Because such independent
tests are frequently relied upon within the packaging industry, the Company
anticipates that its lack of objective corroboration will likely hamper future
marketing efforts. To date, the Company has had only limited success in
marketing LTI Processed(TM) materials and has encountered difficulties in
penetrating certain segments of the packaging industry where, for example, the
strength and insulating properties of LTI Processed(TM) products would be
critical but where manufacturers and end-users demand objective confirmation of
these properties. However there can be no assurance of when or if such tests
will be successfully concluded or whether such tests will confirm the Company's
beliefs about the physical properties of its products. Should any such
laboratory tests, if performed, fail to support the Company's beliefs regarding
its products, the marketability of such products will be adversely affected.
Dependence on Suppliers; Shortages of Raw Materials and Price
Fluctuations. The Company does not manufacture the raw material that is used in
its products and thus it depends on its raw material suppliers. The Company does
not have any long-term supply or distribution agreements with any of its
suppliers. The Company's success will depend in part on its ability to maintain
relationships with its current suppliers and to develop new supplier
relationships, as to which there can be no assurance. There can be no assurance
that the loss of, or a significant disruption in the relationship with, one or
more of the Company's suppliers would not have a material adverse effect on the
Company's business and results of operations. Moreover, the corrugating industry
periodically suffers shortages of roll stock paper from which corrugated board
is made. These shortages more seriously affect non-vertically integrated
corrugating converters (i.e., those that do not own their own timber and produce
their own roll stock) by raising prices and forcing customers of corrugated
board to purchase from integrated converters. In that the Company intends to
utilize, to some extent, non-integrated converters for the production of LTI
Processed(TM) packaging, a shortage-induced price increase could raise the price
of such LTI Processed(TM) materials beyond its value margin, causing end users
to seek integrated suppliers who may not use the Company's products.
Dependence on Third Parties for Manufacturing and Marketing Activities.
The Company does not intend to directly manufacture either LTI Processed(TM)
linerboard or finished products. Instead the Company expects to contract for
manufacture with additional outside laminators, corrugators and sheet plants
with whom the Company may establish formal or informal relationships. Although
the Company believes that such services are widely available, there can be no
assurance that the Company will be able to procure these services on terms
acceptable to the Company. Moreover, the Company's dependence on such third
parties will reduce its control over the manufacturing process.
Additionally, the Company may rely on large integrated converters to
market LTI Processed(TM) products to their end users and intends to pursue
strategic alliances with such companies for manufacture and marketing. The
success of the Company will depend, in part, on its ability to enter into and
maintain such strategic alliances and the collaborator's strategic interest in
and ability to successfully manufacture and/or market LTI Processed(TM)
products. To the extent the Company enters into any strategic alliance, the
Company will be dependent to a significant extent on such partners. The success
of any such strategic alliance will depend in part upon such partners' own
competitive, marketing and strategic considerations, including the relative
advantages of alternative products being developed and/or marketed by such
partners. If any such partners are unsuccessful in manufacturing and/or
marketing the Company's products, the Company's business, financial condition
and results of operations would be materially adversely affected.
The Company has no experience in manufacturing or marketing products on
a commercial scale and does not have the resources to manufacture on a
commercial scale any of its products. To the extent that the Company
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determines not to, or is unable to, enter into strategic alliances with respect
to the manufacture or marketing of LTI Processed(TM) products, significant
additional funds, capital expenditures, management resources and time will be
required to establish a manufacturing facility or develop a larger sales force.
There can be no assurance that the Company will be able to enter into strategic
alliances to manufacture or market its proposed products or, in lieu thereof,
establish a manufacturing facility or develop a sufficient sales force, or be
successful in gaining market acceptance of its products. See "Business --
Manufacturing" and "-- Sales and Marketing."
Dependence on Patents and Proprietary Technology; Uncertainty of Patent
Protection; No Assurance of Significant Competitive Advantage. The Company's
success will depend in part on its ability to obtain patent protection for its
products, both in the United States and abroad. On December 9, 1988, Michael
Olvey, Sr., the inventor of the LTI Processed(TM) method and a founder and
former President of the Company, filed a patent application with the U.S. Patent
and Trademark Office (the "U.S. Patent Office") covering the Company's LTI
Processed(TM) technology. On March 15, 1990, the U.S. Patent Office rejected the
claims of the Company's patent application as being too broad in light of prior
art. On April 19, 1993, Mr. Olvey assigned all rights to this patent application
to the Company. The Company submitted a modification of its original application
on March 27, 1997. This resulted in withdrawal of part of the rejections, and
the Company expects to submit a further modification or responsive arguments not
later than November 1997, to attempt to overcome the remaining rejections.
There can be no assurance that any patent applications filed by or on
behalf of the Company will result in patents being issued, that patents, if any,
issued to the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide any significant competitive
advantage to the Company. Furthermore, there can be no assurance that others
have not independently developed, or will not independently develop, similar
products or technologies or, if patents are issued to the Company, will not
design around such patents.
The Company's potential products may conflict with patents which have
been or may be granted to competitors or others. In particular, the Company is
aware of a patent issued to Adolph Coors Company that relates to certain
processes by which film, including polyester film, is reverse-printed and
laminated onto linerboard. Such patent may affect the ability of the Company to
obtain patent protection for some or all of the claims included in its patent
application. Moreover, there can be no assurance that any application of the
Company's technology will not infringe the Coors patent or any other patents or
proprietary rights of others. Such other persons could bring legal actions
against the Company claiming damages and seeking to enjoin manufacturing and
marketing of the Company's products. If any such actions are successful, in
addition to any potential liability for damages, the Company could be required
to obtain a license in order to continue to manufacture or market the affected
products. There can be no assurance that the Company would prevail in any such
action or that any license required under any such patent would be made
available on acceptable terms, if at all. If the Company becomes involved in
litigation, it could consume a substantial portion of the Company's time and
resources. Moreover, the non-approval of the Company's patent application or the
invalidation of any patent that may be issued to the Company would likely have a
material adverse effect on the Company.
The Company also relies on trade secret protection for its confidential
and proprietary information. However, trade secrets are difficult to protect and
there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology, or that
the Company can meaningfully protect its rights to unpatentable trade secrets.
The Company intends to protect its proprietary technology through the
use of licensing, exclusivity and non-disclosure agreements with the laminators,
corrugators, converters and printers with which it may establish strategic
alliances and production relationships. The Company also requires that certain
of its employees and consultants execute a confidentiality agreement upon the
commencement of an employment or consulting relationship with the Company. The
agreements generally provide that trade secrets and all inventions conceived by
the individual and all confidential information developed or made known to the
individual during the term of the relationship shall be the exclusive property
of the Company and shall be kept confidential and not disclosed to third parties
except in specified circumstances. There can be no assurance, however, that
these agreements will provide meaningful
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protection for the Company's proprietary information in the event of
unauthorized use or disclosure of such information. See "Description of Business
- -- Patents and Proprietary Rights."
Competition. Competition in the corrugated and packaging industries is
intense and based significantly on price. Moreover, certain aspects of the
Company's business, including printing, are characterized by rapidly evolving
technology that could result in the technological obsolescence of processes
utilized by the Company. The Company competes with many corrugating firms and
manufacturers of other packaging products, including those made of styrofoam,
metal and plastic. Most of the Company's competitors have substantially greater
financial, technical and human resources than the Company and are better
equipped to develop, manufacture and market products. These companies also
compete with the Company in recruiting and retaining highly qualified personnel
and consultants.
Additionally, there are both corrugated and other packaging and display
materials available which can provide some or all of the physical
characteristics of LTI Processed(TM) products as well as high quality aesthetics
and which directly compete with the Company's products. Major corrugating and
integrated converters produce large quantities of corrugated products with wax
and other coatings which are water resistant and can be used, for example, to
pack wet and frozen foods for extended periods and to reduce abrasion of items
with delicate finishes. The Company will face intense competition from these
manufacturers to the extent that these products present viable alternatives to
LTI Processed(TM) products. These products may remain attractive to many end
users as they can be lower priced and end users will not have to incur the
potential cost of interrupting product lines and supply sources to accommodate
different packaging from a new company. The Company intends to compete with such
manufacturer by offering a product that can be more expensive but which the
Company believes will be of higher quality, and in many circumstances may be
more cost-efficient in the long term. Additionally, the Company will face
competition from non-integrated converters who supply corrugated products that
are laminated with high quality, lithographically printed paper. While the
Company believes that these products do not have the physical properties of LTI
Processed(TM), these products may offer a price advantage over LTI Processed(TM)
and will effectively compete with the Company's products in the market for
quality printed products.
The Company also expects to encounter significant competition as it
seeks to enter markets for other forms of value-added packaging and products
such as styrofoam, metal and plastic. Given the fact that the physical
properties of these other materials have been long established, that end users
are accustomed to using these materials and that manufacturers have massive
national and international production and marketing efforts as well as
sophisticated and well developed product lines, the Company will need to
persuade end users of the value of an entirely new material and product design
which is purchased from a new supplier. There can be no assurance that such
efforts will be successful. Moreover, there can be no assurance that other
companies will not develop products which are superior to the Company's or which
achieve greater market penetration. See "Description of Business --
Competition."
Historical Inability to Leverage Technology; Management Turnover.
Although the Company was organized in March 1993, its basic laminating
technology has been owned by the Company and its predecessors since 1988.
Nonetheless, the Company and its predecessors have been unable to successfully
commercialize such technology, have generated only minimal revenues and have
been unable to effectively penetrate the Company's target markets. In addition,
the Company has had a limited number of management personnel and has also
experienced significant turnover in such management since inception. These
management issues have contributed to periods of limited or no operating
activity and insufficient continuity of business relationships and related
agreements. See "--Risks Related to Potential License Agreements." While the
Company has recently instituted a new management team, there can be no assurance
that current management will be successful in implementing the Company's
business plan, or that the Company will not be adversely affected by issues
relating to past operations.
Risks Related to Potential License Agreements. The Company believes
that approximately six years ago a predecessor to the Company entered into
negotiations regarding two potential licenses of the LTI Processed(TM)
technology. Neither the Company nor the other parties to such negotiations have
been able to produce a copy of an executed license agreement and, to the
Company's knowledge, no significant license-related activities have been
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<PAGE> 14
performed. Based on the Company's efforts to determine the existence of any such
agreements, the Company does not believe any license agreements exist. However,
there can be no assurance that license agreements do not exist or as to the
terms of any such license. Although the Company's strategy currently does not
emphasize licensing its technology, the Company may determine to do so in the
future. In the event that any previous license agreements exist, they may limit
the Company's ability to enter into additional licenses in the future or may
otherwise restrict the Company's operations, which could have an adverse effect
on the Company.
Uncertainty of Government Regulatory Requirements. To the extent that
LTI Processed(TM) is used in the food service and packaging industries, the
Company will be required to ensure that its products meet federal Food and Drug
Administration ("FDA") regulations regarding materials used in contact with
food. The Company believes that both the polyester film and the bonding agents
used in LTI Processed(TM) products will be in compliance with approved food
additive regulations permitting the types of food contact use contemplated by
the Company. However, there can be no assurance that the Company's use of the
materials included in its products will not require separate FDA approval.
Obtaining FDA approval has historically been a costly and time-consuming
process. The Company may also need to seek regulatory approval from foreign
governments for the use of LTI Processed(TM) products shipped to those
countries. For example, the European Union has strict regulations as to the
disposability and recyclability of imported packaging and paper products. There
can be no assurance that such foreign regulations will not restrict or preclude
the Company from engaging in activities in such countries, which could have a
material adverse effect on the Company. The failure to obtain any required
regulatory approvals could have a material adverse effect on the Company.
Charges and Potential Charges to Earnings. The Securities and Exchange
Commission (the "Commission") has taken the position with respect to escrow
arrangements such as that entered into by the Company and its stockholders that
in the event any shares are released from escrow to the holders who are
officers, directors, employees or consultants of the Company, a compensation
expense will be recorded for financial reporting purposes. Accordingly, in the
event of the release of the Escrow Shares, the Company will recognize during the
period in which the earnings thresholds are probable of being met or such stock
price levels achieved, a substantial noncash charge (not deductible for income
tax purposes) to operations equal to the then fair market value of such shares,
which would have the effect of significantly increasing the Company's loss or
reducing or eliminating earnings, if any, at such time. The recognition of such
compensation expense may have a depressive effect on the market price of the
Company's securities. Notwithstanding the foregoing discussion, there can be no
assurance that the Company will attain the targets which would enable the Escrow
Shares to be released from escrow.
In April 1996, two principal stockholders of the Company granted to
Michael E. Noonan, the Company's Chairman, President and Chief Executive
Officer, options to purchase an aggregate of 116,346 shares of Common Stock of
the Company held by such stockholders at an exercise price of $1.00 per share.
The options are fully vested and are exercisable two-thirds immediately and
one-third in April of 1998. The Company recorded a contribution to capital and
compensation expense on the date of the grant in an amount equal to the
difference between the exercise price and the fair market value of the shares at
the time of grant. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Certain Transactions," "Principal
Stockholders" and "Description of Securities."
Broad Discretionary Use of Proceeds. The proceeds received by the
Company as a result of the exercise of any Warrants are intended to be used for
working capital, including salaries and the payment of certain accounts payable.
Thus, purchasers of the securities offered hereby will be entrusting their funds
to the Company's management, upon whose judgment the investors must depend, with
only limited information concerning management's specific intentions. See "Use
of Proceeds."
Dependence on Key Personnel. The Company is dependent on Michael E.
Noonan, the Company's Chairman and Chief Executive Officer, as well as principal
members of its management, design and marketing staff, the loss of one or more
of whom could substantially impair the Company's development and marketing
plans. The Company has obtained a $2,000,000 "key-man" life insurance policy on
the life of Mr. Noonan and has also entered into a one-
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year employment agreement with Mr. Noonan. The future success of the Company
depends in large part upon its ability to attract and retain highly qualified
personnel. The Company faces intense competition for such highly qualified
personnel from other corrugated manufacturers and may be required to pay higher
salaries to attract and retain such personnel. There can be no assurance that
the Company will be able to hire sufficient qualified personnel on a timely
basis or retain such personnel. The loss of such key personnel or failure to
recruit additional key personnel by the Company could have a material adverse
effect on the Company's business, financial condition and results of operations.
Managing the integration of any new personnel could adversely affect the
Company's growth and progress until such integration occurred.
Availability of Active Trading Market. Since the 1996 Offering, the
securities of the Company have been thinly traded, and there can be no assurance
that the level of trading activity involving the Company's securities can be
sustained or will grow in the future, nor can there be any assurance that the
market price for said securities will not decline below the initial public
offering price. The market prices of the Company's securities could also be
subject to significant fluctuations in response to variations in the Company's
quarterly operating results, developments concerning proprietary rights,
government regulations, general trends in the industry and other factors. See
"Plan of Distribution."
Outstanding Options and Warrants. Upon completion of the 1996 Offering,
the Company had outstanding: (i) 1,955,000 Class A Warrants to purchase an
aggregate of 1,955,000 shares of Common Stock and 1,955,000 Class B Warrants;
(ii) 1,955,000 Class B Warrants to purchase 1,955,000 shares of Common Stock;
(iii) the Selling Securityholder Warrants to purchase 997,500 shares of Common
Stock and 997,500 Class B Warrants; (iv) warrants to purchase 36,897 shares of
Common Stock, which Warrants are owned by Blair; (v) the Unit Purchase Option to
purchase an aggregate of 680,000 shares of Common Stock, assuming exercise of
the underlying Warrants; and (vi) 250,000 shares of Common Stock reserved for
issuance upon exercise of options under the Company's 1996 Stock Option Plan,
under which options to purchase 170,000 shares of Common Stock have been
granted. Holders of such warrants and options are likely to exercise them when,
in all likelihood, the Company could obtain additional capital on terms more
favorable than those provided by warrants and options. Further, while these
warrants and options are outstanding, the Company's ability to obtain additional
financing on favorable terms may be adversely affected. See "Management -- Stock
Options" and "Description of Securities."
Control by Existing Stockholders; Potential Anti-takeover Provisions.
As of July 22, 1997, the Company's directors, executive officers and principal
stockholders of the Company owned approximately 24.9% of the outstanding Common
Stock of the Company. As a result, such directors, officers and principal
stockholders will generally be able to influence significantly the outcome of
corporate transactions or other matters submitted for stockholder approval. Such
influence by principal stockholders could preclude any unsolicited acquisition
of the Company and consequently adversely affect the market price of the Common
Stock. The Company's Board of Directors is also authorized to issue from time to
time, without stockholder authorization, shares of preferred stock, in one or
more designated series or classes. The Company is also subject to a Delaware
statute regulating business combinations. Any of these provisions could
discourage, hinder or preclude an unsolicited acquisition of the Company and
could make it less likely that stockholders receive a premium for their shares
as a result of any such attempt. See "Certain Transactions," "Principal
Stockholders" and "Description of Securities."
Immediate and Substantial Dilution. Purchasers of the securities
offered hereby will incur immediate substantial dilution in the per-share net
tangible book value of their Common Stock. Therefore, purchasers of the
securities offered hereby will bear a proportionately greater risk of loss than
the Company's current stockholders.
Shares Eligible for Future Sale. Future sales of Common Stock by
existing stockholders pursuant to Rule 144 under the Securities Act, pursuant to
the Concurrent Offering or otherwise, could have an adverse effect on the price
of the Company's securities. Pursuant to the Concurrent Offering, 997,500
Selling Securityholder Warrants and the underlying securities have been
registered for resale. In addition to the 1,955,000 Units offered hereby,
approximately 137,631 shares of Common Stock are eligible for immediate resale
in the public market, and, subject to compliance with Rule 144 under the
Securities Act, approximately 483,355 shares of Common Stock are eligible
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<PAGE> 16
for sale in the public market (subject to the restrictions on transfer
applicable to the Escrow Shares). An additional 120,000 shares of Common Stock
issuable upon the exercise of vested options and warrants also became eligible
for sale in the public market pursuant to Rule 701 and Rule 144 under the
Securities Act beginning 90 days from the date of the 1996 Offering. Rule 144
permits resales of restricted securities after a one-year holding period rather
than a two-year holding period, and permits unrestricted resales by
non-affiliates after a two-year holding period rather than a three-year holding
period. However, holders of all of the outstanding shares of Common Stock and
outstanding options prior to the Offering have agreed not to sell any shares of
Common Stock for a period of 13 months from the date of the 1996 Offering
without the prior written consent of Blair. Sales of Common Stock, or the
possibility of such sales, in the public market may adversely affect the market
price of the securities offered hereby. In addition, the holders of the Unit
Purchase Option and the holders of options and warrants to purchase an aggregate
of 153,243 shares of Common Stock have certain demand and "piggy-back"
registration rights with respect to their securities commencing twelve months
from the closing of the 1996 Offering. Exercise of such rights could involve
substantial expense to the Company. See "Description of Securities," "Shares
Eligible for Future Sale, and " Concurrent Offering."
Potential Adverse Impact of Release of Locked-up Securities. All of the
Company's current stockholders, officers and directors have agreed not to sell,
assign, transfer or otherwise dispose publicly any of their shares of Common
Stock for a period from October 9, 1996, until November 10, 1997, without the
prior written consent of Blair. Sales of such shares of Common Stock, or the
possibility of such sales, in the public market may have an adverse effect on
the market price of the securities offered hereby.
Potential Adverse Effect of Redemption of Warrants. Commencing October
9, 1997, the Warrants may be redeemed by the Company at a redemption price of
$.05 per Warrant upon not less than 30 days prior written notice if, with
respect to the Class A Warrants, the closing bid price of the Common Stock shall
have averaged in excess of $9.10 per share and, with respect to the Class B
Warrants, $12.25 per share, in each instance for 30 consecutive trading days
ending within 15 days of the notice. Redemption of the Warrants could force the
holders: (i) to exercise the Warrants and pay the exercise price therefor at a
time when it may be disadvantageous for the holders to do so; (ii) to sell the
Warrants at the then-current market price when they might otherwise wish to hold
the Warrants; or (iii) to accept the nominal redemption price which, at the time
the Warrants are called for redemption, is likely to be substantially less than
the market value of the Warrants.
Current Prospectus and State Registration to Exercise Warrants; Lack of
Certain Aftermarket Exemptions. Holders of Warrants will be able to exercise the
Warrants only if: (i) a current prospectus under the Securities Act relating to
the securities underlying the Warrants is then in effect; and (ii) such
securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various holders of
Warrants reside. Although the Company has undertaken and intends to use its best
efforts to maintain a current prospectus covering the securities underlying the
Warrants following completion of the Offering to the extent required by Federal
securities laws, there can be no assurance that the Company will be able to do
so. The value of the Warrants may be greatly reduced if a prospectus covering
the securities issuable upon the exercise of the Warrants is not kept current or
if the securities are not qualified, or exempt from qualification, in the states
in which the holders of Warrants reside. Persons holding Warrants who reside in
jurisdictions in which such securities are not qualified and in which there is
no exemption will be unable to exercise their Warrants and would either have to
sell their Warrants in the open market or allow them to expire unexercised. The
failure of the Company to meet such requirements may deprive the Warrants of any
value, even if the Warrants are exercisable pursuant to any exemptions from
qualification under applicable state securities laws, and cause the resale or
other disposition of Common Stock issued upon the exercise of the Warrants to
become unlawful. If and when the Warrants become redeemable by the terms
thereof, the Company may exercise its redemption right even if it is unable to
qualify the underlying securities for sale under all applicable state securities
laws.
Possible Adverse Effect on Liquidity of the Company's Securities Due to
the Investigation of D.H. Blair Investment Banking Corp. and D.H. Blair & Co.,
Inc. by the Securities and Exchange Commission. The Commission is conducting an
investigation concerning various business activities of Blair and Blair & Co., a
selling group member
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<PAGE> 17
in the 1996 Offering. The investigation appears to be broad in scope, involving
numerous aspects of Blair's and Blair & Co.'s compliance with the Federal
securities laws and compliance with the Federal securities laws by issuers whose
securities were underwritten by Blair or Blair & Co., or in which Blair or Blair
& Co. made over-the-counter markets, persons associated with Blair or Blair &
Co., such issuers and other persons. The Company has been advised by Blair that
the investigation has been ongoing since at least 1989 and that it is
cooperating with the investigation. Blair cannot predict whether this
investigation will ever result in any type of formal enforcement action against
Blair or Blair & Co., or, if so, whether any such action might have an adverse
effect on Blair or the securities offered hereby. Since the 1996 Offering, Blair
& Co. has made a market in the securities that were offered in the 1996
Offering. An unfavorable resolution of the Commission's investigation could have
the effect of limiting such firm's ability to make a market in the Company's
securities, which could adversely affect the liquidity or price of such
securities. See "Plan of Distribution."
