COMPASS PLASTICS & TECHNOLOGIES INC, 424B3, 1997-09-04

COMPASS PLASTICS & TECHNOLOGIES INC
424B3, 1997-09-04
PLASTICS PRODUCTS, NEC

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<PAGE>
Pursuant to Rule 424(b)(3)
Registration File No. 33-28741

PROSPECTUS

1,650,000 Shares

[LOGO] Compass Plastics & Technologies, Inc.
Common Stock
------------

Of the 1,650,000 shares of Common Stock (the "Common Stock") offered
hereby, 1,200,000 shares are being sold by Compass Plastics & Technologies, Inc.
(the "Company") and 450,000 shares are being sold by certain stockholders of the
Company (the "Selling Stockholders"). See "Principal and Selling Stockholders."
The Company will not receive any proceeds from the sale of shares by the Selling
Stockholders. Prior to this offering, there has been no public market for the
Common Stock of the Company. See "Underwriting" for a discussion of the factors
to be considered in determining the initial public offering price. The Common
Stock has been approved for quotation on the Nasdaq National Market ("Nasdaq")
under the symbol "CPTI."

Certain clients of JO Hambro & Partners Limited, including certain existing
stockholders of the Company, have indicated to the Company that they have an
interest in purchasing 105,000 shares of Common Stock in this offering.

---------------------
The shares offered hereby involve a high degree of risk.
See "Risk Factors" beginning on page 8 hereof.
---------------------

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.
<TABLE>
<CAPTION>
===========================================================================================
Underwriting
Price to Discounts and Proceeds Proceeds to
Public Commissions (1) to Company (2) Selling Stockholders
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share ...... $8.00 $0.76 $7.24 $7.24
- -------------------------------------------------------------------------------------------
Total (3) ...... $13,200,000 $1,254,000 $8,688,000 $3,258,000
===========================================================================================
</TABLE>
<PAGE>
(1) Excludes the value of warrants to be issued to Cruttenden Roth Incorporated
and Josephthal Lyon & Ross Incorporated, as the representatives of the
several Underwriters (the "Representatives"), to purchase up to 165,000
shares of Common Stock (the "Representatives' Warrants"). The Company and
the Selling Stockholders have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."

(2) Before deducting expenses of the offering payable by the Company estimated
to be $815,000, including the Representatives' non-accountable expense
allowance.

(3) The Company and the Selling Stockholders have granted the Underwriters a
45-day option to purchase up to 247,500 additional shares of Common Stock
from the Company (123,750 shares) and the Selling Stockholders (123,750
shares) solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to Selling Stockholders will
be $15,180,000, $1,442,100, $9,583,950 and $4,153,950, respectively. See
"Underwriting."
----------------

The shares of Common Stock are offered by the several Underwriters, when,
as and if delivered to and accepted by the Underwriters and subject to various
prior conditions, including their right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that delivery of share
certificates will be made against payment therefor at the offices of Cruttenden
Roth Incorporated in Irvine, California or through the facilities of the
Depository Trust Company, on or about September 9, 1997.

CRUTTENDEN ROTH JOSEPHTHAL LYON & ROSS
INCORPORATED INCORPORATED

The date of this Prospectus is September 3, 1997
<PAGE>

[Artwork depicting the Company's manufacturing operations]

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

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

The Company intends to furnish annual reports to stockholders containing
audited financial statements and make available quarterly reports and such other
periodic reports as it may determine to be appropriate or as may be required by
law.

- --------------------------------------------------------------------------------
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus, including information under "Risk Factors." The shares of
Common Stock offered hereby involve a high degree of risk and investors should
carefully consider information set forth in "Risk Factors." Unless otherwise
indicated, all information in this Prospectus (i) gives effect to a 4-for-1
stock split consummated prior to the effectiveness of this offering, and (ii)
assumes that the Underwriters' over-allotment option as described in
"Underwriting" is not exercised. As used in this Prospectus, (i) unless the
context otherwise requires, the term "Company" refers to Compass Plastics &
Technologies, Inc. and its wholly-owned subsidiary, and (ii) the term "year" or
"fiscal year" refers to the Company's fiscal year ending on the last Sunday of
the 52 consecutive weeks ending in October, and the fiscal year ended October
27, 1996 includes the operations of the Company and its predecessor, AB
Plastics. See "Selected Financial Data."

The Company

Compass Plastics & Technologies, Inc., through its wholly-owned subsidiary,
AB Plastics Corporation ("AB Plastics"), is a leading contract manufacturer and
assembler of custom injection-molded plastic components in the western United
States. The Company manufactures the plastic exteriors of computer monitors,
televisions, electronic music keyboards and other consumer electronics
equipment. In addition to injection-molded components, the Company offers a
broad range of "value-added" services, including painting, decorating and
assembly. A significant percentage of the Company's components are manufactured
using gas-assist molding technology which reduces material usage and permits the
molding of lighter and stronger parts. The Company believes its technical and
manufacturing capabilities to produce large injection-molded plastic components
on both a "just-in-time" basis and in production volumes with low reject rates
provide a significant competitive advantage.