Possible Restrictions on Market-Making Activities in Company's
Securities. Although neither Blair nor Blair & Co has any legal obligation
to do so, Blair & Co. from time to time may act as market maker and otherwise
effect transactions in the Company's securities offered hereby or by
the 1996 Offering. Regulation M under the Securities Exchange Act of 1934 (the
"Exchange Act"), may prohibit Blair & Co. from engaging in any market making
activities or solicited brokerage activities with respect to the Company's
securities for the period from five business days (or such other applicable
period as Regulation M may provide) prior to any solicitation by Blair & Co. of
the exercise of any Warrant offered hereby until the completion of such
solicitation activity or the termination (by waiver or otherwise) of any right
that Blair & Co. may have to receive a fee for the exercise of Warrants
following such solicitation. As a result, Blair & Co. may be unable to continue
to provide a market for the Company's securities during certain periods while
the Warrants offered hereby are exercisable. The prices and liquidity of the
Company's securities may be adversely affected by the cessation of Blair &
Co.'s market making activities. In addition, under applicable rules and
regulations under the Exchange Act, any person engaged in the distribution of
the Selling Securityholder Warrants may not simultaneously engage in
market-making activities or solicited brokerage activities with respect to any
securities of the Company for the applicable "cooling off" period (which is
likely to be five business days) prior to the commencement of such
distribution. Accordingly, in the event Blair or Blair & Co. is engaged in a
distribution of the Selling Securityholder Warrants, neither of such firms will
be able to make a market in the Company's securities or engage in any solicited
brokerage activities during the applicable restrictive period. Any temporary
cessation of such market-making activities or solicited brokerage activities
could have an adverse effect on the market price of the Company's securities.
See "Plan of Distribution."
Possible Delisting of Securities from the Nasdaq Stock Market. While
the Company's Units, Common Stock, Class A Warrants and Class B Warrants meet
the current Nasdaq maintenance requirements and are included on the Nasdaq
SmallCap Market, there can be no assurance that the Company will meet the
criteria for continued listing. Continued inclusion on Nasdaq generally requires
that: (i) the Company maintain at least $2,000,000 in total assets and
$1,000,000 in capital and surplus; (ii) the minimum bid price of the Common
Stock be $1.00 per share; (iii) there be at least 100,000 shares in the public
float valued at $200,000 or more; (iv) the Common Stock have at least two active
market makers; and (v) the Common Stock be held by at least 300 holders.
If the Company is unable to satisfy Nasdaq's maintenance requirements,
its securities may be delisted from Nasdaq. In such event, trading, if any, in
the Units, Common Stock and Warrants would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the NASD's "Electronic
Bulletin Board". Consequently, the liquidity of the Company's securities could
be impaired, not only in the number of securities which could be bought and
sold, but also through delays in the timing of transactions, reduction in
security analyst's and the news media's coverage of the Company, and lower
prices for the Company's securities than might otherwise be attained.
Risks of Low-priced Stock. If the Company's securities were delisted
from Nasdaq (See "-- Risk Factors -- Possible Delisting of Securities from the
Nasdaq Stock Market"), they could become subject to Rule 15g-9 under the
Exchange Act, which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with net worths in
excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together
with their spouses). For transactions
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<PAGE> 18
covered by this rule, a broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to sale. Consequently, such rule may adversely
affect the ability of broker-dealers to sell the Company's securities and may
adversely affect the ability of the Company's security holders to sell the
Company's securities in the secondary market.
Commission regulations define a "penny stock" to be any non-Nasdaq
equity security that has a market price (as therein defined) of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on Nasdaq and have certain
price and volume information provided on a current and continuing basis or meet
certain minimum net tangible assets or average revenue criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, it would remain subject to Section 15(b)(6) of the Exchange
Act, which gives the Commission the authority to prohibit any person that is
engaged in unlawful conduct while participating in a distribution of a penny
stock from associating with a broker-dealer or participating in a distribution
of a penny stock, if the Commission finds that such a restriction would be in
the public interest. If the Company's securities were subject to the rules on
penny stocks, the market liquidity for the Company's securities could be
severely adversely affected.
No Dividends. The Company has not paid any cash dividends on its Common
Stock and does not expect to declare or pay any cash or other dividends in the
foreseeable future. See "Dividend Policy."
USE OF PROCEEDS
Holders of warrants are not obligated to exercise their warrants and
there can be no assurance that the holders of the warrants will choose to
exercise all of any of their warrants. In the event that all of the 1,955,000
outstanding Class A Warrants (excluding those of the Remaining Selling
Securityholders and Unit Purchase Option) are exercised, the net proceeds to the
Company would be approximately $12,072,125, after deducting the Solicitation
Fee. In the event that all of the 3,910,000 Class B Warrants outstanding and
issuable upon the exercise of the outstanding Class A Warrants are exercised
(excluding those of the Remaining Selling Securityholders and Unit Purchase
Option), the Company would receive additional net proceeds of approximately
$32,501,875, after deducting the Solicitation Fee.
The Company intends to use the net proceeds received upon the exercise
of the warrants, if any, for general corporate purposes and working capital to
support anticipated growth, including research and development programs and
continuing product development.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain all earnings, if any, for use in the expansion of
the Company's business. The declaration and payment of future dividends, if any,
will be at the sole discretion of the Board of Directors and will depend upon
the Company's profitability, financial condition, cash requirements, future
prospects and other factors deemed relevant by the Board of Directors.
-15-
<PAGE> 19
PRICE RANGE OF SECURITIES
The Company's IPO Units, Common Stock, Class A Warrants and Class B
Warrants have been quoted on the National Association of Securities Dealers
Automated Quotation ("Nasdaq") system under the symbols LAMTU, LAMT, LAMTW, and
LAMTZ, respectively, since October 9, 1996.
The Company estimates there were approximately 30 holders of record and
approximately 490 beneficial holders of the Common Stock on July 22, 1997. The
Company has not paid dividends in the past and does not intend to pay cash
dividends in the foreseeable future. Declaration of dividends will be at the
discretion of the Board of Directors.
The following table sets for the range of high and low bid prices for
the Company's securities for the fiscal year ended March 31, 1997, as reported
by Nasdaq, the principal system or exchange on which such securities are quoted
or traded. On July 29, 1997 closing prices of the IPO Units, Common Stock, Class
A Warrants and Class B Warrants were $11.50, $6.25, $2.625 and $2.125,
respectively.
<TABLE>
<CAPTION>
3RD QUARTER 4TH QUARTER
(COMMENCING 10-9-97)
SECURITY HIGH LOW HIGH LOW
-------- ---- --- ---- ---
<S> <C> <C> <C> <C>
Units ("LAMTU") $10.25 $6.25 $9.625 7.75
Common Stock ("LAMT") 5.625 3.75 5.625 4.00
Class A Warrants ("LAMTW") 2.75 2.00 3.00 0.9375
Class B Warrants ("LAMTZ") 2.00 1.50 1.375 1.125
</TABLE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 and as adjusted to reflects the conversion of Class A and Class B
Warrants. This table should be read in conjunction with the Financial Statements
and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
March 31, 1997
--------------------------------------------------------
Actual Adjusted for A Adjusted for A and
Warrants(1) B Warrants(2)
--------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock, $.01 par value;
5,000,000 shares authorized; no shares issued and -- -- --
outstanding......................................
Common Stock, $.01 par value;
20,000,000 shares authorized; 3,185,000 shares
issued and outstanding(3)........................ $ 31,850 $ 51,400 $ 90,500
Additional paid in capital....................... $ 11,708,605 $ 23,761,180 $ 56,223,955
Deficit accumulated during development stage..... $ (6,784,683) $ (6,784,683) $ (6,784,683)
------------ ------------ ------------
Total stockholders' equity (deficiency).......... $ 4,955,772 $ 17,027,897 $ 49,529,772
------------ ------------ ------------
Total capitalization............................. $ 4,955,772 $ 17,027,897 $ 49,529,772
============ ============ ============
- ------------------------------------------------
</TABLE>
-16-
<PAGE> 20
(1) Gives effect to the exercise of 1,955,000 Class A Warrants
(excluding the Remaining Selling Securityholders and the Unit Purchase Option)
at $6.50 per Class A Warrant, net of solicitation fee.
(2) Gives effect to the exercise of 3,910,000 Class B Warrants
outstanding and issuable upon the exercise of the outstanding Class A Warrants
(excluding the Remaining Selling Securityholders and the Unit Purchase Option)
at $8.75 per Class B Warrant, net of solicitation fee.
(3) Unless otherwise indicated, the number of outstanding shares of
Common Stock referenced does not include: (i) 5,865,000 shares of Common Stock
issuable upon exercise of Company's outstanding Class A and Class B Warrants;
(ii) 36,897 shares of Common Stock issuable upon the exercise of warrants issued
to Blair in March 1994; (iii) 680,000 shares of Common Stock issuable upon
exercise of the Unit Purchase Option and the Warrants included in or underlying
such option; and (iv) 250,000 shares of Common Stock reserved for issuance under
the Company's Amended and Restated 1996 Stock Option Plan, under which options
to purchase 190,000 shares of Common Stock are outstanding (including 40,000
options to be granted on the date of this Prospectus). See "Management -- Stock
Options," "Certain Transactions," "Description of Capital Stock" and "Concurrent
Offering."
SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the
financial statements of the Company. The financial statements of the Company as
of March 31, 1997 and for the years ended March 31, 1997 and March 31, 1996 and
for the period from April 19, 1993 (commencement of operations) through March
31, 1997, together with the notes thereto which were reported on by Richard A.
Eisner & Company, LLP, independent auditors, are included elsewhere in this
Prospectus. The selected financial data as of and for the year ended March 31,
1997 and March 31, 1996 and the period from April 19, 1993 (commencement of
operations) to March 31, 1997 are derived from the Company's financial
statements. The selected financial data set forth below should be read in
conjunction with the financial statements of the Company and the related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, APRIL 19, 1993(1)
------------------------------ THROUGH
1996 1997 MARCH 31, 1997
==================================================
<S> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net Sales...................... $ 119,412 $ 23,918 $ 365,703
Gross (loss) profit............ (158,042) 7,167 (666,821)
Selling, general and
administrative expenses 1,042,290 1,779,339 5,082,384
------------ ------------ ------------
Operating loss................. (1,200,332) (1,772,172) (5,749,205)
Net (loss)..................... (1,228,745) (2,408,710) (6,528,731)
Cumulative dividend on
preferred stock................ 50,000 25,000 150,000
------------ ------------ ------------
Net (loss) attributable to
common stockholders............ $ (1,278,745) $ (2,433,710) $ (6,678,731)
============ ============ ============
Net (loss) per share of
common stock................... $ (2.02) $ (1.47)
============ ============
Weighted average number of
common shares outstanding......
632,719 1,667,821
============ ============
</TABLE>
- ------------
(1) Commencement of Operations
-17-
<PAGE> 21
<TABLE>
<CAPTION>
BALANCE SHEET DATA: MARCH 31, 1997
- ------------------- --------------
<S> <C>
Working capital ............................................. $ 4,746,548
Total assets................................................. 5,303,006
Total liabilities............................................ 347,234
Deficit accumulated during development stage................. (6,784,683)
-----------
Total stockholders' equity .................................. 4,955,772
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a development stage company organized to develop, design
and market value-added packaging and specialty display products. Since its
inception, the Company's efforts have been principally devoted to research,
development and design of products, marketing activities and raising capital.
The Company has had only limited sales, has generated minimal revenues from
operations and has incurred substantial operating losses from these activities.
Most of the Company's sales to date did not involve significant orders
and the Company believes that these customers were primarily evaluating the
commercial potential of the Company's products. The Company also incurred
significant costs associated with such sales in part because a large percentage
of finished product was distributed free of charge as samples. The Company's
sales efforts have also been adversely affected by periods with no operations, a
lack of continuity of management and inadequate capital.
The following discussion should be read in conjunction with the
Financial Statements and notes thereto included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
Fiscal Years Ended March 31, 1996 and 1997. Net sales decreased from
approximately $119,000 in the twelve months ended March 31, 1996 ("Fiscal 1996")
to $24,000 in the twelve months ended March 31, 1997 ("Fiscal 1997"). Management
invested its resources in developing its technology for commercialization during
fiscal 1997 and thus did not pursue product sales. Gross loss, which includes
the costs of items manufactured as well as the cost of samples, was
approximately ($158,000) in fiscal 1996 as compared to a gross profit of $7,000
in fiscal 1997. The gross profit margin in fiscal 1996 and fiscal 1997 includes
pre-production costs and therefore is not indicative of future margins. The
gross loss in fiscal 1996 was primarily attributable to the amount of product
given away as samples.
Selling, general and administrative expenses increased by 71% from
approximately $1,042,000 in fiscal 1996 to approximately $1,779,000 in fiscal
1997. The increase is primarily attributable to (1) a charge of approximately
$386,000 relating to the fair market value of stock options granted by two
principal stockholders of the Company to the Company's Chairman, President and
Chief Executive Officer, (2) a cost of approximately $279,000 for debt placement
fees regarding placement of $1,995,000 in bridge notes, and (3) increased
business activity prior and subsequent to the Company's public stock offering in
October, 1996.
In fiscal 1996 the Company charged to earnings approximately $944,000
relating to the repayment of the Bridge Notes.
Interest expense increased by approximately 681% from approximately
$101,000 for fiscal 1996 to approximately $789,000 for fiscal 1997. The increase
is primarily due to an increase in interest bearing debt
-18-
<PAGE> 22
outstanding during fiscal 1997, which was retired in October, 1996 with the use
of part of the proceeds from the October, 1996 sale of stock.
Interest income increased from zero in fiscal 1995 to approximately
$110,000 in fiscal 1997 as cash proceeds from the Company's public stock
offering in October, 1996 have been invested in short term cash investments to
the extent not needed for current operations.
Net loss increased 96% from approximately $1,229,000, or $2.02 per
share, in fiscal 1996 to approximately $2,409,000, or $ 1.47 per share, in
fiscal 1997, as a result of the foregoing factors.
LIQUIDITY AND CAPITAL RESOURCES
Certain statements contained herein are "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
which provides a "safe harbor" for these types of statements. To the extent
statements herein involve, without limitation, product development and
introduction plans, the Company's expectations for growth, estimates of future
revenue, expenses, profit, cash flow, balance sheet items sell-through or
backlog, forecasts of demand or market trends for the Company's ;various product
categories and for the industries in which the Company operates or any other
guidance on future periods, these statements are forward-looking statements.
These risks and uncertainties include those identified in the "Risk Factors"
section hereof, and other risks identified from time to time in the Company's
filings with the Commission, press releases and other communications. The
Company assumes no obligation to update forward-looking statements.
Prior to the 1996 Offering, the Company funded its activities through
loans from principal stockholders and private placements of equity and debt
securities. The 1996 Offering resulted in total net proceeds to the Company of
approximately $7,988,000.
At March 31, 1997, the Company had $4.9 million in cash and liquid
investments. The Company expects to continue to incur substantial research,
development and marketing costs in the future. The Company also expects that
general and administrative costs necessary to support manufacturing and the
expansion of a marketing and sales organization will increase in the future.
Accordingly, the Company expects to continue to incur operating losses for the
foreseeable future.
The Company expects to continue to incur substantial research,
development and marketing costs in the future. The Company also expects that
general and administrative costs necessary to support manufacturing and the
creation of a marketing and sales organization will increase in the future.
Accordingly, the Company expects to incur increasing operating losses for the
foreseeable future. There can be no assurance that the Company will ever achieve
profitable operations.
Certain common stockholders have agreed to place 410,000 shares of
Common Stock of the Company into escrow. Conditions for release of the
escrowed shares are discussed in the footnotes to the financial statements. In
the event of the release of the Escrow Shares, the Company will recognize
during the period in which the earnings thresholds are probable of being met or
such stock price levels achieved, a substantial non-cash charge to earnings
(not deductible for income tax purposes) equal to the fair market value of such
shares on the date of their release, which would have the effect of
significantly increasing the Company's loss or reducing or eliminating
earnings, if any, at such time. There can be no assurance that the Company will
attain the targets which would enable the Escrow Shares to be released from
escrow. The recognition of the potential charges to income described above may
have a depressive effect on the market price of the Company's securities.
At March 31, 1997 the Company had net operating loss carry-forwards for
Federal income tax purposes of approximately $5,250,000. The net operating loss
and credit carry-forwards expire from March, 2008 through March, 2012.
Additionally, the Company's ability to utilize its net operating loss
carry-forwards may be subject to annual limitations pursuant to Section 382 of
the Internal Revenue Code as a result of this Offering.
-19-
<PAGE> 23
BUSINESS
DESCRIPTION OF BUSINESS
Laminating Technologies, Inc. ("Company", "LTI") was incorporated in
Georgia in March, 1993, as New Cooler Corp. and subsequently changed its name to
Laminating Technologies, Inc. In April, 1996, the Company was merged into
Laminating Merger Corporation, a Delaware corporation, which changed its name to
Laminating Technologies, Inc.
The Company is a development stage company which has been organized to
research, develop, design and market value-added packaging and specialty display
products which are manufactured using the Company's proprietary processing
method ("LTI Processed(TM)"). LTI Processed(TM) is a procedure by which
polyester film is laminated onto single thickness paper ("linerboard") prior to
corrugation. The Company believes that the LTI Processed(TM) method is the only
process currently available in which polyester film can be laminated onto
linerboard such that the resulting laminate can withstand the heat and stress of
corrugation. This procedure results in a packaging material that the Company
believes is physically superior, more attractive and potentially more
cost-effective than many currently existing packaging materials such as plastic,
metal and certain corrugated cardboard products, including those that are
laminated with paper and/or coated after corrugation.
The LTI Processed(TM) method can be utilized to produce a wide variety
of packaging products and specialty displays. To date, the Company has produced
a number of prototype products, including bakery dessert boxes, coolers, frozen
food shippers, point of purchase displays, pizza delivery boxes, medical
product/specimen shippers and microwavable food discs used as pie plates and
pizza slice trays. The Company believes that these products, together with other
potential LTI Processed(TM) products, are capable of improving upon existing
packaging products by reducing or eliminating certain limitations associated
with such products. For example, the Company believes that LTI Processed(TM)
products may be leakproof, resistant to a variety of solvent and petroleum-based
chemicals, recyclable, stronger and have a higher bursting strength than
conventional corrugated products. The Company also believes that the LTI
Processed(TM) method may permit higher quality printing and results in more
attractive packaging than corrugated materials printed with traditional printing
processes. Such aesthetic qualities have become more important in recent years
as retailers have significantly increased the extent to which they display and
sell products in the same packaging in which they were shipped.
In addition, the Company believes that while LTI Processed(TM) material
may be more costly to produce than traditional corrugated board, it is generally
less expensive than certain other non-corrugated packaging products, including
metal and plastic. Moreover, because LTI Processed(TM) containers often can be
reused and can be collapsed in the store pending reuse (thereby requiring less
storage space than containers made from materials such as styrofoam, metal and
plastic), they may be more cost-effective than other packaging materials,
including traditional corrugated materials. Based on these potential performance
advantages and cost savings, the Company believes that LTI Processed(TM)
packaging materials may be preferred to many packaging products currently
marketed by others.
Since its inception, the Company has focused on research and
development, had only a limited number of sales and only recently began to focus
on broader-based marketing. Most of the sales did not involve significant orders
and the Company believes that these customers were primarily evaluating the
commercial application of LTI Processed(TM) products. Moreover, further
development of the LTI Processed(TM) method may be necessary to satisfy the
requirements of specific end users or strategic partners.
PRODUCTS
On April 17, 1997, the Company announced "BAKE'N SHIP(TM)", a new
product line, which is available for sale to the baking industry. BAKE'N
SHIP(TM) utilizes the Company's proprietary (patent pending) process, resulting
in a new material which is ovenable and freezable with the strength and
structure of corrugated material. This is the Company's first commercial
product. The new product line can streamline the process by which bakery
products are
-20-
<PAGE> 24
produced by allowing the baker to bake, freeze, ship and display in one package.
In addition, certain versions of the product line provide an appealing
presentation media for baked goods.
STRATEGY
The Company's strategy is to focus principally on (i) designing,
developing and marketing value-added, niche LTI Processed(TM) products directly
to end users and (ii) leveraging its resources by establishing strategic
alliances with vertically integrated corrugators ("converters") for whom the
Company could potentially supply LTI Processed(TM) linerboard for further
manufacture and sale by such converters. The principal elements of the Company's
strategy are as follows:
Design, Develop and Market Products Directly. The Company intends to
design, develop and market value-added, niche LTI Processed(TM) products
directly to end users. The Company believes that this strategy will provide more
flexibility to: (i) identify quickly certain end users for whom the physical
properties or potential cost-effectiveness of LTI Processed(TM) materials may
provide a significant advantage over their current packaging or display
products; and (ii) design specific products that satisfy such end user's
requirements.
Out-Source Manufacturing Activities. With the exception of design
activities, the Company currently has out-sourced substantially all of its
manufacturing to existing laminating, corrugating, printing and sheet plant
companies with whom the Company has established formal, contractual
relationships. The Company believes that such out-sourcing may be more
cost-effective and will enable it to maintain the flexibility to both
accommodate the varied product needs of a wide array of customers and adjust
rapidly to developments in the Company's product offerings.
Seek Strategic Alliances for Production and Marketing. In the future,
the Company hopes to seek strategic alliances with vertically integrated
converters for whom the Company could supply LTI Processed(TM) board for further
manufacturing and sale by such converters. The Company believes that such
relationships could enable the Company to more effectively penetrate the
national market and persuade larger end users of the value of LTI Processed(TM)
products without disrupting existing supplier relationships. The Company expects
that such alliances, if entered into, would involve the purchase by such
converters of LTI Processed(TM) linerboard (either printed or unprinted) from
the Company and the completion (i.e., die-cutting and printing, if necessary)
and sale of finished products by such converters.
Licensing of LTI Processed(TM) Technology. The Company may in the
future also seek to license its LTI Processed(TM) technology to manufacturers
who would produce LTI Processed(TM) linerboard and finished products
independently. Such licensing agreements might provide for up-front licensing
fees and/or royalty payments.
INDUSTRY BACKGROUND
The corrugated packaging industry is divided into three basic groups:
integrated converters, non-integrated converters and sheet plants. Integrated
converters are the largest manufacturers, grow and harvest their own timber and
process it for high volume into large, pre-sized linerboard rolls in various
basic grades. Linerboard produced for in-house corrugation is then moved to
corrugating lines where it is processed, cut and printed if desired. Integrated
converters are extremely competitive and focus primarily on high speed, high
volume manufacture of commodity-type paper and packaging products with low
profit margins. Accordingly, they generally avoid production of value-added
products which typically require costlier materials, more manual labor,
interruptions in production and have shorter manufacturing runs. Integrated
converters have the advantage of being largely self-sufficient for supplies of
raw materials and can guarantee continuity of production, thus competing with
value-added products largely by providing basic corrugated packaging at low
prices.
Non-integrated corrugating converters do not produce their own
linerboard but purchase linerboard roll-stock and corrugate it into sheets from
which finished packaging and other products are produced, either by them or by
sheet
-21-
<PAGE> 25
plants. Non-integrated converters generally compete on a smaller scale, are
regional in scope, focus their operations on shorter runs and produce more
value-added products than integrated converters.
Sheet plants do not produce or corrugate rolls of linerboard but rather
purchase finished corrugated sheets from converters and then design, cut,
customize and process these sheets into finished packaging, displays and other
specialty items, including post-corrugation laminated products such as
point-of-purchase displays. Sheet plants generally market to local or regional
end users who require higher cost, special design or value-added packaging and
have shorter run needs.
PRODUCT BACKGROUND
Since the late 1960s, the corrugating industry has focused its
technological research and development largely on generating faster and more
efficient production of basic corrugated products through the use of high speed
corrugation, die-cutting and processing equipment designed to reduce labor
costs. Few advances have been made in the design or construction of the actual
corrugated packaging materials. The Company believes that there is a market for
corrugated products with physical properties such as insulation, improved
strength, resistance to chafing of the package surface, reduced abrasion of
packaged products, resistance to water and other liquids and improved graphics,
print resolution and gloss finishes. However, although film-on-film and
film-on-paper laminates exist for items such as snack-food bags and specialty
products, the Company believes that there currently exists no other corrugated
film laminates that can withstand the heat, pressure and stress of corrugation.
There currently exist certain alternative methods for producing
value-added corrugated products. For example, wax and other chemical coatings
allow corrugated board to be water resistant and scuff and abrasion resistant.
However, wax and chemical coatings are often absorbed by the linerboard over
time, thereby affecting its structural integrity. Increased bursting strength
can be achieved by increasing the weight of the linerboard or through "double
wall" or "triple wall" construction in which two or three layers of corrugating
"flutes" are sandwiched between layers of linerboard, creating bulkier material
which is difficult to bend. To the extent that packaging is required which
exceeds the capabilities of traditional corrugated boards, other materials such
as styrofoam, metal and plastic can be used. However, in addition to limited
physical advantages, many currently available value-added corrugated products
are often not purchased by national end users because they are typically
manufactured by non-integrated converters whose focus is more regional.
The most advanced printing method currently available for high volume
production of corrugated material is pre-printing on linerboard before
corrugating. Pre-printed linerboard is produced in roll form and then corrugated
into sheets. This type of printing has certain problems associated with it such
as chafing of the exposed printed surface and cracking along the "score line" (a
crease placed into a product to allow easy bending). Additionally, because the
process entails printing of a porous, exposed surface, it requires more ink to
be used and thus allows somewhat limited graphics quality and gloss
capabilities. Pre-printing on linerboard also requires that higher quality, and
therefore more expensive, linerboard be used.
An alternative printing method, litho-laminating, involves the
lamination of lithographically printed paper (lithographic printing produces a
higher quality image and is commonly referred to as offset printing) onto
already corrugated rigid sheets. Both the lithographic printing and the handling
of the rigid corrugated sheets are relatively slow and labor intensive and thus
more costly, but are generally required for items which demand the most advanced
graphics available such as point-of-purchase displays. Litho-laminated products
also suffer from the problems of chafing of the printed surface and cracking
along the score lines because the printed surface is exposed.
LTI PROCESSED(TM)
The Company believes that the application of the LTI Processed(TM)
method, which is a proprietary process involving the lamination of polyester
film onto linerboard before corrugation, results in a packaging and display
material that is physically superior, more attractive and potentially more
cost-effective than some traditional
-22-
<PAGE> 26
corrugated products and certain non-corrugated packaging products, including
metal and plastic. The Company believes that the LTI Processed(TM) method is the
only currently available procedure that permits the lamination of linerboard
prior to corrugation.
The corrugating process entails using steam, heat and pressure to mold
paper into the interior flutes of the corrugated board and these flutes are then
sandwiched between two layers of linerboard using a starch bonding agent and the
further application of heat and pressure. The stress inherent in the corrugating
process can cause improperly laminated film to distort, shrink, melt, burn or
delaminate over time and can cause improper bonding agents to bubble or
crystallize. The Company believes that the LTI Processed(TM) method avoids these
problems by utilizing a proprietary combination or combinations of film,
linerboard and polymer bonding agents and by laminating using proprietary
laminating techniques. The Company believes that, with the proper direction by
the Company's personnel, independent companies possessing the proper machinery
can produce LTI Processed(TM) products with little or no modification of
existing equipment and with only minor interruption in production and thus with
minimal added processing cost. The resulting laminate can then be corrugated
using traditional methods and virtually no modification of existing machinery,
thereby permitting high volume production of LTI Processed(TM) corrugated
material.
The Company believes that the LTI Processed(TM) laminate provides a
protective barrier allowing corrugated board, in the right configuration, to be
leakproof and resistant to a variety of solvents, paints, petroleum-based
products and other chemicals for extended periods of time. The Company believes
that this laminate allows the board to have a higher bursting strength (bursting
strength refers to the ability of the board surface to withstand pressure before
tearing) than traditional corrugated board. LTI Processed(TM) materials may also
be recyclable, a significant advantage over styrofoam, which may pose certain
environmental hazards and has been restricted in certain areas, including the
European Union.
The Company believes that the LTI Processed(TM) method can also
significantly improve on the ability to print corrugated board, especially for
high volume production orders. The Company expects that high volume printing of
LTI Processed(TM) materials will be done in one of two ways, either by
reverse-printing the polyester film before laminating and corrugating or by
printing onto linerboard before laminating and corrugating. Both of these
methods afford higher quality, more durable graphics than is possible on
traditional corrugated material while maintaining the economies of scale not
possible with litho-lamination.
Reverse printing the polyester film ("reverse printing") before the
laminating produces the highest quality image because the smooth surface of the
film allows extremely detailed, high resolution printing using minimal
quantities of ink. Laminating polyester film onto pre-printed linerboard
("pre-printing") also allows high quality, high resolution and more detailed
images because the layer of film protects the printed surface and again, allows
less ink to be used. However, the quality of the images are somewhat diminished
relative to reverse printing due to the porous nature of the linerboard.
Pre-printing is used when the width of the product to be printed exceeds the
width of film printers which are generally used for items such as snack-food
bags and are generally not designed for larger dimension printing. Both of these
methods have high gloss capabilities and are expected to solve the chafing and
cracking problems associated with traditional printing methods because the
printed surface is protected by the external layer of film. These processes may
reduce the cost of high quality printing on corrugated products by effectively
integrating printing into the corrugator's high-speed, high-volume production
lines. Moreover, in either case, there is no need for the corrugator to utilize
quality linerboard as is the case with traditional corrugated printing
processes. Because these processes require printing in advance of corrugation
and thus the timely coordination of the entire production process, the Company
expects to utilize these methods only for high volume orders.
For smaller orders, which are expected to constitute most of the
Company's business for the foreseeable future, the Company expects to "screen
print" after corrugation onto previously laminated board. Screen printing
entails applying ink to the film surface of the corrugated board using a
silk-screen type process. While this process can be more expensive than reverse
printing and pre-printing and suffers some of the scuffing problems associated
with exterior surface printing, the Company uses particular inks which allow a
superior bond of the ink to the film,
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<PAGE> 27
thereby minimizing scuffing. Additionally, screen printing allows more ink to be
used to attain greater opacity and a glossy finish while the particular screen
printing technique maintains high quality resolution.
PRODUCT DEVELOPMENT
The Company believes that the LTI Processed(TM) method can be utilized
to produce a wide variety of packaging products and specialty displays. For
example, the Company believes that LTI Processed(TM) may be utilized to produce
reusable containers for the large scale delivery of cold, frozen and fresh food
which is now frequently shipped in single-use cardboard boxes, as well as for
packaging of specialty and mail-order fresh foods, replacing bulky styrofoam and
plastic containers which are expensive to produce and ship. The Company believes
LTI Processed(TM) products can be used as an alternative to styrofoam coolers
and it has produced waterproof, reusable, collapsible and printable beer, wine
and soft drink coolers and containers. The Company has also produced insulated
catering and pizza delivery boxes and believes that LTI Processed(TM) can
produce improved alternatives to corrugated products currently used in these
industries. LTI Processed(TM) products may also have applications for the
shipment of items with delicate finishes, and where the use of styrofoam has
been curtailed (for example, in the case of products shipped to the European
Union). LTI Processed(TM) products may also be employed in the medical industry
for packaging difficult to handle and contaminated items and for containers for
paints, solvents and chemicals which are currently stored in metal cans.
The Company has targeted the prepared desserts segment of the bakery
industry as an initial market and has developed a line of LTI Processed(TM)
bakery products that it believes are physically superior and more cost effective
than alternative products currently used in the industry. On April 17, 1997, the
Company announced "BAKE'N SHIP(TM)", a new product line, which is available for
sale to the baking industry. BAKE'N SHIP(TM) utilizes the Company's proprietary
(patent pending) process, resulting in a new material which is ovenable and
freezable with the strength and structure of corrugated material. This is the
Company's first commercial product. The new product line can streamline the
process by which bakery products are produced by allowing the baker to bake,
freeze, ship and display in one package. In addition, certain versions of the
product line provide an appealing presentation media for baked goods.
The Company continues to design, develop and test alternative packaging
designs and products targeted at other industries. Because the exact
specifications of the LTI Processed(TM) material can vary significantly
depending on the use to which the product is put, the Company must continually
test sample products designed for specific end use applications.
SALES AND MARKETING
The Company's sales force currently consists of two salespersons. The
Company intends to hire approximately two additional salespersons in the near
term. The Company may also determine to utilize the services of independent
sales representatives. See "--Employees". The sales force is under the direction
of J. Scott Stewart, Senior Vice President - Marketing/Sales.
The Company believes that direct sales to end users of LTI
Processed(TM) finished products could enable the Company to more effectively
penetrate the national market. The Company also believes that direct sales to
end users will enable the Company to identify and design particular niche
products that may provide a significant advantage over alternative packaging or
display products. To the extent that the Company enters into relationships with
converters, the Company will be dependent to a large degree upon such converters
to market products incorporating LTI Processed(TM) technology, and the success
of any such relationship will depend in part upon the converter's own
competitive, marketing and strategic considerations, including the relative
advantages of alternative products being developed or marketed by such
converters. To date, the Company has not entered into any marketing arrangements
with any converter, and the Company anticipates that such arrangements, if any,
will become more likely only if the Company is able to effectively penetrate the
direct sales market.
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<PAGE> 28
The Company believes that much of the corrugated packaging industry is
characterized by long-standing business relationships between manufacturers and
end users. In addition, the Company will need to convince potential customers
currently utilizing non-corrugated packaging products of the relative advantages
of LTI Processed(TM) products. As a result, the Company may encounter
significant resistance in its marketing efforts and expects that it will be
required to some extent to educate the market regarding LTI Processed(TM)
products. Moreover, the Company anticipates that it will be required in certain
cases to design and produce at its expense prototype products prior to
consummating a sale, which activities could have an adverse effect on the
Company's results of operations.
MANUFACTURING
The Company does not intend to directly manufacture either LTI
Processed(TM) roll-stock or finished products. Instead, the Company has
contracted with manufacturers and may enter into formal and informal
arrangements with additional manufacturers and outside laminators, corrugators
and sheet plants. However, the Company may, in the future, consider performing
some or all of the manufacturing processes if it believes it is appropriate
under the circumstances. The Company has no experience in manufacturing products
on a commercial scale and does not have the resources to directly manufacture on
a commercial scale any of its products. In the event the Company decides to
engage in any manufacturing activities, the Company will require substantial
funds and will be required to hire and train significant additional personnel.
LTI Processed(TM) polyester film can be laminated either on laminating
machines which are currently used largely for film-on-film lamination, or on
coating machines which currently coat single-ply cardboard with polyethylene and
other coatings for finishes such as those on cereal boxes. The Company believes
that, with the proper direction by the Company's personnel, independent
companies possessing the proper laminating and coating machinery can produce LTI
Processed(TM) material with little or no modification of existing equipment and
with only minor interruption in production and thus with minimal added cost. The
Company believes that there are a sufficient number of laminators and coaters
both locally and nationally to fill the Company's production needs. The Company
has entered into a formal arrangement with Ludlow Corporation, a laminator and
coater, to provide its products to Company designated corrugators and
converters.
The Company intends to out-source the corrugation of LTI Processed(TM)
roll-stock with corrugators with whom the Company has established formal
relationships. See "--Strategy." The Company believes that the corrugation of
LTI Processed(TM) roll-stock requires little oversight by the Company, that no
modification of existing machinery is required and that corrugators are widely
available. However the Company will be dependent on these corrugators for
production and there can be no assurance that these corrugators will continue to
fill the Company's production needs or, if they cease to do so, that the Company
would be able to secure adequate production on terms acceptable to the Company.
The Company has entered into a formal arrangement with Jet Corr, Inc., a
corrugator, to provide for the corrugation of LTI Processed(TM) roll-stock and
such production is currently commercialized.
After corrugation, sheets of LTI Processed(TM) board will typically be
stored on the converter's premises to await specific orders. To fill smaller
customer orders, this inventory can be die-cut and printed if necessary by sheet
plants and made into final products. On larger orders for printed products, the
Company expects to laminate onto pre-printed linerboard or laminate with
reverse-printed film and thus run printed roll-stock through the corrugating
process, allowing higher volume and faster and less expensive production. See
"--LTI Processed(TM)." Through the use of a laminator, a corrugator and a
converter, the Company is now capable of manufacturing its products for the
baking industry ("BAKE'N SHIP(TM)") in commercially viable quantities.
COMPETITION
Competition in the corrugated and packaging industries is intense and
based significantly on price. Moreover, certain aspects of the Company's
business, including printing, are characterized by rapidly evolving technology
that could result in the technological obsolescence of processes utilized by the
Company. The Company competes with
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<PAGE> 29
many corrugating firms and manufacturers of other packaging products, including
those made of styrofoam, metal and plastic. Most of the Company's competitors
have substantially greater financial, technical and human resources than the
Company and may be better equipped to develop, manufacture and market products.
These companies also compete with the Company in recruiting and retaining highly
qualified personnel and consultants.
Additionally, there are both corrugated and other packaging and display
materials available which can provide some or all of the physical
characteristics of LTI Processed(TM) products as well as high quality aesthetics
and which directly compete with the Company's products. Major corrugating and
integrated converters produce large quantities of corrugated products with wax
and other coatings which are water resistant and can be used, for example, to
pack wet and frozen foods for extended periods and to reduce abrasion of items
with delicate finishes. The Company will face intense competition from these
manufacturers to the extent that these products present viable alternatives to
LTI Processed(TM) products. These products may remain attractive to many end
users as they can be lower priced and end users will not have to incur the
potential cost of interrupting product lines and supply sources to accommodate
different packaging from a new company. The Company intends to compete with such
manufacturers by offering a product that can be more expensive but which the
Company believes will be of a higher quality, and in many circumstances, more
efficient in the long term. Additionally, the Company will face competition for
non-integrated converters who supply corrugated products that are laminated with
high quality, lithographically printed paper. While the Company believes that
these products do not have the physical properties of LTI Processed(TM) and
offer little price advantage over LTI Processed(TM), they will effectively
compete with the Company's products in the market for quality printed products.
The Company also expects to encounter significant competition as it
seeks to enter markets for other forms of value-added packaging and seeks to
compete with products such as styrofoam, metal and plastic. Given the fact that
the physical properties of these other materials have been long established,
that end users are accustomed to using these materials and that manufacturers
have massive national and international production and marketing efforts as well
as sophisticated and well developed product lines, the Company will need to
persuade end users of the value of an entirely new material and product design
which is purchased from a new supplier. There can be no assurance that such
efforts will be successful. Moreover, there can be no assurance that other
companies will not develop products which are superior to the Company's or which
achieve greater market penetration.
PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in part on its ability to obtain
patent protection for its products, both in the United States and abroad. On
December 9, 1988, Michael Olvey, Sr., the inventor of the LTI Processed(TM)
method and a founder and former President of the Company filed a patent
application with the U.S. Patent and Trademark Office (the "U.S. Patent Office")
covering the Company's LTI Processed(TM) technology. On March 15, 1990, the U.S.
Patent Office rejected claims of the Company's patent application as being too
broad in light of prior art. On April 19, 1993, Mr. Olvey assigned the rights to
this patent application to the Company. The Company submitted a modification of
its original application on March 27, 1997. This resulted in withdrawal of part
of the rejections, and the Company expects to attempt to submit a further
modification or responsive arguments not later than November, 1997, to attempt
to overcome the remaining rejections.
There can be no assurance that any patent applications filed by or on
behalf of the Company will result in patents being issued, that patents, if any,
issued to the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide any significant competitive
advantage to the Company. Furthermore, there can be no assurance that others
have not independently developed, or will not independently develop, similar
products or technologies or, if patents are issued to the Company, will not
design around such patents.
The Company's potential products may conflict with patents which have
been or may be granted to competitors or others. In particular, the Company is
aware of a patent to Adolph Coors Company that relates to certain processes by
which film, including polyester film, is reverse-printed and laminated onto
linerboard. Such patent may affect the ability of the Company to obtain patent
protection for some or all of the claims included in its patent application.
Moreover, there can be no assurance that any application of the Company's
technology will not
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<PAGE> 30
infringe the Coors patent or any other patents or proprietary rights of others.
Such other persons could bring legal actions against the Company claiming
damages and seeking to enjoin manufacturing and marketing of the Company's
products. If any such actions are successful, in addition to any potential
liability for damages, the Company could be required to obtain a license in
order to continue to manufacture or market the affected products. There can be
no assurance that the Company would prevail in any such action or that any
license required under any such patent would be made available on acceptable
terms, if at all. If the Company becomes involved in litigation, it could
consume a substantial portion of the Company's time and resources. Moreover, the
non-approval of the Company's patent application or the invalidation of any
patent that may be issued to the Company would likely have a material adverse
effect on the Company.
The Company also relies on trade secret protection for its confidential
and proprietary information. However, trade secrets are difficult to protect and
there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology, or that
the Company can meaningfully protect its rights to unpatented trade secrets.
The Company intends to protect its proprietary technology through the
use of non-disclosure agreements with the laminators, corrugators, converters
and printers with which it may establish strategic alliances and production
relationships. The Company also requires that certain of its employees and
consultants execute a confidentiality agreement upon the commencement of an
employment or consulting relationship with the Company. The agreements generally
provide that trade secrets and all inventions conceived by the individual and
all confidential information developed or made known to the individual during
the term of the relationship shall be the exclusive property of the Company and
shall be kept confidential and not disclosed to third parties except in
specified circumstances. There can be no assurance, however, that these
agreements will provide meaningful protection for the Company's proprietary
information in the event of unauthorized use or disclosure of such information.
SUPPLIERS
The Company is dependent on the suppliers of the raw materials used to
produce LTI Processed(TM) products, including polyester film and linerboard. The
corrugating industry periodically suffers shortages of linerboard. These
shortages more seriously affect non-vertically integrated corrugating converters
(those who do not own their own timber and produce their own roll-stock) by
raising prices and forcing customers of corrugated board to purchase from
integrated converters. To the extent the Company intends to utilize
non-integrated converters for the production of LTI Processed(TM) packaging, a
shortage-induced price increase could raise the price of such LTI Processed(TM)
materials beyond the value margin, causing end users to seek integrated
suppliers which may not use the Company's products. Although the Company's
requirements for linerboard have to date been limited, the Company has relied,
and will likely continue to rely, upon Ludlow Corporation as a principal
supplier of linerboard. Additionally, the Company has entered into contracts
with Jet Corr, Inc. and Packaging-Atlanta, Corporation to corrugate and convert,
respectively, the Company's integrated products.
In the absence of a shortage, the Company believes that there are
numerous sources of supply of its raw materials. However, should the Company be
unable to obtain an adequate supply of necessary raw material, the Company's
ability to continue to manufacture products in accordance with its business plan
would be adversely affected.
GOVERNMENT REGULATION
To the extent that LTI Processed(TM) is used in the food service and
packaging industries, the Company is required to ensure that its products meet
federal Food and Drug Administration (the "FDA") regulations regarding materials
used in contact with food. A primary supplier of polyester film has informed the
Company that the polyester film used by the Company has received FDA approval
for contact with food. The Company believes that both polyester film and the
bonding agents used in LTI Processed(TM) products are in compliance with
approved food additive regulations permitting the types of food contact use
contemplated by the Company. However, there can be no
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<PAGE> 31
assurance that the Company's use of the materials included in its products will
not require separate FDA approval. Obtaining FDA approval has historically been
a costly and time-consuming process. The Company may also need to seek
regulatory approval from foreign governments for the use of the LTI
Processed(TM) products shipped to those countries. For example, the European
Union has strict regulations as to the disposability and recyclability of
imported packaging and paper products. There can be no assurance that such
foreign regulations will not restrict or preclude the Company from engaging in
activities in such countries, which could have a material adverse effect on the
Company. The failure to obtain any required regulatory approvals could have a
material adverse effect on the Company. To date the Company has not incurred
substantial expenses to comply with environmental laws.
EMPLOYEES
The Company currently has seven full-time employees and one part-time
employee. The Company intends to hire two additional salespersons in the near
future and may hire up to three additional salespersons. The Company may also
determine to utilize the services of independent sales representatives. The
Company's future success depends in significant part upon the continued services
of its executive officers and its ability to attract and retain highly qualified
sales and marketing and managerial personnel. Competition for such personnel is
intense and there can be no assurance that the Company can retain its key
employees or that it can attract, assimilate or retain other highly qualified
sales and marketing and managerial personnel in the future. None of the
Company's employees is represented by a labor union and the Company believes its
relations with its employees to be satisfactory. On April 1, 1997, the Company
placed its employees with Paradyme, a Professional Employer Organization. Under
terms of the arrangement with Paradyme, the Company's employees became employees
of Paradyme, entitling the employees to obtain superior benefits that the
Company previously could not offer to its employees. While the Company must pay
for the payroll cost of the employees, and a fee for this service, it avoids the
overhead and additional administrative costs typically associated with these
benefits.
PROPERTIES
As of March 31, 1997, the Company leased approximately 5,000 square
feet of office space for its executive offices pursuant to a two year agreement
which provides for a monthly rent of $3,833. The office space, located in
Atlanta, Georgia, is in excellent condition.
LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of the
executive officers and directors of the Company as of July 22, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael E. Noonan.......... 56 Chairman of the Board of Directors,
President, Chief
Executive Officer and Director
Richard B. Carlock......... 46 Chief Financial Officer
Robert L. Dover............ 63 Senior Vice President --
Marketing/Operations, Secretary
and Director
</TABLE>
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<PAGE> 32
<TABLE>
<S> <C> <C>
J. Scott Stewart.......... 43 Senior Vice President --
Marketing/Sales
Ronald L. Christensen..... 59 Director
Jerome I. Gellman......... 70 Director
Leonard Toboroff.......... 64 Director
William J. Warren......... 58 Director
</TABLE>
MICHAEL E. NOONAN was appointed Chairman of the Board, President and
Chief Executive Officer on February 1, 1996. From 1994 to February 1, 1996, Mr.
Noonan was self-employed as a business consultant. From 1989 to 1994, Mr. Noonan
was the Chief Executive Officer, President and sole shareholder of Winning
Image, Inc., an apparel marketing and manufacturing firm which was sold to Terry
Manufacturing Co. From 1986 to 1989, Mr. Noonan was a Senior Vice President of
Domestic and North American Operations at the Mead Packaging Division of Mead
Corporation.
RICHARD B. CARLOCK has served as Chief Financial Officer to Laminating
Technologies, Inc. on a part-time basis since February 1997, devoting
approximately 25 percent of his time to LTI. He is a Partner in the firm Tatum
CFO Partners, L.P. which provides CFO expertise to emerging growth companies,
and to augment the financial needs of larger corporations for specific projects.
Accordingly, Mr. Carlock has other clients that he serves. He has served as
Chief Financial Officer, Treasurer and member of the Board of Directors for
4Health, Inc., a nutritional supplement company from 1995 to 1996. Previously,
he served as Chief Financial Officer, Treasurer, and Vice-President of
Electromedics, Inc., a medical device manufacturer, for the period from 1989 to
1994. Mr. Carlock served as Chief Financial Officer and Corporate Secretary of
Evans BioControl, Inc., a biotechnology firm specializing in entomology research
development (1987 to 1989) and as Vice-President of Finance and Vice President
of Technical Services at Information Solutions, Inc., a software sales and
development company, from 1983 to 1987. Mr. Carlock is a Certified Public
Accountant who practiced with Price Waterhouse & Company and Main LaFrentz &
Company prior to his financial experience in industry. He received a Master of
Science degree in Accounting from New York University's Graduate School of
Business, currently Sterns Business School, in 1976 and holds a Bachelor of Arts
degree from the University of Colorado at Boulder.
ROBERT L. DOVER has been the Senior Vice President --
Marketing/Operations, Secretary and a director of the Company since May 1996.
From 1966 to April 1995, Mr. Dover was an executive of Mead Packaging Division
of Mead Corporation in Atlanta, Georgia working in the capacity of Director of
Marketing and Technological Planning, Environmental Technology, Marketing and
Sales, for the Food Industry, Marketing for the Soft Drink Industry, Film
Systems, Market Research and Machinery Systems Development. From May 1995 to May
1996, Mr. Dover was an independent consultant. Mr. Dover graduated with a
Masters of Science Degree in Industrial Management from the Georgia Institute of
Technology.
J. SCOTT STEWART has been Senior Vice President -- Marketing/Sales of
the Company since May 1996. From 1992 to 1996, Mr. Stewart was co-founder and a
sales representative for Simmons Survey, a company involved in leak detection
for underground fuel tanks. From 1981 to 1992, Mr. Stewart worked for the
Royston Division of AWH Corporation in Winston-Salem North Carolina as a Vice
President of the Contract Business Division and of Corporate Marketing. Mr.
Stewart graduated with a Masters Degree in Business Administration from Emory
University in 1977, and with a Bachelor's Degree in Industrial Management from
the Georgia Institute of Technology in 1975.
RONALD L. CHRISTENSEN has been a director of the Company since March
1996. From 1993 to the present, Mr. Christensen has served as President and
Chief Executive Officer of PrinTech Label Corporation, a printing and converting
firm. Since 1983 he has also served as president of Adrienne Associates, a
consulting services company to the printing and pressure sensitive materials
industry. Mr. Christensen graduated from Georgia Institute of Technology in 1960
with a Bachelor's Degree in Chemical Engineering.
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<PAGE> 33
JEROME I. GELLMAN has been a director of the Company since July 1996.
From 1988 to the present, Mr. Gellman has been counsel to the law firm of Cowan,
Liebowitz & Latman. Mr. Gellman has also served as a director of Tyco Toys,
Inc., a publicly-traded toy company, from 1987 to 1997; Tyco Toys, Inc merged
into Mattel, Inc. on March 31, 1997.
LEONARD TOBOROFF has been a director of the Company since July 1996.
Mr. Toboroff has also served as Vice President and a director of Riddell Sports
Inc., a manufacturer and distributor of sporting goods, since April 1988 and
Vice President and Vice-Chairman of the Board of Allis-Chalmers Corp. since May
1989. Mr. Toboroff has been a practicing attorney since 1961 and has served as
(i) a director of American Bakeries Company since August 1987, (ii) a director
of Banner Aerospace, Inc., a supplier of aircraft parts, since September 1992,
(iii) a director of ANMR Corp., a manufacturer of medical diagnostic equipment,
since September 1992 and (iv) Chairman of the Board of Saratoga Springs Beverage
Co. since December 1995.
WILLIAM J. WARREN has been a director of the Company since March 1996.
Mr. Warren founded Mar-Lyn Container Corp., a sheet converter, in 1967 and is
the president and a majority shareholder of Mar-Lyn. Mr. Warren graduated from
the University of California in 1961 with a Bachelor's Degree in Industrial
Management.
Directors serve until the next annual meeting or until their successors
are elected and qualified. Officers serve at the discretion of the Board of
Directors, subject to rights, if any, under contracts of employment. See
"Management -- Employment and Consulting Agreements."
The Company has agreed, if requested by Blair, to nominate a designee
of Blair to the Company's Board of Directors for a period of five years after
the date of the 1996 Offering. Blair has not yet selected such designee.
See "Plan of Distribution."
The Board of Directors intends to establish an Audit Committee which
will review, with the Company's independent auditors, the results and scope of
their audit services and any other services they are asked to perform, their
report on the Company's financial statements following completion of their audit
and the Company's policies and procedures with respect to internal accounting
and financial controls. In addition, the Audit Committee will make annual
recommendations to the Board of Directors for the appointment of independent
public accountants for the ensuing year.
EXECUTIVE COMPENSATION
The following table sets forth certain information covering the
compensation paid or accrued by the Company during the fiscal year indicated to
its President/Chief Executive Officer during the fiscal year ended March 31,
1997. No other executive officer had compensation, including salary and bonus,
in excess of $100,000 during the fiscal year ended March 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation Awards
NAME AND FISCAL YEAR NUMBER OF SECURITIES
PRINCIPAL POSITION ENDED MARCH 31 SALARY UNDERLYING OPTIONS
------------------ -------------- ------ ------------------
<S> <C> <C> <C>
Michael E. Noonan 1997 144,000.00 116,346(1)
Chairman of the Board, President, Chief 1996 72,000.00(2)
Executive Officer and Director
</TABLE>
(1) Consists of 25,027 shares issuable upon exercise of options granted
to Mr. Noonan by TransMillennial Resource Corporation and 91,319 shares issuable
upon exercise of options granted by Steve Gorlin.
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<PAGE> 34
(2) Represents amounts accrued in the fiscal year ended March 31, 1996
and includes $60,000 payable pursuant to a consulting arrangement prior to March
31, 1996.
- ------------
The following table sets forth information regarding options granted to
the President/Chief Executive Officer during the fiscal year ended March 31,
1997.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE PRICE
NAME OPTIONS GRANTED IN FISCAL YEAR ($/SHARE) EXPIRATION DATE(1)
---- --------------- -------------- --------- ----------------
<S> <C> <C> <C> <C>
Michael E. Noonan 116,346 47.2% $0.68 04/06/02
</TABLE>
(1) Consists of 25,027 shares issuable upon exercise of options granted
to Mr. Noonan by TransMillennial Resource Corporation and 91,319 shares issuable
upon exercise of options granted by Steve Gorlin. The options became exercisable
commencing as of April 6, 1996 and expire on April 6, 2002.
- ------------
The following table sets forth the number of exercisable and
unexercisable options as of March 31, 1997, and the value of such options for
the President/Chief Executive Officer.
<TABLE>
<CAPTION>
NO. OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT FY END OPTIONS AT FY END
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME OR EXERCISED (#) REALIZED UNEXERCISABLE UNEXERCISABLE
---- ---------------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Michael E. Noonan -- -- 77,564/38,782 $364,163/$182,081
</TABLE>
EMPLOYMENT AND CONSULTING AGREEMENTS
In June 1996, the Company entered into a one year employment agreement
with Michael E. Noonan, Chairman and Chief Executive Officer of the Company. The
agreement provides for an annual base salary of $144,000 per year and is
automatically renewable for successive one year terms unless either party gives
six months' notice to the other. The Company may terminate the agreement without
cause and, upon such termination, Mr. Noonan will be entitled to receive his
base salary for a period of one year (subject to a 50% offset during the second
six months for salary received from subsequent employment). In addition, if the
Company exercises its right not to renew the agreement, Mr. Noonan will be
entitled to six months of severance pay. The agreement contains confidentiality
and non-competition provisions.
The Company has agreed with Blair that, notwithstanding the provisions
of the foregoing agreements, the compensation of the Company's executive
officers will not increase from current levels for a period of 13 months after
the closing of the 1996 Offering.
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<PAGE> 35
DIRECTOR COMPENSATION
Non-employee directors of the Company are entitled to compensation of
$500 for each Board of Directors meeting attended and are reimbursed for
expenses actually incurred in connection with such meeting. Directors are not
precluded from serving the Company in any other capacity and receiving
compensation therefor.
Director's Option. In addition, directors are entitled to receive
Director Options pursuant to the Company's 1996 Stock Option Plan (the "Plan").
The provisions of the Plan provide for the automatic grant of non-qualified
stock options to purchase shares of Common Stock ("Director Options") to
directors of the Company who are not employees or principal stockholders of the
Company ("Eligible Directors"). Eligible Directors of the Company were granted a
Director Option to purchase 10,000 shares of Common Stock on or about October 9,
1996 at a per share exercise price equal to $5.00. Future Eligible Directors
will be granted a Director Option to purchase 10,000 shares of Common Stock on
the date that such person is first elected or appointed a director. Further,
commencing on the day immediately following the date of the annual meeting of
stockholders for the Company's fiscal year ending March 31, 1997, each Eligible
Director, other than directors who received an Initial Director Option since the
last annual meeting, will be granted a Director Option to purchase 1,000 shares
of Common Stock ("Automatic Grant") on the day immediately following the date of
each annual meeting of stockholders, as long as such director is a member of the
Board of Directors. The exercise price for each share subject to a Director
Option shall be equal to the fair market value of the Common Stock on the date
of grant, except for directors who receive incentive options and who own more
than ten percent of the voting power, in which case the exercise price shall be
not less than 110 percent of the fair market value on the date of grant.
Director Options are exercisable in four equal annual installments, commencing
six months from the date of grant. Director Options will expire the earlier of
ten years after the date of grant or 90 days after the termination of the
director's service on the Board of Directors.
STOCK OPTIONS
General. In March 1996, the Board of Directors adopted and the
Company's stockholders approved the Amended and Restated 1996 Stock Option Plan
(the "Plan"), which provides for the grant by the Company of options to purchase
up to an aggregate of 250,000 shares of the Company's authorized but unissued
Common Stock. Pursuant to the Plan, employees, officers and directors of, and
consultants or advisers to, the Company and any subsidiary corporations are
eligible to receive incentive stock options ("incentive options") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and/or options that do not qualify as incentive options ("non-qualified
options"). The Plan, which expires in March 2006, will be administered by the
Board of Directors or a committee of the Board of Directors, provided, however,
that any delegation of powers to a committee shall be consistent with Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), which provides, among other things, that a grant or award
transaction will be an exempt transaction for short-swing profit liability
purposes if it is approved by a committee that is composed solely of two or more
non-employee directors. The purposes of the Plan are to ensure the retention of
existing executive personnel, key employees, directors, consultants and advisors
who are expected to contribute to the Company's future growth and success and to
provide additional incentive by permitting such individuals to participation the
ownership of the Company, and the criteria to be utilized by the Board of
Directors or the committee in granting options pursuant to the Plan will be
consistent with these purposes. The Plan provides for automatic grants of
options to certain directors in the manner set forth below.
Options granted under the Plan may be either incentive options or
non-qualified options. Incentive options granted under the Plan are exercisable
for a period of up to 10 years from the date of grant at an exercise price which
is not less than the fair market value of the Common Stock on the date of the
grant, except that the term of an incentive option granted under the Plan to a
stockholder owning more than 10% of the outstanding voting power may not exceed
five years and its exercise price may not be less than 110% of the fair market
value of the Common Stock on the date of the grant. To the extent that the
aggregate fair market value, as of the date of grant, of the shares for which
incentive options become exercisable for the first time by an optionee during
the calendar year exceeds $100,000, the portion of such option which is in
excess of the $100,000 limitation will be treated as a non-qualified
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<PAGE> 36
option. Options granted under the Plan to officers, directors or employees of
the Company may be exercised only while the optionee is employed or retained by
the Company or within 90 days of the date of termination of the employment
relationship or directorship. However, options which are exercisable at the time
of termination by reason of death or permanent disability of the optionee may be
exercised within 12 months of the date of termination of the employment
relationship or directorship. Upon the exercise of an option, payment may be
made by cash or by any other means that the Board of Directors or the committee
determines. No option may be granted under the Plan after March 2006.
Options may be granted only to such employees, officers and directors
of, and consultants and advisors to, the Company or any subsidiary of the
Company as the Board of Directors or the committee shall select from time to
time in its sole discretion, provided that only employees of the Company or a
subsidiary of the Company shall be eligible to receive incentive options. As of
June 30, 1997, the number of employees, officers and directors of the Company
eligible to receive grants under the Plan was 12 persons. The number of
consultants and advisors to the Company eligible to receive grants under the
Plan is not determinable. An optionee may be granted more than one option under
the Plan. The Board of Directors or the committee will, in its discretion,
determine (subject to the terms of the Plan) who will be granted options, the
time or times at which options shall be granted, and the number of shares
subject to each option, whether the options are incentive options or
non-qualified options, and the manner in which options may be exercised. In
making such determination, consideration may be given to the value of the
services rendered by the respective individuals, their present and potential
contributions to the success of the Company and its subsidiaries and such other
factors deemed relevant in accomplishing the purpose of the Plan.
Under the Plan, the optionee has none of the rights of a stockholder
with respect to the shares issuable upon the exercise of the option until such
shares shall be issued upon such exercise. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
the date of exercise, except as provided in the Plan. During the lifetime of the
optionee, an option shall be exercisable only by the optionee. No option may be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of decent and distribution.
The Board of Directors may amend or terminate the Plan except that
stockholder approval is required to effect a change so as to increase the
aggregate number of shares that may be issued under the Plan (unless adjusted to
reflect such changes as a result of a stock dividend, stock split,
recapitalization, merger or consolidation of the Company), to modify the
requirements as to eligibility to receive options, to increase materially the
benefits accruing to participants or as otherwise may be required by Rule 16b-3
or Section 422 of the Code. No action taken by the Board may materially and
adversely affect any outstanding option grant without the consent of the
optionee.
Under current tax law, there are no Federal income tax consequences to
either the employee or the Company on the grant of non-qualified options if
granted under the terms set forth in the Plan. Upon exercise of a non-qualified
option, the excess of the fair market value of the shares subject to the option
over the option price (the "Spread") at the date of exercise is taxable as
ordinary income to the optionee in the year it is exercised and is deductible by
the Company as compensation for Federal income tax purposes, if Federal income
tax is withheld on the Spread. However, if the shares are subject to vesting
restrictions conditioned on future employment or the holder is subject to the
short-swing profits liability restrictions of Section 16(b) of the Exchange Act
of (i.e., is an executive officer, director or 10% stockholder of the Company)
then taxation and measurement of the Spread is deferred until such restrictions
lapse, unless a special election is made under Section 83(b) of the Code to
report such income currently without regard to such restrictions. The optionee's
basis in the shares will be equal to the fair market value on the date taxation
is imposed and the holding period commences on such date.
Incentive option holders incur no regular Federal income tax liability
at the time of grant or upon exercise of such option, assuming that the optionee
was an employee of the Company from the date the option was granted until 90
days before such exercise. However, upon exercise, the Spread must be added to
regular Federal taxable income in computing the optionee's "alternative minimum
tax" liability. An optionee's basis in the shares received on exercise
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<PAGE> 37
of an incentive stock option will be the option price of such shares for regular
income tax purposes. No deduction is allowable to the Company for Federal income
tax purposes in connection with the grant or exercise of such option.
If the holder of shares acquired through exercise of an incentive
option sells such shares within two years of the date of grant of such option or
within one year from the date of exercise of such option (a "Disqualifying
Disposition"), the optionee will realize income taxable at ordinary rates.
Ordinary income is reportable during the year of such sale equal to the
difference between the option price and the fair market value of the shares at
the date the option is exercised, but the amount includable as ordinary income
shall not exceed the excess, if any, of the proceeds of such sale over the
option price. In addition to ordinary income, a Disqualifying Disposition may
result in taxable income subject to capital gains treatment if the sales
proceeds exceed the optionee's basis in the shares (i.e., the option price plus
the amount includable as ordinary income). The amount of the optionee's taxable
ordinary income will be deductible by the Company in the year of the
Disqualifying Disposition.
At the time of sale of shares received upon exercise of an option
(other than a Disqualifying Disposition of shares received upon the exercise of
an incentive option), any gain or loss is long-term or short-term capital gain
or loss, depending upon the holding period. The holding period for long-term
capital gain or loss treatment is more than one year.
The foregoing is not intended to be an exhaustive analysis of the tax
consequences relating to stock options issued under the Plan. For instance, the
treatment of options under state and local tax laws, which is not described
above, may differ from the treatment for Federal income tax purposes.
As of March 31, 1997, options to purchase 170,000 shares of Common
Stock at exercise prices of $4.00 and $5.00 per share have been granted under
the Plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation eliminates in certain
circumstances the liability of directors of the Company for monetary damages for
breach of their fiduciary duty as directors. This provision does not eliminate
the liability of a director (i) for breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions by the director not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for willful or negligent declaration of an unlawful dividend, stock
purchase or redemption, or (iv) for transactions from which the director derived
an improper personal benefit. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission.
The Company believes that it is the position of the Commission that
insofar as the foregoing provision may be invoked to disclaim liability for
damages arising under the Securities Act, the provision is against public policy
as expressed in the Securities Act and is therefore unenforceable. Such
limitation of liability also does not affect the availability of equitable
remedies such as injunctive relief of recision.
The Company entered into indemnification agreements ("Indemnification
Agreement(s)") with each of its directors and officers after the 1996 Offering.
Each such Indemnification Agreement provided that the Company will indemnify the
indemnitee against expenses, including reasonable attorneys' fees, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with any civil or criminal action or administrative
proceeding arising out of his performance of his duties as a director or
officer, other than an action instituted by the director or officer. Such
indemnification will be available if the indemnitee acted in good faith and in a
matter he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action, had no reasonable cause
to believe his conduct was unlawful. The Indemnification Agreements also require
that the Company indemnify the director or other party thereto in all cases to
the fullest extent permitted by applicable law. Each Indemnification Agreement
permits the director or officer that is party thereto to bring suit to seek
recovery or amounts due under the Indemnification Agreement and to recover the
expenses of such a suit if he is successful.
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<PAGE> 38
The Company's By-laws provide that the Company shall indemnify its
directors, officers, employees or agents to the full extent permitted by the
Delaware General Corporation Law, and the Company shall have the right to
purchase and maintain insurance on behalf of any such person whether or not the
Company would have the power to indemnify such person against the liability. The
Company has not currently purchased any such insurance policy on behalf on any
of its directors, officers, employees or agents.
CERTAIN TRANSACTIONS
Upon the conversion of the Series A Preferred Stock in connection with
the 1996 Offering, the Company paid to D.H. Blair Capital Corp. ("Blair & Co.")
approximately $150,000, representing the accumulated dividends on the Series A
Preferred Stock. The sole stockholder of D.H. Blair Capital Corp. is J. Morton
Davis, who is also the sole stockholder of Blair, the underwriter for the 1996
Offering. In September 1993, Blair loaned $30,000 to the Company and in March
1994, Blair loaned an additional $100,000 to the Company, each of which loans
bore interest at ten percent per annum. The principal amount of all of such
indebtedness was repaid in April 1996 and accrued interest of approximately
$30,000 was repaid in August 1996. In March 1994, the Company issued warrants to
purchase 36,897 shares of Common Stock of the Company to Blair in consideration
of the extension of the loan by Blair. Blair also acted as Placement Agent for
the Bridge Financing in April and May 1996 for which it received a Placement
Agent fee of $199,500 and a non-accountable expense allowance of $59,850.
All of the Company's stockholders, officers and directors as of the
1996 Offering have agreed not to sell, assign, transfer or otherwise dispose
publicly any of their shares of Common Stock for a period of 13 months after the
1996 Offering without the prior written consent of Blair.
Blair has the right to designate one individual for nomination to the
Company's Board of Directors for a period of five years after the completion of
the 1996 Offering, although it has not yet selected any such designee. Such
designee may be a director, officer, partner, employee or affiliate of Blair.
The Company has agreed to indemnify Blair against certain liabilities, including
liabilities under the Securities Act.
During the five-year period after the date of 1996 Offering, in the
event Blair originates a financing or a merger, acquisition or transaction to
which the Company is a party, Blair will be entitled to receive a finder's fee
in consideration for origination of such transaction. The fee is based on a
percentage of the consideration paid in the transaction ranging from 7 percent
of the first $1,000,000 to 2 1/2 percent of any consideration in excess of
$9,000,000.
The Company has agreed not to solicit Warrant exercises other than
through Blair, unless Blair declines to make such solicitation. Upon any
exercise of the Warrants after the one-year period after the 1996 Offering, the
Company will pay Blair a fee of 5 percent of the aggregate exercise price of the
Warrants, if (i) the market price of the Company's Common Stock on the date the
Warrants are exercised is greater than the then exercise price of the Warrants;
(ii) the exercise of the Warrants was solicited by a member of the NASD; (iii)
the warrant holder designates in writing that the exercise of the Warrant was
solicited by a member of the NASD and designates in writing the broker-dealer to
receive compensation for such exercise; (iv) the Warrants are not held in a
discretionary account; (v) disclosure of compensation arrangements was made both
at the time of the 1996 Offering and at the time of exercise of the Warrants;
and (vi) the solicitation of exercise of the Warrant was not in violation of
Regulation M.
Blair acted as the underwriter of the IPO Units in the 1996 Offering
for which it received underwriting discounts and commissions of $909,075 and a
non-accountable expense allowance of $293,250. In addition, in connection with
the 1996 Offering, the Company agreed to sell to Blair and its designees, for
nominal consideration, the Unit Purchase Options to purchase up to 170,000 IPO
Units, substantially identical to the IPO Units offered in the 1996 Offering,
except that the Class A Warrants and Class B Warrants included therein are each
subject to redemption by the Company, in accordance with the terms of the
Warrant Agreement, at any time after the Unit Purchase Options have been
exercised and the underlying warrants are outstanding.
Blair acted as Placement Agent for the Bridge Financing in April and
May of 1996, for which it received a Placement Agent fee of $199,500 and a
non-accountable expense allowance of $59,850.
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<PAGE> 39
In April 1996, Steve Gorlin and TransMillennial Resource Corporation
("TMR"), each principal stockholders of the Company, granted to Michael E.
Noonan, Chairman, President and Chief Executive Officer of the Company, options
to purchase an aggregate of 91,319 and 25,027 shares, respectively, of Common
Stock owned by Mr. Gorlin and TMR. The options are exercisable at $0.68 per
share and expire ten years from the date of grant. All of the TMR options and
13,755 of the Gorlin options are immediately exercisable, and the remaining
77,564 options are exercisable in approximately equal annual installments in
April 1997 and April 1998. The Company has granted Mr. Noonan demand and
piggyback registration rights with respect to the shares of Common Stock
issuable upon exercise of these options.
On August 26, 1994, the stockholders of the Company ratified a
preliminary agreement (the "Memorandum of Understanding") with TMR. Charles
Broes, the President and a principal stockholder of TMR, served as the President
and Chief Executive Officer of the Company from August 1994 to March 1995 and a
director of the Company from August 1994 to February 1996. Pursuant to the
Memorandum of Understanding, TMR agreed to provide certain management, financing
and marketing services to the Company for fees to be established at a later date
and the issuance of certain warrants contingent upon TMR securing certain
financing for the Company within six months. On September 1, 1994, the Company
entered into an Outsourcing Agreement with TMR (the "TMR Outsourcing Agreement")
pursuant to which the Company agreed to pay TMR $20,000 a month for its
management services.
On September 1, 1994, the Company also entered into an Outsourcing
Agreement with Revenue Process Development, Inc. ("RPD"), a subsidiary of TMR
(the "RPD Outsourcing Agreement"), pursuant to which RPD would act as exclusive
marketing and sales agent for the Company in exchange for the greater of 20
percent of gross sales or RPD's actual costs. On February 2, 1995, the Company
agreed with TMR to amend the Memorandum of Understanding (the "Amendment") and
extend the term of the agreement to ten months, to increase TMR's fees to
$22,000 a month, payable, along with TMR's expenses, in the form of 10 percent
convertible debentures of the Company and to cancel the RPD Outsourcing
Agreement. On June 7, 1995, TMR informed the Company via letter that it was
unable to secure the financing called for under the Memorandum of Understanding.
Accordingly, as per its terms, the Memorandum of Understanding expired on June
30, 1995 and the Company was obligated only for fees and expenses due to TMR
through such date and no warrants were issued or issuable to TMR.
On July 1, 1995, the Company sold certain assets to TMR at book value
for $54,279 in exchange for a reduction in the Company's indebtedness to TMR. As
of December 31, 1995, TMR sold certain of these assets to third parties for an
aggregate of $43,750, which amount was collected by the Company and resulted in
an increase in the Company's indebtedness to TMR. This indebtedness was included
in the indebtedness that was converted to equity in April 1996, as described
below. In July 1995, the Company purchased all of the outstanding stock of RPD
from TMR for $2,000.
In April 1996, pursuant to an agreement dated March 21, 1996, TMR
contributed to the capital of the Company $307,457 of indebtedness owed by the
Company to TMR for management services, expenses and other indebtedness under
the Memorandum of Understanding and the TMR Outsourcing Agreement and converted
the remaining $428,346 of Company indebtedness into 158,048 shares of Common
Stock at a rate of one share for every $2.7102 of indebtedness. In April 1996,
pursuant to additional debt conversion agreements dated March 21, 1996 (the
"Debt Conversion Agreements"), the Conversion Investors also converted an
aggregate of $550,210 of indebtedness of the Company into 203,013 shares of
Common Stock at a rate of one share for every $2.7102 of indebtedness.
In April 1996, Donald B. Sallee, a stockholder of the Company, and
other debtholders of the Company converted an aggregate of $495,000 principal
amount of indebtedness of the Company into an aggregate of $495,000 in principal
amount of Bridge Notes and 247,500 Bridge Warrants. The Company agreed to pay
the accrued interest on the indebtedness in cash. The principal amount of the
Bridge Notes and interest thereon at a rate of ten percent per annum were paid
to the holders of the Bridge Notes upon the closing of the 1996 Offering.
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<PAGE> 40
In June 1995, the Company purchased from Michael W. Olvey, Sr., a
founder, stockholder and former President and a director of the Company, 126,114
shares of Common Stock of the Company for $150,000, which amount was paid in
installments through April 1996. In July 1995, the Company sold 126,114 shares
of Common Stock to Donald Sallee for $85,000 in connection with a $250,000 loan
by Mr. Sallee to the Company in June 1995. As a result, the Company recorded a
financing cost of approximately $65,000 which was charged to earnings in the
year ended March 31, 1996. Additionally, in June 1995, the Company issued 33,208
shares of Common Stock to Mr. Olvey in consideration for the cancellation of
$90,000 of the Company's indebtedness to him. In March 1996, Mr.
Olvey canceled 7,379 of these shares.
In December 1995, the Company entered into a one year consulting
agreement with Mr. Olvey. The agreement provided for annual payments of $60,000
and a $60,000 bonus upon the issuance of a patent under the Company's current
patent application. The bonus is increased to $100,000 upon the issuance of
multiple patents under the current patent application.
TMR provided has been providing management services to the Company, and
the management fees incurred by the Company for such services during the year
ended March 31, 1997 were approximately $45,000. In addition, TMR advanced funds
to the Company and paid certain of its obligations, resulting in a balance of
$735,803 due to TMR at March 31, 1996. TMR agreed to contribute $307,457 of such
debt to the capital of the Company and to convert the remaining balance of
$428,346 into 158,048 shares of the Company's common stock. This conversion was
completed in April 1996. Two of the Company's former officers are shareholders
of TMR, and the Company was located in office space which was leased by TMR.
Rent on such space was included in the indebtedness described above.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of July 22, 1997, certain
information regarding ownership of Common Stock by: (i) each person known by the
Company to own beneficially more than 5% of the outstanding Common Stock; (ii)
each director and named executive officer of the Company; and (iii) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Name and Address(1) No. of Shares(1) Percentage
------------------- ---------------- ----------
<S> <C> <C>
Michael E. Noonan............................................... 77,564(2) 2.4%
Robert L. Dover................................................. 26,667(3) *
Ronald L. Christiansen.......................................... 2,500(4) *
Jerome I. Gellman............................................... 2,500(4) *
Leonard Toboroff................................................ 2,500(4) *
William J. Warren............................................... 2,500(4) *
J. Morton Davis................................................. 359,748(5,6) 11.2%
D. H. Blair Capital Corp........................................ 322,851(6) 10.1%
Steve Gorlin.................................................... 202,012(7) 6.3%
TransMillennial Resource Corporation............................ 158,048(8) 5.0%
All executive officers and directors as a group (8 persons)..... 114,231(9) 3.5%
</TABLE>
- --------------
* Less than 1 percent
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<PAGE> 41
(1) Except as otherwise indicated, each of the parties listed above has sole
voting and investment power over the shares owned. Except as otherwise
indicated, the address of each stockholder is c/o Laminating Technologies,
Inc., 1160 Hightower Trail, Atlanta, Georgia 30350-2910.
(2) Includes 25,027 shares issuable upon exercise of immediately exercisable
options granted to Mr. Noonan by TMR and 52,537 shares issuable upon
exercise of immediately exercisable options granted by Steve Gorlin. Does
not include an additional 38,782 shares issuable upon exercise of options
granted to Mr. Noonan by Mr. Gorlin that are not exercisable within 60 days.
(3) Includes 26,667 immediately exercisable options to purchase Common Stock.
Does not include 13,333 shares issuable upon exercise of options that are
not exercisable within 60 days.
(4) As to each director, includes 2,500 immediately exercisable options to
purchase Common Stock. Does not include 7,500 shares issuable upon exercise
of options that are not exercisable within 60 days.
(5) Includes 322,851 shares owned by D.H. Blair Capital Corp. and 36,897 shares
issuable upon exercise of immediately exercisable warrants issued to D.H.
Blair Investment Banking Corp. Mr. Davis is the sole stockholder of each of
D.H. Blair Capital Corp. and D.H. Blair Investment Banking Corp. The address
of Mr. Davis is 44 Wall Street, New York, New York 10005.
(6) Does not include 36,897 shares issuable upon the exercise of immediately
exercisable warrants issued to D.H. Blair Investment Banking Corp. in March
1994 and expiring on March 25, 1999. The sole stockholder of D.H. Blair
Capital Corp. is J. Morton Davis, who is also the sole stockholder of Blair
Investment. The address of D.H. Blair Capital Corp. is 44 Wall Street, New
York, New York 10005.
(7) Includes 91,319 shares subject to options granted by Mr. Gorlin to Michael
E. Noonan. The address of Mr. Gorlin is 5115 Peachtree Road, Suite 200,
Chamblee, Georgia 30341.
(8) Includes 25,027 shares subject to options granted by TMR to Michael E.
Noonan. The address of TMR is 31847 W. Sea Level Drive, Malibu, California
90265.
(9) Includes 114,231 shares issuable upon exercise of options that are
immediately exercisable. Does not include 82,115 shares issuable upon
exercise of options that are not exercisable within 60 days. Steve Gorlin
may be deemed a "founder" of the Company, as such term is defined in the
Securities Act.
- ------------
ESCROW SHARES
In connection with the 1996 Offering, the then stockholders of the
Company placed, on approximately a pro rata basis, 410,000 shares, or one-third
of the outstanding shares of Common Stock of the Company before the 1996
Offering, into escrow pursuant to an escrow agreement (the "Escrow Agreement")
between such holders and American Stock Transfer & Trust Company, as escrow
agent. The Escrow Shares are not transferable or assignable; however, the Escrow
Shares may be voted by the beneficial holders thereof. The shares of Common
Stock underlying the options granted to Michael E. Noonan by Steve Gorlin and
are not be Escrow Shares.
The Escrow Shares will be released from escrow if, and only if, one or
more of the following conditions are met:
(a) The Company's net income before provision for income taxes and
exclusive of any extraordinary earnings (all as audited by the Company's
independent public accountants) (the "Minimum Pretax Income") amounts to at
least $3,100,000 for the fiscal year ending March 31, 1998;
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<PAGE> 42
(b) the Minimum Pretax Income amounts to at least $4,400,000 for the
fiscal year ending March 31, 1999;
(c) the Minimum Pretax Income amounts to at least $5,700,000 for the
fiscal year ending March 31, 2000;
(d) the Closing Price (as defined in the Escrow Agreement) of the
Common Stock averages in excess of $12.50 per share for 30 consecutive business
days during the 18-month period commencing on the date of the 1996 Offering;
(e) the Closing Price of the Common Stock averages in excess of $16.75
per share for 30 consecutive business days during the 18-month period commencing
with the nineteenth month from the date of the 1996 Offering;
(f) during the periods specified in (d) or (e) above, the Company is
acquired by or merged into another entity in a transaction in which the value of
the per share consideration received by the stockholders of the Company on the
date of such transaction or at any time during the applicable period set forth
in (d) or (e), respectively, equals or exceeds the applicable levels set forth
in (d) or (e), respectively.
The Minimum Pretax Income amounts set forth above shall: (i) be
calculated exclusive of any extraordinary earnings, including any charge to
income relating to the Bridge Financing and repayment of the Bridge Notes or
resulting from release of the Escrow Shares; and (ii) be increased
proportionately, with certain limitations, in the event additional shares of
Common Stock or securities convertible into, exchangeable for, or exercisable
into Common Stock are issued after completion of the Offering. The Closing Price
amounts set forth above are subject to adjustment in the event of any stock
splits, reverse stock splits or other similar events.
Any money, securities, rights or property distributed in respect of the
Escrow Shares and including any property distributed as dividends or pursuant to
any stock split, merger, recapitalization, dissolution, or total or partial
liquidation of the Company, shall be held in escrow until release of the Escrow
Shares. If none of the applicable Minimum Pretax Income or Closing Price levels
set forth above have been met by June 30, 2000, the Escrow Shares, as well as
any dividends or other distributions made with respect thereto, will be canceled
and contributed to the capital of the Company. The Company expects that the
release of the Escrow Shares to officers, directors, employees and consultants
of the Company will be deemed compensatory and, accordingly, will result in a
substantial charge (not deductible for income tax purposes) to reportable
earnings, which would equal the fair market value of such shares on the date of
release. Such charge could substantially increase the loss or reduce or
eliminate the Company's net income, if any, for financial reporting purposes for
the period during which such shares and options are, or become probably of
being, released from escrow. Although the amount of compensation expense
recognized by the Company will not affect the Company's total stockholders"
equity, it may have a negative effect on the market price of the Company's
securities. See "Management's Discussion and Analysis of Financial Condition"
and "Results of Operations."
The Minimum Pretax Income and Closing Price levels set forth above were
determined by negotiation between the Company and Blair and should not be
construed to imply or predict any future earnings by the Company or any increase
in the market price of its securities.
CONCURRENT OFFERING BY SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part also
relates to the Remaining Selling Securityholder Securities. An aggregate of
997,500 Bridge Warrants were originally issued in connection with the Bridge
Financing completed by the Company in April and May, 1996 ("Bridge Financing").
These Bridge Warrants were automatically converted on the closing of the 1996
Offering into the Remaining Selling Securityholder Class A Warrants. The
Remaining Selling Securityholder Class A Warrants are identical to the Class A
Warrants included
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<PAGE> 43
in the IPO Units offered in the 1996 Offering. Exercise of the Remaining Selling
Securityholder Class A Warrants by the persons named below is further subject to
the existence of an exemption from registration applicable to the issuance of
the underlying securities by the Company to the Remaining Selling
Securityholders. It is likely that sales of the Remaining Selling Securityholder
Class A Warrants or the Remaining Selling Securityholder Class B Warrants and
the Remaining Selling Securityholder Common Stock, or even the potential of such
sales at any time, could have an adverse effect on the market prices of the
Common Stock and Class A and Class B Warrants.
The following table sets forth certain information with respect to each
Remaining Selling Securityholder for whom the Company registered securities for
resale to the public in the 1996 Offering. Some of these Selling Securityholders
may have transferred their Selling Securityholder Warrants since the 1996
Offering. The Company will not receive any of the proceeds from the sale of
these securities. Except as described below, there are no material relationships
between any of the Remaining Selling Securityholders and the Company, nor have
any such material relationships existed within the past three years.
<TABLE>
<CAPTION>
NUMBER OF CLASS A WARRANTS
BENEFICIALLY OWNED AND
SELLING SECURITYHOLDER MAXIMUM NUMBER TO BE SOLD(1)
---------------------- ----------------------------
<S> <C>
Columbia Funding........................................... 50,000
Stephen Comeau............................................. 25,000
Tom N. Davidson Revocable Living Trust..................... 50,000
Nathan Eisen............................................... 12,500
Jerome Grushkin & Esther Grushkin JTROS.................... 12,500
Jerome J. Grushkin Defined Benefit Plan.................... 12,500
Melving L. Katten.......................................... 12,500
Frank G. Lake III.......................................... 25,000
Benjamin Lehrer............................................ 12,500
Levine & Staller PA TTEE................................... 25,000
George Lionikis Sr......................................... 25,000
Joseph O. Manzi............................................ 50,000
Efrain Martinez............................................ 50,000
Albert Milstein............................................ 12,500
Lloyd A. Moriber, M.D...................................... 25,000
Karen A. Omahen............................................ 25,000
Poseidon Capital Pension and Profit-Sharing Plan........... 12,500
William Rands.............................................. 25,000
Jesse D. Roggen............................................ 12,500
Marc Roberts............................................... 75,000
Gary J. Strauss............................................ 25,000
Donald Sallee.............................................. 175,000
Melvin Stein............................................... 25,000
Malcolm Levenson Trust..................................... 37,500
The Steiro Company......................................... 10,000
Byron M. Allen............................................. 12,500
The Frank & Brynde Berkowitz Foundation.................... 25,000
Kenneth Cohen & Sherry Cohen JTROS......................... 25,000
Robert M. Freeman.......................................... 50,000
Stuart Gruber.............................................. 12,500
Edward D. Hurley Keogh Plan................................ 12,500
Richard A. Nelson & Elaine M. Nelson JTROS................. 25,000
Wolfson Equities........................................... 12,500
-------
TOTAL.................................... 997,500
=======
</TABLE>
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<PAGE> 44
(1) Does not include shares of Common Stock and Class B Warrants issuable upon
exercise of the Class A Warrants and the shares of Common Stock issuable up on
the exercise of the Class B Warrants. The Selling Securityholders agreed not to
exercise the Class A Warrants for a period of one year from October 9, 1996.
- ---------------------------
Each Selling Securityholder agreed: (i) not to sell, transfer or
otherwise dispose publicly the Remaining Selling Securityholder Class A Warrants
through a 270-day maximum lock-up period measured from October 9, 1996, which
has now expired; and (ii) not to exercise the Remaining Selling Securityholder
Class A Warrants for a period of one year from October 9, 1996. Purchasers of
the Selling Securityholder Class A Warrants will not be subject to such
restrictions.
After the one year period following the effective date of the 1996
Offering, the Selling Securityholders may exercise and sell the Common Stock
issuable upon exercise of the Selling Securityholder Class A and Class B
Warrants (collectively, the "Selling Securityholder Warrants") without
restriction if a current prospectus relating to such Common Stock is in effect
and the securities are qualified for sale. The Company will not receive any
proceeds from the sale of the Selling Securityholder Warrants. Sales of Selling
Securityholder Warrants issued upon conversion of the securities underlying such
Class A Warrants or even the potential of such sales could have an adverse
effect on the market prices of the Company's securities.
With the exception of Donald B. Sallee, Melvin Stein, the Malcolm
Levenson Trust and The Steiro Company, who owned 4.3%, 1.8%, 1.4% and 1.4% as of
the date of the 1996 Offering, respectively, there are no material relationships
between any of the Selling Securityholders and the Company, nor have any such
material relationships existed within the past three years. The Company has been
informed by Blair that there are no agreements between Blair and any Selling
Securityholder regarding the distribution of the Selling Securityholder Warrants
or the underlying securities.
The sale of the securities by the Selling Securityholders may be
effected from time to time in transactions (which may include block transactions
by or for the account of the Selling Securityholders) in the over-the-counter
market or in negotiated transactions, a combination of such methods of sale or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices or in negotiated transactions, a combination of such methods of sale or
otherwise.
Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers from whom such broker-dealer may act as agents or to whom they may
sell as principals or otherwise (which compensation as to a particular
broker-dealer may exceed customary commissions).
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Selling Securityholder Warrants may
not simultaneously engage in market-making activities or solicited brokerage
activities with respect to any securities of the Company for the applicable
"cooling off" period (which is likely to be five business days) prior to the
commencement of such distribution. Accordingly, in the event Blair or Blair &
Co. is engaged in a distribution of the Selling Securityholder Warrants, neither
of such firms will be able to make a market in the Company's securities or
engage in any solicited brokerage activities during the applicable restrictive
period. Any temporary cessation of such market-making activities or solicited
brokerage activities could have an adverse effect on the market price of the
Company's securities. However, neither Blair nor Blair & Co. has agreed to nor
is either of them obligated to act as broker-dealer in the sale of the Selling
Securityholder Warrants and the Selling Securityholders may be required, and in
the event Blair & Co. is a market-maker, will likely be required, to sell such
securities through another broker-dealer. In addition, each Selling
Securityholder desiring to sell Warrants will be
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<PAGE> 45
subject to the applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation Regulation M, which
provisions may limit the timing of the purchases and sales of shares of the
Company's securities by such Selling Securityholder.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discount and commissions under the Securities Act.
DESCRIPTION OF SECURITIES
The following description of the Company's securities does not purport
to be complete and is subject in all respects to applicable Delaware law and to
the provisions of the Company's Amended and Restated Certificate of
Incorporation and By-laws, the Warrant Agreement among the Company, Blair and
American Stock Transfer & Trust Company, as warrant agent, pursuant to which the
Warrants will be issued, and the Underwriting Agreement between the Company and
Blair, copies of all of which have been filed with the Commission as exhibits to
the Registration Statement of which this Prospectus is a part.
Effective upon the closing of the 1996 Offering, the authorized capital
stock of the Company consisted of 20,000,000 shares of Common Stock, par value
$.01 per share, and 5,000,000 shares of Preferred Stock, par value $.01 per
share.
COMMON STOCK
As of March 31, 1997, there were 3,185,000 shares of Common Stock
outstanding held by approximately 30 stockholders of record. Holders of Common
Stock have the right to cast one vote for each share held of record on all
matters submitted to a vote of holders of Common Stock, including the election
of directors. There is no right to cumulate votes for the election of directors.
Stockholders holding a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of the Company's stockholders,
and the vote by the holders of a majority of such outstanding shares is required
to effect certain fundamental corporate changes such as liquidation, merger or
amendment of the Company's Certificate of Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by the Board of
Directors, from funds legally available therefor, subject to the rights of
holders of any outstanding preferred stock. In the event of the liquidation,
dissolution or winding up of the affairs of the Company, all assets and funds of
the Company remaining after the payment of all debts and other liabilities,
subject to the rights of the holders of any outstanding preferred stock, shall
be distributed, pro rata, among the holders of the Common Stock. Holders of
Common Stock are not entitled to preemptive or subscription or conversion
rights, and there are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and the shares of
Common Stock offered hereby will be when issued, fully paid and non-assessable.
REDEEMABLE WARRANTS
Class A Warrants. Each Class A Warrant entitles the registered holder
to purchase one share of Common Stock and one Class B Warrant at an exercise
price of $6.50 at any time until 5:00 P.M., New York City time, on October 8,
2001. Commencing one year from the date of this Prospectus, the Class A Warrants
are redeemable by the Company on 30 days' written notice at a redemption price
of $.05 per Class A Warrant if the "closing price" of the Company's Common Stock
for any 30 consecutive trading days ending within 15 days of the notice of
redemption averages in excess of $9.10 per share. "Closing price" shall mean the
closing bid price if listed in the
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<PAGE> 46
over-the-counter market on Nasdaq or otherwise or the closing sale price if
listed on the Nasdaq National Market or a national securities exchange. All
Class A Warrants must be redeemed if any are redeemed.
Class B Warrants. Each Class B Warrant entitles the registered holder
to purchase one share of Common Stock at an exercise price of $8.75 at any time
after issuance until 5:00 P.M. New York City Time, on October 8, 2001.
Commencing one year from the date of this Prospectus, the Class B Warrants are
redeemable by the Company on 30 days' written notice at a redemption price of
$.05 per Class B Warrant, if the closing price (as defined above) of the
Company's Common Stock for any 30 consecutive trading days ending within 15 days
of the notice of redemption averages in excess of $12.25 per share. All Class B
Warrants must be redeemed if any are redeemed.
General. The Class A Warrants and Class B Warrants were issued pursuant
to a warrant agreement (the "Warrant Agreement") among the Company, Blair and
American Stock Transfer & Trust Company, New York, New York, as warrant agent
(the "Warrant Agent"), and were evidenced by warrant certificates in registered
form. The Warrants provide for adjustment of the exercise price and for a change
in the number of shares issuable upon exercise to protect holders against
dilution in the event of a stock dividend, stock split, combination or
reclassification of the Common Stock or upon issuance of shares of Common Stock
at prices lower than the market price of the Common Stock other than issuances
upon exercise of options granted to employees, directors and consultants to the
Company under the Company's stock option plans, other outstanding warrants on
the date of this Prospectus or with respect to the Unit Purchase Option.
The exercise prices of the Warrants were determined by negotiation
between the Company and Blair and should not be construed to be predictive of or
to imply that any price increases in the Company's securities will occur.
The Company has reserved from its authorized but unissued shares a
sufficient number of shares of Common Stock for issuance upon the exercise of
the Class A Warrants and the Class B Warrants. A Warrant may be exercised upon
surrender of the Warrant certificate on or prior to its expiration date (or
earlier redemption date) at the offices of the Warrant Agent, with the form of
"Election to Purchase" on the reverse side of the Warrant certificate completed
and executed as indicated, accompanied by payment of the full exercise price (by
certified or bank check payable to the order of the Company) for the number of
shares with respect to which the Warrant is being exercised. Shares issued upon
exercise of Warrants and payment in accordance with the terms of the Warrants
will be fully paid and non-assessable.
For the life of the Warrants, the holders thereof have the opportunity
to profit from a rise in the market value of the Common Stock, with a resulting
dilution in the interest of all other stockholders. So long as the Warrants are
outstanding, the terms on which the Company could obtain additional capital may
be adversely affected. The holders of the Warrants might be expected to exercise
them at a time when the Company would, in all likelihood, be able to obtain any
needed capital by a new offering of securities on terms more favorable than
those provided for by the Warrants.
The Warrants do not confer upon the Warrantholder any voting or other
rights of a stockholder of the Company. Upon notice to the Warrantholders, the
Company has the right to reduce the exercise price or extend the expiration date
of the Warrants.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of
"blank-check" Preferred Stock. The Board of Directors will have the authority to
issue this Preferred Stock in one or more series and to fix the number of shares
and the relative rights, conversion rights, voting rights and terms of
redemption (including sinking fund provisions) and liquidation preferences,
without further vote or action by the stockholders. If shares of Preferred Stock
with voting rights are issued, such issuance could affect the voting rights of
the holders of the Company's Common Stock by increasing the number of
outstanding shares having voting rights, and by the creation of class or series
voting rights. If the Board of Directors authorizes the issuance of shares of
Preferred Stock with conversion rights, the
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<PAGE> 47
number of shares of Common Stock outstanding could potentially be increased by
up to the authorized amount. Issuance of Preferred Stock could, under certain
circumstances, have the effect of delaying or preventing a change in control of
the Company and may adversely affect the rights of holders of Common Stock.
Also, Preferred Stock could have preferences over the Common Stock (and other
series of preferred stock) with respect to dividend and liquidation rights. The
Company currently has no plans to issue any Preferred Stock.
IPO UNITS
The Company also has outstanding IPO Units which are currently listed
on the Nasdaq SmallCap Market. Each IPO Unit consists of one share of Common
Stock, one redeemable Class A Warrant and one redeemable Class B Warrant. Each
Class A Warrant entitles the holder thereof to purchase one share of Common
Stock and one redeemable Class B Warrant. The Common Stock and Warrants
comprising the IPO Units were separately transferable immediately upon issuance.
UNIT PURCHASE OPTIONS
In conjunction with the 1996 Offering, the Company granted to Blair the
Unit Purchase Option to purchase up to 170,000 Units. These Units were identical
to the IPO Units offered, except that the Class A Warrants and the Class B
Warrants included in the Unit Purchase Options are subject to redemption by the
Company, in accordance with the terms of the Warrant Agreement, at any time
after the Unit Purchase Options have been exercised and the underlying Warrants
are outstanding. The Unit Purchase Options cannot be transferred, sold, assigned
or hypothecated for two years, except to any officer of Blair or members of the
selling group or their officers. The Unit Purchase Options are exercisable
during the three-year period commencing two years from the date of the 1996
Offering at an exercise price of $6.00 per Unit (120% of the initial public
offering price) subject to adjustment in certain events to protect against
dilution. The holders of the Unit Purchase Options have certain demand and
piggyback registration rights. See "Shares Eligible for Future Sales."
REGISTRATION RIGHTS
Beginning one year from the date of the 1996 Offering, the holders of
the Unit Purchase Options will have demand and piggy-back registration rights
relating to such options and the underlying securities and Blair will have
certain demand and piggy-back registration rights with respect to 36,897
warrants issued to it in March 1994 and the Common Stock into which such
warrants are exercisable. See "Plan of Distribution." The Company has also
granted certain demand and piggyback registration rights to Michael E. Noonan,
the Company's Chairman President and Chief Executive Officer, with respect to
the shares issuable upon exercise of an aggregate of 116,346 options granted to
Mr. Noonan by Steve Gorlin and TMR, which registration rights will be
exercisable beginning 13 months from the date of the 1996 Offering.
Except as set forth above, no stockholder of the Company, nor any
holder of warrants to purchase shares of the Company's Common Stock, has any
registration rights.
TRANSFER AGENT
American Stock Transfer & Trust Company, New York, New York, will act
as Transfer Agent for the shares of Common Stock and Warrant Agent for the
Warrants.
BUSINESS COMBINATION PROVISION
The Company is subject to a Delaware statute regulating "business
combinations," defined to include a broad range of transactions, between
Delaware corporations and "interested stockholders," defined as persons who have
acquired at least 15% of a corporation's stock. Under such statute, a
corporation may not engage in any business combination with any interested
stockholder for a period of three years after the date such person became an
interested
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<PAGE> 48
stockholder unless certain conditions are satisfied. The statute contains
provisions enabling a corporation to avoid the statute's restrictions. The
Company has not sought to "elect out" of the statute and, therefore, the
restrictions imposed by such statute apply to the Company.
SHARES ELIGIBLE FOR FUTURE SALE
As of March 31, 1997, the Company had outstanding an aggregate of
3,185,000 shares of Common Stock. Of these shares, the 1,955,000 shares of
Common Stock included in the IPO Units offered by the 1996 Offering will be
freely transferable without restriction or further registration under the
Securities Act, unless purchased by affiliates of the Company as that term is
defined in Rule 144 under the Securities Act ("Rule 144") described below. All
other shares of Common Stock outstanding prior to the 1996 Offering are
"restricted securities" or owned by affiliates within the meaning of Rule 144
and may not be sold publicly unless they are registered under the Securities Act
or are sold pursuant to Rule 144 or another exemption from registration.
Approximately 137,631 of the Restricted Shares became eligible for sale
immediately following the date of the 1996 Offering and, subject to compliance
with Rule 144 under the Securities Act, approximately 483,355 of the Restricted
Shares were eligible for sale in the public market beginning 90 days from the
date of the 1996 Offering. The remaining Restricted Shares will become eligible
for sale pursuant to Rule 144 between June 1997 and April 1998. However, holders
of all of the outstanding shares have agreed not to sell or otherwise dispose of
any shares of Common Stock without Blair's prior written consent for a period of
13 months after the date of the 1996 Offering.
Under Rule 701 of the Securities Act, persons who purchase shares upon
exercise of options granted prior to the date of the 1996 Offering are now
entitled to sell such shares without having to comply with the holding
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. Affiliates are also subject to all Rule 144 restrictions, but without
the holding period. If all the requirements of Rule 701 are met, an aggregate of
50,003 shares subject to outstanding vested stock options may be sold pursuant
to such rule, subject to an agreement by all option holders not to sell or
otherwise dispose of any shares of Common Stock for a period of 13 months after
the date of the 1996 Offering without Blair's prior written consent.
In general, under the recent amendment to Rule 144 that has been
adopted by the Commission, a person (or persons whose shares are aggregated),
including persons who may be deemed to be "affiliates" of the Company as that
term is defined under the Securities Act, is entitled to sell within any
three-month period a number of restricted shares beneficially owned for at least
one year that does not exceed the greater of: (i) 1% of the then outstanding
shares of Common Stock; or (ii) an amount equal to the average weekly trading
volume in the Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain requirements as to the manner
of sale, notice and the availability of current public information about the
Company. However, a person who is not deemed an affiliate and has beneficially
owned such shares for at least two years is entitled to sell such shares under
Rule 144(k) without regard to the volume or other resale requirements. The above
is a brief summary of Rule 144 and is not intended to be a complete description
of the Rule.
Blair also has demand and piggyback registration rights with respect to
the securities underlying the Unit Purchase Option and with respect to 36,897
warrants issued in March 1994 and the Common Stock underlying such warrants. The
Company has also granted certain demand and piggyback registration rights to
Michael E. Noonan, the Company's Chairman, President and Chief Executive
Officer. See "Description of Securities -- Registration Rights" and "Plan of
Distribution."
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<PAGE> 49
PLAN OF DISTRIBUTION
The securities offered hereby are being offered directly by the Company
pursuant to the terms of the Warrants. No underwriter is being utilized in
connection with this offering. The sale of the Company's securities may be
effected from time to time in transactions in the over-the-counter market or in
negotiated transactions, a combination of such methods of sale or otherwise.
Sales may be made at fixed prices which may be changed, at market prices or in
negotiated transactions, a combination of such methods of sale or otherwise.
Holders of the Company's securities may effect such transactions by selling
their securities directly to purchasers, through broker-dealers acting as agents
for such Holders or to broker-dealers who may purchase shares as principals and
thereafter sell the securities from time to time in the over-the-counter market,
in negotiated transactions or otherwise. Such broker-dealers, if any, may
receive compensation in the form of discounts, concessions or commissions from
the Holders of the Company's securities and/or the purchasers from whom such
broker-dealer may act as agents or to whom they may sell as principals or
otherwise (which compensation as to a particular broker-dealer may exceed
customary commissions).
The Company has agreed not to solicit Warrant exercises other than
through Blair, unless Blair declines to make such solicitation. Upon any
exercise of the Warrants after the first anniversary of the date of the 1996
Offering, the Company has agreed to pay Blair a fee of 5% of the aggregate
exercise price of the Warrants, if (i) the market price of the Company's Common
Stock on the date the Warrants are exercised is greater than the then exercise
price of the Warrants; (ii) the exercise of the Warrants was solicited by a
member of the NASD; (iii) the warrant holder designates in writing that the
exercise of the Warrant was solicited by a member of the NASD and designates in
writing the broker-dealer to receive compensation for such exercise; (iv) the
Warrants are not held in a discretionary account; (v) disclosure of compensation
arrangements was made both at the time of the Offering and at the time of
exercise of the Warrants; and (vi) the solicitation of exercise of the Warrant
was not in violation of Regulation M.
Regulation M under the Securities Exchange Act of 1934 (the "Exchange
Act"), may prohibit Blair & Co. or any other person involved in the distribution
of the Company's securities from engaging in any market making activities or
solicited brokerage activities with respect to the Company's securities for the
period from five business days (or such other applicable period as Regulation M
may provide) prior to any solicitation by Blair & Co. of the exercise of any
Warrant offered hereby until the completion of such solicitation activity or the
termination (by waiver or otherwise) of any right that Blair & Co. may have to
receive a fee for the exercise of Warrants following such solicitation. As a
result, Blair & Co. may be unable to continue to provide a market for the
Company's securities during certain periods while the Warrants offered hereby
are exercisable. The prices and liquidity of the Company's securities may be
adversely affected by the cessation of Blair & Co.'s market making activities.
In addition, under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Selling Securityholder Warrants may
not simultaneously engage in market-making activities or solicited brokerage
activities with respect to any securities of the Company for the applicable
"cooling off" period (which is likely to be five business days) prior to the
commencement of such distribution. Accordingly, in the event Blair or Blair &
Co. is engaged in a distribution of the Selling Securityholder Warrants, neither
of such firms will be able to make a market in the Company's securities or
engage in any solicited brokerage activities during the applicable restrictive
period. Any temporary cessation of such market-making activities or solicited
brokerage activities could have an adverse effect on the market price of the
Company's securities.
The warrant prices and other terms of the Warrants have been determined
by negotiation between the Company and Blair and are not necessarily related to
the Company's asset value, net worth or other established criteria of value.
Blair has the right to designate one individual for nomination to the
Company's Board of Directors for a period of five years after the completion of
the Offering, although it has not yet selected any such designee. Such designee
may be a director, officer, partner, employee or affiliate of Blair.
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<PAGE> 50
EXPERTS
The consolidated financial statements of Laminating Technologies, Inc.
as of March 31, 1997 and for each of the fiscal years ended March 31, 1997 and
March 31, 1996 and for the period from April 19, 1993 (commencement of
operations) through March 31, 1997, appearing in this Prospectus and
Registration Statement have been audited by Richard A. Eisner & Company, LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Post-Effective Amendment to its Registration Statement on Form
SB-2, File No. 333-6711 ("Registration Statement") under the Securities Exchange
Act of 1933, as amended, with respect to the securities offered hereby.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete. In each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Company will provide, without charge, to
each person who receives a prospectus, upon written or oral request of such
person, a copy of any of the information that is incorporated by reference in
this Prospectus (not including exhibits to the information that is incorporated
by reference unless the exhibits are themselves specifically incorporated by
reference). Please direct such requests to the Company at 1160 Hightower Trail,
Atlanta, Georgia 30350-2910, Attn: Michael E. Noonan, telephone: (770) 518-6010.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance herewith files
reports, proxy statements and other information with the Commission. For further
information with respect to the Company, reports, proxy statements and other
information and the securities offered, reference is made to such reports, proxy
statements and other information, the Registration Statement and the exhibits
filed as part thereof, which may be examined without charge, and copies of such
material can be obtained at prescribed rates from the Public Reference Section
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission also maintains a Web site (http:\\www.sec.gov) that contains
reports, proxy statements and information statements and other information
regarding the Company.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and may furnish interim reports as it
deems appropriate. A copy of the Company's Annual Report on Form 10-KSB, as
filed with the Commission, is available upon request, without charge, by writing
to Laminating Technologies, Inc., 1160 Hightower Trail, Atlanta, Georgia
30350-2910.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE> 51
LAMINATING TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
I N D E X
TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors....................................................F-2
Consolidated Balance Sheet as at March 31, 1997...................................F-3
Consolidated Statements of Operations for the Year ended March 31,
1996, the Year ended March 31, 1997 and the Period from April 19, 1993
(Commencement of Operations)
through March 31, 1997............................................................F-4
Consolidated Statements of Changes in Stockholders' Equity (Capital
Deficiency) for the Period from April 19, 1993
(Commencement of Operations) through March 31, 1997...............................F-5
Consolidated Statements of Cash Flow the Year ended March 31, 1996, the
Year ended March 31, 1997 and the Period from April 19, 1993
(Commencement of Operations) through March 31, 1997...............................F-6
Notes to Financial Statements.....................................................F-7
</TABLE>
F-1
<PAGE> 52
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Laminating Technologies, Inc.
Atlanta, Georgia
We have audited the accompanying consolidated balance sheet of
Laminating Technologies, Inc. and subsidiary (a development stage company) as at
March 31, 1997, and the related consolidated statements of operations, changes
in stockholders' equity (capital deficiency) and cash flows for each of the
years in the two-year period ended March 31, 1997 and for the period from April
19, 1993 (commencement of operations) through March 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the consolidated financial position of
Laminating Technologies, Inc. and subsidiary at March 31, 1997 and the
consolidated results of their operations, and their consolidated cash flows for
each of the years in the two-year period ended March 31, 1997 and for the period
from April 19, 1993 (commencement of operations) through March 31, 1997 in
conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
June 4, 1997
F-2
<PAGE> 53
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 1997
A S S E T S
<TABLE>
<S> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 907,850
Investments (Note B[2]). . . . . . . . . . . . . . . . . 4,032,267
Accounts receivable. . . . . . . . . . . . . . . . . . . 8,772
Inventories (Notes B[3] and C) . . . . . . . . . . . . . 103,326
Other current assets . . . . . . . . . . . . . . . . . . 41,567
-----------
Total current assets. . . . . . . . . . . . . . . 5,093,782
Fixed assets, net (Notes B[4] and D). . . . . . . . . . . . 209,224
-----------
T O T A L . . . . . . . . . . . . . . . . . . . . $ 5,303,006
===========
L I A B I L I T I E S
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 256,341
Accrued expenses . . . . . . . . . . . . . . . . . . . . 39,268
Payroll taxes payable. . . . . . . . . . . . . . . . . . 51,625
-----------
Total current liabilities . . . . . . . . . . . . 347,234
-----------
Commitments and other matters (Note F)
STOCKHOLDERS' EQUITY
(Note E)
Series A convertible preferred stock, par value $.01,
5,000,000 shares authorized, none issued
Common stock, par value $.01, 20,000,000 shares authorized,
3,185,000 shares issued and outstanding. . . . . . . . . 31,850
Additional paid-in capital. . . . . . . . . . . . . . . . . 11,708,605
Deficit accumulated during the development stage. . . . . . (6,784,683)
------------
Total stockholders' equity. . . . . . . . . . . . 4,955,772
-----------
T O T A L . . . . . . . . . . . . . . . . . . . . $ 5,303,006
===========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-3
<PAGE> 54
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
April 19, 1993
(Commencement
Year Ended March 31, of Operations)
--------------------------------- Through
1996 1997 March 31, 1997
----------- ----------- --------------
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . $ 119,412 $ 23,918 $ 365,703
Cost of goods sold . . . . . . . . . . . . . 277,454 16,751 1,032,524
----------- ----------- -----------
Gross profit (loss). . . . . . . . . . . . . (158,042) 7,167 (666,821)
Selling, general and administrative
expenses. . . . . . . . . . . . . . . . . 1,042,290 1,779,339 5,082,384
----------- ----------- -----------
Operating (loss) . . . . . . . . . . . . . . (1,200,332) (1,772,172) (5,749,205)
Interest expense . . . . . . . . . . . . . . 100,874 789,433 955,783
Interest income. . . . . . . . . . . . . . . (109,533) (109,533)
Cancellation of debt . . . . . . . . . . . . (121,738) (49,170) (170,908)
Loss on abandonment of fixed assets. . . . . 49,277 5,808 104,184
----------- ----------- -----------
NET (LOSS) . . . . . . . . . . . . . . . . . $(1,228,745) $(2,408,710) $(6,528,731)
=========== =========== ===========
Net (loss) per share of common stock . . . . $ (2.02) $ (1.47)
=========== ===========
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . 632,719 1,667,821
=========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-4
<PAGE> 55
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
(Note E)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
Par Value $.01 Par Value $.01 Stock
--------------------- ---------------------- Subscription
Shares Amount Shares Amount Receivable
--------- ------- --------- -------- --------------
<S> <C> <C> <C> <C> <C>
Common stock issued in connection with the acquisition of
the assets of Cool-R Enterprises, Inc. in April 1993 . . 168,114 $ 1,681
Common stock issued in connection with obtaining
rights to developed technology in April 1993 . . . . . . 150,126 1,501
Issuance of common stock for cash and settlement of debt
in April 1993. . . . . . . . . . . . . . . . . . . . . . 235,221 2,352
Cash contributed by stockholder . . . . . . . . . . . . . .
Issuance of convertible preferred stock for cash
in September 1993. . . . . . . . . . . . . . . . . . . . 250,000 $ 2,500
Common stock issued to an officer in connection
with the signing of an employment agreement in
October 1993 . . . . . . . . . . . . . . . . . . . . . . 46,122 461 $ (1,250)
Net (loss) for the period April 19, 1993 (commencement of
operations) through March 31, 1994 . . . . . . . . . . . -------- ------- --------- ------- ---------
Balance - March 31, 1994 . . . . . . . . . . . . . . . . . 250,000 2,500 599,583 5,995 (1,250)
Issuance of common stock for cash in May 1994 . . . . . . . 3,690 37
Common stock issued as consideration for
compensation in August 1994. . . . . . . . . . . . . . . 50,662 507
Services contributed by stockholder . . . . . . . . . . . .
Net (loss) for the year ended March 31, 1995. . . . . . . . -------- ------- --------- ------- ---------
Balance - March 31, 1995 . . . . . . . . . . . . . . . . . 250,000 2,500 653,935 6,539 (1,250)
Issuance of common stock as settlement of notes payable
to a stockholder in June 1995. . . . . . . . . . . . . . 33,208 332
Collection of stock subscription. . . . . . . . . . . . . . 1,250
Common stock purchased for treasury . . . . . . . . . . . . (126,114)
Common stock issued from treasury . . . . . . . . . . . . . 126,114
Common stock contributed to treasury and cancelled. . . . . (7,379) (74)
Contribution to capital (Note G). . . . . . . . . . . . . .
Net (loss) for the year ended March 31, 1996. . . . . . . .
-------- ------- --------- ------- ---------
Balance - March 31, 1996 . . . . . . . . . . . . . . . . . 250,000 2,500 679,764 6,797 - 0 -
Warrants issued in connection with Bridge Notes . . . . . .
Conversion of debt to common stock. . . . . . . . . . . . . 361,061 3,611
Common stock issued as consideration for compensation . . . 4,689 47
Stock options issued by stockholders to an officer as
compensation . . . . . . . . . . . . . . . . . . . . . .
Payment of cumulative dividends on Series A
preferred stock. . . . . . . . . . . . . . . . . . . . .
Preferred stock conversion. . . . . . . . . . . . . . . . . (250,000) (2,500)
Sale of 1,955,000 shares of common stock (net of
offering costs). . . . . . . . . . . . . . . . . . . . . 1,955,000 19,550
Net (loss) for the year ended March 31, 1997. . . . . . . .
-------- ------- --------- ------- ---------
BALANCE AT MARCH 31, 1997 . . . . . . . . . . . . . . . . . - 0 - $ - 0 - 3,185,000 $31,850 $ - 0 -
======== ======= ========= ======= =========
<CAPTION>
Deficit
Accumulated
Additional During the
Paid-in Treasury Development
Capital Stock Stage Total
------------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Common stock issued in connection with the acquisition of
the assets of Cool-R Enterprises, Inc. in April 1993 . . (1,681) $ (255,952) $ (255,952)
Common stock issued in connection with obtaining
rights to developed technology in April 1993 . . . . . . (1,501) - 0 -
Issuance of common stock for cash and settlement of debt
in April 1993. . . . . . . . . . . . . . . . . . . . . . 635,148 637,500
Cash contributed by stockholder . . . . . . . . . . . . . . 12,500 12,500
Issuance of convertible preferred stock for cash
in September 1993. . . . . . . . . . . . . . . . . . . . 497,500 500,000
Common stock issued to an officer in connection
with the signing of an employment agreement in
October 1993 . . . . . . . . . . . . . . . . . . . . . . 124,539 123,750
Net (loss) for the period April 19, 1993 (commencement of
operations) through March 31, 1994 . . . . . . . . . . . (1,361,215) (1,361,215)
------------ ----------- -----------
Balance - March 31, 1994 . . . . . . . . . . . . . . . . . 1,266,505 (1,617,167) (343,417)
Issuance of common stock for cash in May 1994 . . . . . . . 19,963 20,000
Common stock issued as consideration for
compensation in August 1994. . . . . . . . . . . . . . . 136,799 137,306
Services contributed by stockholder . . . . . . . . . . . . 30,000 30,000
Net (loss) for the year ended March 31, 1995. . . . . . . . (1,530,061) (1,530,061)
------------ ----------- ------------
Balance - March 31, 1995 . . . . . . . . . . . . . . . . . 1,453,267 (3,147,228) (1,686,172)
Issuance of common stock as settlement of notes payable
to a stockholder in June 1995. . . . . . . . . . . . . . 89,668 90,000
Collection of stock subscription. . . . . . . . . . . . . . 1,250
Common stock purchased for treasury . . . . . . . . . . . . $(150,000) (150,000)
Common stock issued from treasury . . . . . . . . . . . . . 150,000 150,000
Common stock contributed to treasury and cancelled. . . . . 74 - 0 -
Contribution to capital (Note G). . . . . . . . . . . . . . 307,457 307,457
Net (loss) for the year ended March 31, 1996. . . . . . . . (1,228,745) (1,228,745)
------------ --------- ----------- -----------
Balance - March 31, 1996 . . . . . . . . . . . . . . . . . 1,850,466 - 0 - (4,375,973) (2,516,210)
Warrants issued in connection with Bridge Notes . . . . . . 665,000 665,000
Conversion of debt to common stock. . . . . . . . . . . . . 974,961 978,572
Common stock issued as consideration for compensation . . . 12,660 12,707
Stock options issued by stockholders to an officer as
compensation . . . . . . . . . . . . . . . . . . . . . . 386,000 386,000
Payment of cumulative dividends on Series A
preferred stock. . . . . . . . . . . . . . . . . . . . . (150,000) (150,000)
Preferred stock conversion. . . . . . . . . . . . . . . . . 655 -0-
Sale of 1,955,000 shares of common stock (net of
offering costs). . . . . . . . . . . . . . . . . . . . . 7,968,863 7,988,413
Net (loss) for the year ended March 31, 1997. . . . . . . . (2,408,710) (2,408,710)
------------ --------- ----------- -----------
BALANCE AT MARCH 31, 1997 . . . . . . . . . . . . . . . . . $ 11,708,605 $ - 0 - $(6,784,683) $ 4,955,772
============ ========= =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-5
<PAGE> 56
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
April 19,1993
(Commencement
Year Ended March 31, of Operations)
------------------------------ Through
1996 1997 March 31, 1997
------------ ----------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,228,745) $(2,408,710) $ (6,528,731)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . 7,000 20,000
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 34,158 51,311 199,456
Compensation recorded for fair value of common shares
issued in excess of price paid by employee. . . . . . . . . . . . 12,707 273,763
Compensation recorded for stock options issued by stockholders
to an officer . . . . . . . . . . . . . . . . . . . . . . . . . . 386,000 386,000
Services contributed by stockholder. . . . . . . . . . . . . . . . 30,000
Noncash finance charge . . . . . . . . . . . . . . . . . . . . . . 19,551 665,000 684,551
Loss on disposal of fixed assets. . . . . . . . . . . . . . . . . . 49,277 122,375
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable. . . . . . . . . . . . 4,877 549 (16,342)
(Increase) decrease in inventories. . . . . . . . . . . . . . . . 70,454 (103,326) (43,625)
(Increase) decrease in other assets . . . . . . . . . . . . . . . 17,998 (38,567) (25,550)
Increase in due to related party. . . . . . . . . . . . . . . . . 71,329 790,082
(Decrease) increase in accounts payable and accrued
expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 228,761 (327,281) 218,529
----------- ----------- ------------
Net cash (used in) operating activities . . . . . . . . . . . (725,340) (1,762,317) (3,889,492)
----------- ----------- ------------
Cash flows from investing activities:
Acquisitions of fixed assets. . . . . . . . . . . . . . . . . . . . . . (14,733) (253,674) (487,979)
Purchase of government securities . . . . . . . . . . . . . . . . . . . (4,032,267) (4,032,267)
----------- ----------- ------------
Net cash (used in) investing activities . . . . . . . . . . . (14,733) (4,285,941) (4,520,246)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds of notes payable . . . . . . . . . . . . . . . . . . . . . . . 459,250 1,500,000 2,557,750
(Repayment of) notes payable. . . . . . . . . . . . . . . . . . . . . . (52,118) (2,352,616) (2,583,907)
Proceeds of notes payable - stockholders. . . . . . . . . . . . . . . . 350,000 458,700
(Repayment of) notes payable - stockholders . . . . . . . . . . . . . . (7,995) (31,036) (49,736)
Advances from stockholders. . . . . . . . . . . . . . . . . . . . . . . 9,485 11,485
(Repayment of) capital leases payable . . . . . . . . . . . . . . . . . (20,288) (41,367)
Proceeds from sale of common stock. . . . . . . . . . . . . . . . . . . 7,988,413 8,600,913
Proceeds from sale of preferred stock . . . . . . . . . . . . . . . . . 500,000
Proceeds from stock subscription receivable . . . . . . . . . . . . . . 1,250 1,250
Cash contributed by stockholder . . . . . . . . . . . . . . . . . . . . 12,500
Payment of dividends on preferred stock . . . . . . . . . . . . . . . . (150,000) (150,000)
----------- ----------- ------------
Net cash provided by financing activities . . . . . . . . . 739,584 6,954,761 9,317,588
----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH. . . . . . . . . . . . . . . . . . . . . . (489) 906,503 907,850
Cash - beginning of period . . . . . . . . . . . . . . . . . . . . . . . . 1,836 1,347 - 0 -
----------- ----------- -----------
CASH - END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,347 $ 907,850 $ 907,850
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest. . . . . . . . . . . . . . . . 28,206 $ 507,423 $ 673,773
Noncash transactions:
Common stock subscribed . . . . . . . . . . . . . . . . . . . . . . . 1,250
Common stock issued for developed technology. . . . . . . . . . . . . 406,875
Conversion of debt to equity. . . . . . . . . . . . . . . . . . . . . 978,572 978,572
Common stock issued as settlement of note payable to
stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 90,000
Due to stockholder for shares purchased for treasury. . . . . . . . . 19,551 19,551
Cancellation of debt obligation in exchange for fixed assets. . . . . 54,279 54,279
Settlement of related party debt by capital contribution. . . . . . . 307,457 307,457
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
F-6
<PAGE> 57
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company and Basis of Presentation:
Laminating Technologies, Inc. and subsidiary, (the "Company"), formerly
New Cooler Corp., is a development stage company formed to research, develop,
design and market packaging and specialty display products using the Company's
proprietary processing method. The Company was incorporated on March 29, 1993
and in April 1993 acquired substantially all of the assets and assumed
substantially all of the liabilities of Cool-R Enterprises, Inc. ("Cool-R"),
obtaining the rights to developed technology.
In April 1996, the Board of Directors and stockholders approved a
reverse split of approximately 2.71022 to 1. Such split has been retroactively
reflected in the accompanying financial statements.
(NOTE B) - Summary of Significant Accounting Policies:
[1] Principles of consolidation:
The accompanying financial statements have been prepared on a
consolidated basis. They include the accounts of the Company and its wholly
owned subsidiary, Revenue Process Development, Inc. All intercompany
transactions and balances have been eliminated in consolidation.
[2] Investments:
Investments consist primarily of United States government
obligations with various maturity dates. These investments are accounted for as
available for sale securities and are stated at fair value which approximates
cost.
[3] Inventory:
Inventory is recorded at lower of cost or market.
[4] Fixed assets:
Machinery, furniture and equipment, including property under
capital lease arrangements, are carried at cost. Depreciation is provided using
the double declining balance method over the useful lives of the assets.
(continued)
F-7
<PAGE> 58
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE B) - Summary of Significant Accounting Policies: (continued)
[5] Net loss per share of common stock:
Net loss per share of common stock was determined by dividing
net loss, as adjusted by cumulative dividends on the Company's preferred stock
during the time it was outstanding, by the weighted average number of shares
outstanding during each period. The weighted average number of shares
outstanding excludes 410,000 shares held in escrow. The computation of fully
diluted net loss per share of common stock would have been antidilutive in each
of the periods presented.
[6] Income taxes:
Deferred income taxes are provided for temporary differences
between financial statement and taxable income or loss.
[7] Use of estimates in the preparation of financial statements:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
[8] Major customers and concentration of credit risk:
As a result of the Company's limited sales volume, the percentage
of net sales and accounts receivable balances outstanding relating to any one
customer is significant.
[9] Fair value of financial instruments:
The carrying value of cash, accounts receivable and accounts
payable approximates fair value because of the short-term maturity of those
instruments.
[10] Stock-based compensation:
In fiscal 1997 the Company adopted the "disclosures only"
alternative available under Financial Accounting Standards Board No. 123 ("FASB
123") for its employee stock option grants and accounts for employee stock
option grants pursuant to Accounting Principles
Board Opinion No. 25 ("APB 25").
(continued)
F-8
<PAGE> 59
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE C) - Inventory:
Inventories at March 31, 1997 are summarized as follows:
Raw materials . . . . . . . . . . . $ 45,393
Work-in-process . . . . . . . . . . 40,964
Finished goods. . . . . . . . . . . 16,969
--------
T o t a l . . . . . . . . $103,326
========
(NOTE D) - Fixed Assets:
Fixed assets at March 31, 1997 are summarized as follows:
Machinery and equipment . . . . . . $147,216
Furniture and fixtures. . . . . . . 91,086
Leasehold improvements. . . . . . . 15,371
--------
T o t a l . . . . . . . . 253,673
Less accumulated depreciation . . . 44,449
--------
B a l a n c e . . . . . . $209,224
========
(NOTE E) - Stockholders' Equity:
[1] Common stock:
Upon incorporation in March 1993 the Company authorized
10,000,000 shares of its $.01 par value common stock. The shares of common stock
have unlimited voting rights. In March 1996, the Company increased the number of
authorized common shares to 20,000,000.
[2] Convertible preferred stock:
In September 1993 the Company authorized and issued 250,000
shares of its $.01 par value Series A convertible preferred stock (the
"Preferred") for $500,000. In August 1994 the Company increased the number of
authorized shares of Preferred to 2,500,000. In March 1996 the Company increased
the number of authorized shares of the Preferred to 5,000,000.
The Preferred had no voting rights. The holders of the
Preferred were entitled to cumulative quarterly dividends of $.05 per share due
upon the redemption of the shares. The liquidation value of each share of
Preferred is equal to $2.00 plus cumulative dividends.
(continued)
F-9
<PAGE> 60
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE E) - Stockholders' Equity: (continued)
[2] Convertible preferred stock: (continued)
Concurrent with the public offering in October 1996, the
250,000 shares of the Preferred then outstanding were converted into 184,486
shares of common stock.
[3] Initial public offering:
In October and November 1996, the Company completed its
initial public offering and issued 1,955,000 units at a price of $5.00 per unit.
Each unit consists of one share of common stock, one Class A warrant and one
Class B warrant. Each Class A warrant entitles the holder to purchase one share
of common stock and one Class B warrant at an exercise price of $6.50. Each
Class B warrant entitles the holder to purchase one share of common stock at an
exercise price of $8.75. The warrants are redeemable by the Company, under
certain conditions, at any time after October 9, 1997. As a result of the
offering, the Company received net proceeds of approximately $7,988,000.
In connection with the offering, the underwriter required, as
a condition of the offering, that an aggregate of 410,000 shares of the
Company's common stock be designated as forfeitable shares ("forfeitable
shares") and placed in escrow. The forfeitable shares are not assignable nor
transferable until certain earnings or market criteria have been met. If the
conditions are not met by March 31, 2000, all shares remaining in escrow will be
returned to the Company as treasury shares for cancellation thereof as a
contribution to capital. The forfeitable shares will be released, to the
stockholders, in the event specified levels of pretax income of the Company for
the years ending December 31, 1997 to December 31, 1999 are achieved or the
market price of the Company's common stock attains specified targets during the
36 month period commencing October 9, 1996. There will be a charge to earnings
for the fair value of these shares upon their release. Such charge will not be
deductible for income tax purposes.
[4] Bridge financing:
In April and May 1996, the Company completed a private
placement for an aggregate of $1,500,000 (net proceeds of approximately
$1,185,000) principal amount of Bridge Notes bearing interest at an annual rate
of 10% and warrants to purchase an aggregate of 997,500 shares of common stock.
The warrants automatically converted into Class A warrants concurrent with the
Company's public offering. Additionally $495,000 of previously
(continued)
F-10
<PAGE> 61
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE E) - Stockholders' Equity: (continued)
[4] Bridge financing: (continued)
existing debt and $55,210 of interest accrued thereon was converted into Bridge
Notes. The Company valued the Bridge loan warrants at an aggregate of $665,000
which was accounted for as a debt discount. The unamortized balance of the debt
discount was charged to expense upon the close of the offering.
[5] Stock options and warrants:
In connection with the Company's initial public offering, the
Company granted to the underwriter an option to purchase 170,000 units at $6.00
per unit exercisable for a three year period commencing October 9, 1998.
The Company has outstanding 2,952,500 Class A warrants and
1,955,000 Class B warrants exercisable for a five year period commencing October
9, 1996.
The Company has outstanding warrants to purchase 36,897 shares
of its common stock which are held by the underwriter of the Company's initial
public offering who assisted in raising capital for the Company. The warrants,
which were issued on March 25, 1994, have an exercise price of $2.71 and are
exercisable through March 25, 1999.
[6] Shares reserved for issuance:
The Company has 8,656,897 shares of common stock for issuance
as follows:
Class A warrants . . . . . . . . . . 2,952,500
Class B warrants . . . . . . . . . . 4,907,500
Underwriter's Unit Purchase Option . 510,000
Underwriter's warrants . . . . . . . 36,897
1996 Stock Option Plan . . . . . . . 250,000
---------
8,656,897
=========
(continued)
F-11
<PAGE> 62
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Commitments and Other Matters:
[1] Employment contract:
Effective June 1, 1996 the Company entered into a one-year
employment agreement with the Chairman and Chief Executive Officer of the
Company. The agreement provides for an annual base salary of $144,000 per year
and is automatically renewable for successive one-year terms unless either party
gives six months notice to the other. The Company may terminate the agreement
without cause and, upon such termination, the Officer will be entitled to
receive his base salary for a period of one year (subject to a 50% offset during
the second six months for salary received from subsequent employment). In
addition, if the Company exercises its right not to renew the agreement, the
Officer will be entitled to six months of severance pay. The agreement contains
confidentiality and noncompetition provisions.
In April 1996 two principal stockholders of the Company
granted options to an officer to purchase an aggregate of 116,347 of their
shares of common stock at an exercise price of $.68 per share. Such options,
which are fully vested, contain a predefined schedule for their exercise. In
connection therewith, a contribution to capital and compensation expense was
recorded, in the amount of $386,000 which represents the difference between the
exercise price and the fair value of the shares, on the date of grant.
[2] Operating lease:
The Company entered into an operating lease for its office
facility. The lease provides for minimum annual rental payments through 1999 as
follows:
Year Ending
March 31,
-----------
1998 . . . . . . . . . . . . . $46,342
1999 . . . . . . . . . . . . . 35,535
-------
T o t a l . . . . . $81,877
=======
[3] Contingency:
The Company is aware of a patent issued to an unrelated entity
that relates to certain processes by which film, including polyester film, is
reverse-printed and laminated onto linerboard. Such patent may affect the
ability of the Company to obtain patent protection for some or all of the claims
included in its patent
(continued)
F-12
<PAGE> 63
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Commitments and Other Matters: (continued)
[3] Contingency: (continued)
application. Moreover, there can be no assurance that any application of the
Company's technology will not infringe this or any other patents or proprietary
rights of others. Management believes that the Company has not infringed on any
patents.
A predecessor to the Company may have entered into license
agreements regarding the developed technology owned by the Company. Even though
no executed agreement has been produced by the Company or other parties, there
can be no assurance that such license agreements do not exist or as to the terms
of any such licenses. In the event that any previous license agreements exist,
they may adversely affect the Company's ability to utilize its technology or
enter into additional licenses in the future.
(NOTE G) - Income Taxes:
The Company has a deferred tax asset of $2,600,000 at March 31, 1997
attributable to the net operating losses discussed below. The Company has fully
reserved the deferred tax asset since the likelihood of realization cannot be
determined. The difference between the statutory tax rate of 34% and the
Company's effective tax rate of 0% is due to an increase in the valuation
allowance of $950,000 for the year ended March 31, 1997.
At March 31, 1997, the Company has a net operating loss carryforward of
$5,250,000 expiring in various amounts through 2012. Under Section 382 of the
Internal Revenue Code, the Company is subject to an annual limitation of
approximately $350,000 on utilization of its net operating loss carryforwards
because an ownership change of more than 50% has occurred.
(NOTE H) - Related Party Transactions:
TransMillenial Resource Corporation ("TMR") provided management
services to the Company. Management fees incurred for the year ended March 31,
1996 were $45,000.
In addition, TMR advanced funds to the Company and paid certain of its
obligations, resulting in a balance of $735,803 due to TMR at March 31, 1996.
TMR agreed to contribute $307,457 of such debt to the capital of the Company and
to convert the remaining balance of $428,346 into 158,048 shares of the
Company's common stock. The conversion was completed in April 1996. Two of the
Company's former officers are shareholders of TMR.
(continued)
F-13
<PAGE> 64
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE H) - Related Party Transactions: (continued)
The Company was located in office space which was leased by TMR. Rent
on such space is included in the indebtedness described above.
In June 1995 the Company entered into an agreement with one of its
stockholders to repurchase 126,114 shares of common stock for $150,000. The
shares were simultaneously sold for approximately $85,000 to a third party. The
Company sold the shares from treasury at a discount to induce the third party to
loan the Company $250,000. As a result the Company recorded deferred financing
cost of $65,000, which was fully amortized over the term of the lend, which was
due in December 1995. Accordingly, the full amount was charged to earnings in
the year ended March 31, 1996.
(NOTE I) - Stock Option Plan:
In 1996, the Board of Directors adopted and the Company's stockholders
approved the Amended and Restated 1996 Stock Option Plan (the "Plan"). Pursuant
to the Plan, as amended, incentive stock options and nonqualified stock options
may be granted to purchase up to 250,000 shares of the Company's common stock
through March 2006. Incentive stock options are to be granted at a price not
less than the fair market value of the Company's common stock at the date of
grant. If a stockholder owns 10% or more of the Company's outstanding stock, the
exercise price may not be less than 110% of the fair market value of the
Company's common stock at the date of grant and its term must not exceed five
years. Options may be granted to employees, consultants, and directors of the
Company and must be exercised within a ten-year period after the date granted.
Nonqualified stock options are exercisable at a price to be determined by the
Board of Directors for a period of ten years after the grant date. Through March
31, 1997, 120,000 options have been granted at exercise prices of $4.00 per
share and 10,000 options have been granted at $5.00 per share.
Additionally, the provisions of the Plan provide for the automatic
grant of nonqualified stock options to purchase shares of common stock
("Director Options") to directors of the Company who are not employees or
principal stockholders of the Company ("Eligible Directors"). Each of the four
Eligible Directors of the Company were granted Director Options to purchase
10,000 shares of common stock on July 15, 1996 at $5.00 per share. Future
Eligible Directors are to be granted a Director Option to purchase 10,000 shares
of common stock on the date of election or appointment. Further, commencing on
the day immediately following the date of the annual meeting of stockholders for
the Company's fiscal year ending March 31, 1997, each Eligible Director, other
than directors who received an Initial Director Option since the last annual
meeting, are to be granted a Director Option to purchase 1,000 shares of common
stock ("Automatic Grant") on the day immediately following the date of each
annual meeting of stockholders,
(continued)
F-14
<PAGE> 65
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Stock Option Plan: (continued)
as long as such director is a member of the Board of Directors. The exercise
price for each share subject to a Director Option shall be equal to the fair
market value of the common stock on the date of grant, except for directors who
receive incentive options and who own more than 10% of the voting power, in
which case the exercise price shall be not less than 110% of the fair market
value on the date of grant. Director Options are exercisable in four equal
annual installments, commencing six months from the date of grant. Director
Options expire the earlier of 10 years after the date of grant or 90 days after
the termination of the director's service on the Board of Directors.
Stock option activity is summarized as follows:
Year Ended
March 31, 1997
--------------------
Weighted-
Average
Exercise
Shares Price
------- ---------
Options outstanding at beginning of year. - 0 - $- 0 -
Granted . . . . . . . . . . . . . . . . . 170,000 4.29
--------
Options outstanding at end of year. . . . 170,000 4.29
========
Options exercisable at end of year. . . . 53,333 4.25
The following table presents information relating to stock options
outstanding at March 31, 1997:
<TABLE>
<CAPTION>
Weighted-
Weighted- Average
Weighted- Average Exercise
Range of Average Remaining Price of
Exercise Exercise Life Exercisable Exerciseable
Price Shares Price in Years Shares Shares
- -------- ------ -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
$4.00 120,000 $4.00 10.00 40,000 $ 4.00
5.00 50,000 5.00 10.00 13,333 5.00
------- 10.00 ------
170,000 53,333
======= ======
</TABLE>
As of March 31, 1997, a total of 80,000 options are available for
future grant.
(continued)
F-15
<PAGE> 66
LAMINATING TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Stock Option Plan: (continued)
The weighted-average fair value at date of grant for options granted
during 1997 was $.60 per option, respectively. The fair value of the options at
date of grant was estimated using the Black-Scholes option-pricing model
utilizing the following assumptions for the year ended March 31, 1997:
Risk-free interest rates. . . . . . . . . 6.70%
Expected option life in years . . . . . . 5
Expected stock price volatility . . . . . .30
Expected dividend yield . . . . . . . . . 0%
Had the Company elected to recognize compensation cost based on the
fair value of the options at the date of grant, net loss applicable to common
stock in 1997 would have been $2,510,710 or $1.51 per share. There would have
been no effect for the year ended March 31, 1996.
F-16
<PAGE> 67
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or by the Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities offered hereby by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer, or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information herein contained is correct as of any time subsequent to
the date hereof.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary .........................3
Risk Factors................................7
Use of Proceeds.............................15
Dividend Policy ............................15
Price Range of Securities...................16
Capitalization..............................16
Selected Financial Data.....................17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations..................18
Business....................................20
Management..................................28
Certain Transactions........................35
Principal Stockholders .....................37
Concurrent Offering of Selling
Securityholders............................39
Description of Securities...................42
Shares Eligible for Future Sale.............45
Plan of Distribution........................46
Experts.....................................47
Additional Information......................47
Index to Financial Statements...............F-1
</TABLE>
------------
LAMINATING
TECHNOLOGIES, INC.
1,955,000 UNITS,
EACH CONSISTING OF
ONE SHARE OF COMMON STOCK AND
ONE REDEEMABLE CLASS B WARRANT,
ISSUABLE UPON THE EXERCISE
OF REDEEMABLE CLASS A WARRANTS
AND
1,955,000 SHARES
OF COMMON STOCK, ISSUABLE
UPON THE EXERCISE OF
CLASS B WARRANTS
------------
PROSPECTUS
------------
August ___, 1997
<PAGE> 68
[ALTERNATE PROSPECTUS]
LAMINATING TECHNOLOGIES, INC.
997,500 REDEEMABLE CLASS A WARRANTS TO PURCHASE 997,500 SHARES OF COMMON STOCK
AND 997,500 REDEEMABLE CLASS B WARRANTS TO PURCHASE 997,500 SHARES OF
COMMON STOCK
This Prospectus relates to 997,500 redeemable Class A Warrants (the
"Class A Warrants") of Laminating Technologies, Inc., a Delaware corporation
(the "Company"), and 997,500 Redeemable Class B Warrants ("Class B Warrants")
issuable upon exercise of the Class A Warrants and 1,995,000 shares of Common
Stock issuable upon exercise of the Class A Warrants and Class B Warrants. The
Class A Warrants were issued to investors (the "Selling Securityholders") in the
1996 Offering in exchange for warrants they received in a private placement by
the Company in April and May 1996 ("Bridge Financing"). (See "Selling
Securityholders" and "Plan of Distribution"). Each Class A Warrant entitles the
holder to purchase, at an exercise price of $6.50, subject to adjustment, one
Class B Warrant and one share of Common Stock. Each Class B Warrant entitles the
holder to purchase, at an exercise price of $8.75, subject to adjustment, one
share of Common Stock. The Class A Warrants and the Class B Warrants
(collectively, the "Warrants") are exercisable at any time after issuance
through October 8, 2001, although the Selling Securityholders have contractually
agreed not to exercise the Class A and Class B Warrants for a period of one year
from the date of the 1996 Offering. Commencing one year from the date of the
1996 Offering, the Warrants are subject to redemption by the Company for $.05
per Warrant, upon 30 days' written notice, if the average closing bid price of
the Common Stock exceeds $9.10 per share with respect to the Class A Warrants
and $12.25 per share with respect to the Class B Warrants (subject to adjustment
in each case) for 30 consecutive business days ending within 15 days of the date
the Warrants are called for redemption. See "Description of Securities."
The securities offered by this Prospectus may be sold from time to time
by the holders thereof ("Selling Securityholders"), or by their transferees. The
distribution of the securities offered hereby may be effected in one or more
transactions that may take place on the over-the-counter market, including
ordinary brokers' transactions, privately negotiated transactions or through
sales to one or more dealers for resale of such securities as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated paces. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders.
The Selling Securityholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"), with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities under the
Act.
The Company will not receive any of the proceeds from the sale of
securities by the Selling Securityholders. In the event all of the Class A and
Class B Warrants are fully exercised, the Company will receive gross proceeds of
approximately $6,483,750 and $8,728,125, respectively. --------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS"
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS AUGUST ___, 1997.
(continued on following page)
A-1
<PAGE> 69
The Company's Class A Warrants and Class B Warrants were issued in
connection with the Company's initial public offering (the "1996 Offering")
which was underwritten by D. H. Blair Investment Banking Corp. ("Blair"). On
October 9, 1996, the Company completed the 1996 Offering which consisted of
1,700,000 units ("IPO Units"), each IPO Unit consisting of one share of Common
Stock, one Class A Warrant and one Class B Warrant. In November 1996, the
Company completed the sale of an additional 255,000 IPO Units upon Blair
exercising its over-allotment option to purchase these IPO Units. The Company
received approximately $7,988,000 net Proceeds from the 1996 Offering after
payment of underwriting discounts and commissions and estimated expenses of the
1996 Offering. The components of the IPO Units were transferrable separately
upon issuance. The Company's IPO Units, Common Stock, Class A Warrants and
Class B Warrants are traded on the Nasdaq SmallCap Market under the symbols
LAMTU, LAMT, LAMTW, and LAMTZ, respectively.
The Company has agreed to pay Blair a solicitation fee (the
"Solicitation Fee") equal to 5% of the exercise price in connections with the
exercise of Warrants under certain conditions. See "Selling Securityholders and
Plan of Distribution." The warrant prices and other terms of the Warrants have
been determined by negotiation between the Company and Blair and are not
necessarily related to the Company's asset value, net worth or other established
criteria of value.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
A-2
<PAGE> 70
[ALTERNATE]
CONCURRENT OFFERING
On October 9, 1996, the Company Filed a Registration Statement under
the Securities Act with respect to an underwritten offering of the 1,955,000 IPO
Units by the Company (i.e., the IPO). The offering of the IPO Units has
subsequently been completed, but the Company may be deemed to continue to be
offering securities pursuant to the outstanding Warrants. Sales of Securities by
the Selling Securityholders, or the potential of such sales, could have an
adverse effect on the market price of the Warrants and of the Common Stock
purchasable upon exercise of the Warrants.
[ALTERNATE]
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
An aggregate of 997,500 Class A Warrants, consisting of one share of
Common Stock and one Class B Warrant may be offered by certain security holders
who received their Class A Warrant in connection with the Bridge Financing in
April and May, 1996.
The following table sets forth certain information with respect to each
Selling Securityholder for whom the Company registered securities for resale to
the public in the 1996 Offering. Some of these Selling Securityholders may have
transferred their Selling Securityholder Warrants since the 1996 Offering. The
Company will not receive any of the proceeds from the sale of these securities.
Except as described below, there are no material relationships between any of
the Remaining Selling Securityholders and the Company, nor have any such
material relationships existed within the past three years.
<TABLE>
<CAPTION>
NUMBER OF CLASS A WARRANTS
BENEFICIALLY OWNED AND
SELLING SECURITYHOLDER MAXIMUM NUMBER TO BE SOLD(1)
---------------------- ----------------------------
<S> <C>
Columbia Funding............................................. 50,000
Stephen Comeau............................................... 25,000
Tom N. Davidson Revocable Living Trust....................... 50,000
Nathan Eisen................................................. 12,500
Jerome Grushkin & Esther Grushkin JTROS...................... 12,500
Jerome J. Grushkin Defined Benefit Plan...................... 12,500
Melving L. Katten............................................ 12,500
Frank G. Lake III............................................ 25,000
Benjamin Lehrer.............................................. 12,500
Levine & Staller PA TTEE..................................... 25,000
George Lionikis Sr........................................... 25,000
Joseph O. Manzi.............................................. 50,000
Efrain Martinez.............................................. 50,000
Albert Milstein.............................................. 12,500
Lloyd A. Moriber, M.D........................................ 25,000
Karen A. Omahen.............................................. 25,000
Poseidon Capital Pension and Profit-Sharing Plan............. 12,500
William Rands................................................ 25,000
Jesse D. Roggen.............................................. 12,500
Marc Roberts................................................. 75,000
Gary J. Strauss.............................................. 25,000
</TABLE>
A-3
<PAGE> 71
<TABLE>
<CAPTION>
NUMBER OF CLASS A WARRANTS
BENEFICIALLY OWNED AND
SELLING SECURITYHOLDER MAXIMUM NUMBER TO BE SOLD(1)
---------------------- ----------------------------
<S> <C>
Donald Sallee................................................ 175,000
Melvin Stein................................................. 25,000
Malcolm Levenson Trust....................................... 37,500
The Steiro Company........................................... 10,000
Byron M. Allen............................................... 12,500
The Frank & Brynde Berkowitz Foundation...................... 25,000
Kenneth Cohen & Sherry Cohen JTROS........................... 25,000
Robert M. Freeman............................................ 50,000
Stuart Gruber................................................ 12,500
Edward D. Hurley Keogh Plan.................................. 12,500
Richard A. Nelson & Elaine M. Nelson JTROS................... 25,000
Wolfson Equities............................................. 12,500
--------
TOTAL...................................... 997,500
========
</TABLE>
(1) Does not include shares of Common Stock and Class B Warrants issuable upon
exercise of the Class A Warrants and the shares of Common Stock issuable upon
the exercise of the Class B Warrants. The Selling Securityholders agreed not to
exercise the Class A Warrants for a period of one year from October 9, 1996.
- ---------------------------
Each Selling Securityholder agreed: (i) not to sell, transfer or
otherwise dispose publicly the Remaining Selling Securityholder Class A Warrants
through a 270-day maximum lock-up period measured from October 9, 1996, which
has now expired; and (ii) not to exercise the Remaining Selling Securityholder
Class A Warrants for a period of one year from October 9, 1996. Purchasers of
the Selling Securityholder Class A Warrants will not be subject to such
restrictions.
After the one year period following the effective date of the 1996
Offering, the Selling Securityholders may exercise and sell the Common Stock
issuable upon exercise of the Selling Securityholder Class A and Class B
Warrants (collectively, the "Selling Securityholder Warrants") without
restriction if a current prospectus relating to such Common Stock is in effect
and the securities are qualified for sale. The Company will not receive any
proceeds from the sale of the Selling Securityholder Warrants. Sales of Selling
Securityholder Warrants issued upon conversion of the securities underlying such
Class A Warrants or even the potential of such sales could have an adverse
effect on the market prices of the Company's securities.
With the exception of Donald B. Sallee, Melvin Stein, the Malcolm
Levenson Trust and The Steiro Company, who owned 4.3%, 1.8%, 1.4% and 1.4% as of
the date of the 1996 Offering, respectively, there are no material relationships
between any of the Selling Securityholders and the Company, nor have any such
material relationships existed within the past three years. The Company has been
informed by Blair that there are no agreements between Blair and any Selling
Securityholder regarding the distribution of the Selling Securityholder Warrants
or the underlying securities.
The sale of the securities by the Selling Securityholders may be
effected from time to time in transactions (which may include block transactions
by or for the account of the Selling Securityholders) in the over-the-counter
market or in negotiated transactions, a combination of such methods of sale or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices or in negotiated transactions, a combination of such methods of sale or
otherwise.
Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders or to broker-dealers who may purchase shares as
A-4
<PAGE> 72
principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers from whom such broker-dealer may act as agents or to whom they may
sell as principals or otherwise (which compensation as to a particular
broker-dealer may exceed customary commissions).
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Selling Securityholder Warrants may
not simultaneously engage in market-making activities or solicited brokerage
activities with respect to any securities of the Company for the applicable
"cooling off" period (which is likely to be five business days) prior to the
commencement of such distribution. Accordingly, in the event Blair or Blair &
Co. is engaged in a distribution of the Selling Securityholder Warrants, neither
of such firms will be able to make a market in the Company's securities or
engage in any solicited brokerage activities during the applicable restrictive
period. Any temporary cessation of such market-making activities or solicited
brokerage activities could have an adverse effect on the market price of the
Company's securities. However, neither Blair nor Blair & Co. has agreed to nor
is either of them obligated to act as broker-dealer in the sale of the Selling
Securityholder Warrants and the Selling Securityholders may be required, and in
the event Blair & Co. is a market-maker, will likely be required, to sell such
securities through another broker-dealer. In addition, each Selling
Securityholder desiring to sell Warrants will be subject to the applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation Regulation M, which provisions may limit the timing
of the purchases and sales of shares of the Company's securities by such Selling
Securityholder.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discount and commissions under the Securities Act.
The Company has agreed to pay Blair a Solicitation Fee of 5% of the
aggregate exercise price of each Warrant which is exercised, if (i) the market
price of the Common Stock on the date of the Warrant is exercises is greater
than the then exercise price of the Warrant; (ii) the exercise of the Warrant
was solicited by a member of the NASD; (iii) the Warrant is not held in a
discretionary account; (iv) disclosure of compensation arrangements was made
both at the time of the offering and at the time of exercise of the Warrant; and
(v) the solicitation of exercise of the Warrants was not in violation of
Regulation M or respective state blue sky laws. Any costs incurred by the
Company in connection with the exercising of the Warrants shall be borne by the
Company.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
A-5
<PAGE> 73
[ALTERNATE]
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or by the Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities offered hereby by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer, or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information herein contained is correct as of any time subsequent to
the date hereof.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary .........................3
Risk Factors................................7
Use of Proceeds.............................15
Dividend Policy ............................15
Price Range of Securities...................16
Capitalization..............................16
Selected Financial Data.....................17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations..................18
Business....................................20
Management..................................28
Certain Transactions........................35
Principal Stockholders .....................37
Concurrent Offering.........................39
Description of Securities...................40
Shares Eligible for Future Sale.............43
Selling Securityholders and
Plan of Distribution......................44
Experts.....................................47
Additional Information......................47
Index to Financial Statements...............F-1
</TABLE>
------------
LAMINATING
TECHNOLOGIES, INC.
997,500 REDEEMABLE CLASS A WARRANTS
AND
997,500 SHARES OF COMMON STOCK
AND 997,500 REDEEMABLE
CLASS B WARRANTS ISSUABLE
UPON THE EXERCISE OF
REDEEMABLE CLASS A WARRANTS
AND
997,500 SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE OF
CLASS B WARRANTS
------------
PROSPECTUS
------------
August ___, 1997
A-6
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Amended and Restated Certificate of Incorporation and By-Laws of
the Registrant provide that the Registrant shall indemnify any person to the
full extent permitted by the Delaware General Corporation Law (the "GCL").
Section 145 of the GCL, relating to indemnification, is hereby incorporated
herein by reference.
In accordance with Section 102(a)(7) of the GCL, the Amended and
Restated Certificate of Incorporation of the Registrant eliminates the personal
liability of directors to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director with certain limited
exceptions set forth in Section 102(a)(7).
The Registrant has also entered into indemnification agreements with
each of its officers and directors, the form of which is filed as Exhibit 10.8
and reference is hereby made to such form.
Reference is made to Section 6 of the Underwriting Agreement (Exhibit
1.1) which provides for indemnification by the Underwriter (Blair) of the
Registrant, its officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
It is estimated that the following approximate expenses, in addition to
Blair's Solicitation Fee of 5% of the Warrant exercise price under certain
circumstances, will be incurred in connection with the proposed offering
hereunder. All of such expenses will be borne by the Company:
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Legal fees and expenses......................... $10,000.00
Accounting fees and expenses.................... $ 2,000.00
Printing expenses............................... $ 4,000.00
----------
Total .............................. $16,000.00
==========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following discussion gives retroactive effect to the reverse stock
split effected in April 1996. During the past three years, the Registrant has
sold and issued the following unregistered securities:
In June 1995, the Company issued 33,208 shares of Common Stock to a
former president and director of the Company for the relinquishment of $90,000
of indebtedness of the Company to that individual. In June 1995, the Company
issued 126,114 shares of Common Stock to Donald Sallee for an aggregate purchase
price of approximately $85,000.
In April 1996, pursuant to debt conversion agreements dated March 21,
1996, the Company converted an aggregate of $978,556 of indebtedness of the
Company into 361,061 shares of Common Stock at a rate of one share for every
$2.7102 of indebtedness. In April 1996, the Company issued an aggregate of 4,689
shares of Common
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<PAGE> 75
Stock as compensation to an ex-employee for accrued wages at a rate of
approximately $2.7102 per share and as a signing bonus to a current employee.
In April and May 1996, the Company issued 39.9 units, each unit
consisting of a note in the principal amount of $50,000 bearing interest at 10%
per annum and warrants to purchase 25,000 shares of Common Stock at an exercise
price of $4.00 per share (assuming the offering contemplated by this
Registration Statement is not consummated), to 32 accredited investors for an
aggregate purchase price of $1,995,000. The units were issued pursuant to an
exemption from registration provided by Regulation D promulgated under Section
4(2) of the Securities Act. Blair acted as the Registrant's placement agent in
connection with this private placement. In connection therewith, the Registrant
paid sales commissions in the amount of $199,500 and a non-accountable expense
allowance in the aggregate amount of $59,850.
Except as otherwise noted, the above transactions were private
transactions not involving a public offering and were exempt from the
registration provisions of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof. The sale of securities was without the use of an
underwriter, and the certificates evidencing the shares bear a restrictive
legend permitting the transfer thereof only upon registration of the shares or
an exemption under the Securities Act of 1933, as amended.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Page No. or
Number Description Method of Filing
------ ----------- ----------------
<S> <C> <C>
1.1 Form of Underwriting Agreement *
3.1 Restated Certificate of Incorporation of the Registrant *
3.2 By-laws of the Registrant *
4.1 Form of Bridge Note *
4.2 Form of Warrant Agreement *
4.3 Form of Unit Purchase Option *
5.1 Opinion and Consent of Bachner, Tally, Polevoy & Misher *
LLP
10.1 Employment Agreement between Registrant and Michael E. *
Noonan
10.2 Memorandum of Understanding dated August 26, 1994 *
between Registrant and TMR, as amended
10.3 Outsourcing Agreement dated September 1, 1994 between the *
Registrant and TMR
10.4 Amended and Restated 1996 Stock Option Plan *
10.8 Form of Indemnification Agreement *
23.1 Consent of Bachner, Tally, Polevoy & Misher, LLP Included in Exhibit 5.1
23.2 Consent of William R. Hinds, Esq. *
</TABLE>
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<PAGE> 76
<TABLE>
<CAPTION>
Exhibit Page No. or
Number Description Method of Filing
------ ----------- ----------------
<S> <C> <C>
23.3 Consent of Richard A. Eisner & Company, LLP Filed Herewith
24.1 Power of Attorney *
27.1 Financial Data Schedule *
</TABLE>
- -----------------
* Previously filed.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) It will file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events arising
after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof), which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
and
(iii) Include any additional or changed material
information on the plan of distribution not
previously disclosed in the Registration Statement.
(4) It will file a post-effective amendment to remove from registration
any of the securities that remain unsold at the termination of the offering.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described in Item 24 hereof, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person thereof in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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<PAGE> 77
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Atlanta, State of Georgia on the 8th
day of August, 1997.
LAMINATING TECHNOLOGIES, INC.
a Delaware corporation
By: /s/ MICHAEL E. NOONAN
----------------------------------------
Michael E. Noonan,
Chairman of the Board, President
and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL E. NOONAN Chairman of the Board, President August 8, 1997
-------------------------- and Chief Executive Officer
Michael E. Noonan
/s/ RICHARD B. CARLOCK Chief Financial Officer August 8, 1997
--------------------------
Richard B. Carlock
* Secretary and Director August 8, 1997
--------------------------
Robert L. Dover
* Director August 8, 1997
--------------------------
Ronald L. Christensen
* Director August 8, 1997
--------------------------
William J. Warren
*By: /s/ MICHAEL E. NOONAN August 8, 1997
--------------------------
Michael E. Noonan
Attorney-In-Fact
</TABLE>
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<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in the Post-Effective Amendment No. 1 to the
Registration Statement, in connection with the registering of (i) common
stock and redeemable Class B Warrants of the Laminating Technologies, Inc.
and Subsidiary ("the Company"), pursuant to outstanding redeemable Class A
Warrants of the Company and Class B Warrants issued in the Company's initial
public offering and (ii) common stock issuable upon the exercise of such
redeemable Class B Warrants (Form SB-2 No. 333-6711) of the Company, of our
report dated June 4, 1997 relating to the consolidated financial statements of
the Company which is contained in that Registration Statement. We also consent
to the reference to our firm under the captions "Selected Financial Data" and
"Experts."
RICHARD A. EISNER & COMPANY, LLP
New York, New York
August 8, 1997
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