The Company charges its customers a fixed price for each component or part
it manufactures, which components may consist of single or multiple parts.
Negotiated prices include the cost of thermoplastic resins, packaging, other
materials and parts, labor and overhead. Although thermoplastic resins have
historically accounted for at least 80% of its raw materials costs, the Company
does not believe that its results of operations are subject to the risk of
fluctuations in resin prices, since the Company's arrangements with most of its
customers provide that price changes in such resins are passed through to the
customer by changes in the component prices charged by the Company.

The Company's two major original equipment manufacturer ("OEM") customers
are Sony Corporation ("Sony"), through its computer monitor and television
manufacturing divisions, and Matsushita Electronic Corporation of America
("Matsushita"), through its Panasonic and Quasar brands. Sales to these
customers represented approximately 66.5% and 18.0%, respectively, of the
Company's total sales for the fiscal year ended October 27, 1996. Of sales to
Sony, computer monitor components accounted for approximately 39.1% and
television components accounted for approximately 27.4% of the Company's total
sales during the fiscal year ended October 27, 1996. The Company has been an
uninterrupted supplier of custom injection-molded components to Sony since 1972,
to Matsushita since 1983 and to virtually all of its other customers for at
least seven years. To improve its ability to support major customers, in
addition to its current manufacturing facility in Gardena, California
(approximately 15 miles south of Los Angeles), the Company is currently
completing a new "build-to-suit" manufacturing facility in Tijuana, Mexico. This
new facility has been logistically located near many of its customers'
manufacturing plants in Mexico and is expected to add significant manufacturing
capacity by September 1997. Management believes that this facility will enable
the Company to capitalize on demand from new and existing customers which have
relocated their manufacturing operations from the Far East and the United States
to Mexico in recent years due to lower labor and transportation costs. Closer
proximity to its major customers will allow the Company to be more efficient in
delivering 15 to 20 daily truckloads of components to its customers' production
facilities and eliminate time-consuming border crossings.

3
<PAGE>

Injection-molded plastic components are used in a wide variety of
industries, including automotive, telecommunications, computer, consumer
electronics, medical and packaging. Based on information provided in Plastic
News, a leading industry publication, sales of the top 100 North American
plastic injection molders were approximately $11.3 billion in 1994, $12.5
billion in 1995 and $14.4 billion in 1996, reflecting a 12.9% industry-wide
average annual growth rate. The Company was ranked by 1996 sales as the 96th
largest plastic injection molder in North America, the 9th largest plastic
injection molder in the western United States (comprised of the states of
California, Arizona, Oregon and Washington), and one of the three largest custom
plastic injection molders in Southern California. According to Stanford
Resources' Monitrak Quarterly Report, United States sales of computer monitors,
the Company's major market, rose to approximately 21.7 million units in 1996,
from sales of approximately 13.4 million units in 1994.

The Company's goal is to be a dominant supplier of injection-molded plastic
components to the increasing number of computer monitor and television OEM
plants located in Southern California and Tijuana, Mexico. Management believes
that the commencement of digital broadcasting in the television industry in the
United States, starting in 1998, will create a demand for new high-definition
television sets ("HDTV") and flat panel displays as consumers replace obsolete
television sets unable to receive digital broadcasting with HDTV quality.
According to the Consumer Electronics Manufacturers Association, at least 20
million television sets have been sold each year since 1991 and 380 million
television sets have been sold since 1974 in the United States. The key elements
of the Company's growth strategy include the following:

o Continue to expand computer monitor and television component business --
through the continuation of the overall growth of the Company's computer
monitor sales to Sony, which have grown from $2.9 million in fiscal 1994 to
$15.4 million in fiscal 1996, expansions into new products such as Sony's
personal computer, known as "Vaio," and by targeting sales to other
computer monitor and television OEMs doing business in Tijuana, Mexico;

o Acquire complementary businesses -- which the Company believes will
diversify its customer base, technical capabilities and geographic areas
served;

o Capitalize on customer demand in Tijuana market -- by completing the
construction of its manufacturing facility in Tijuana, Mexico to increase
manufacturing capacity by 50% and to be located near existing and potential
customers;

o Pursue long-term relationships with new customers -- that require
responsive manufacturing services in the computer, television and consumer
electronics industries; and

o Continue commitment to quality and service -- by continuing to achieve the
highest levels of quality control through continuous improvement of its
engineering and manufacturing capabilities.

The Company was incorporated under the laws of the State of Delaware in May
1996 under the name AB Plastics Holding Corporation. In June 1997, the Company
changed its name to Compass Plastics & Technologies, Inc. The Company's
principal executive offices are located at 15730 South Figueroa Street, Gardena,
California 90248, and its telephone number is (213) 770-8771. For a description
of the background of the Company, see "The Company."

4
<PAGE>

The Offering

Common Stock offered by the
Company ................... 1,200,000 shares of Common Stock

Common Stock offered by the
Selling Stockholders ....... 450,000 shares of Common Stock

Common Stock outstanding
after the offering.......... 4,760,000 shares of Common Stock(1)(2)

Use of Proceeds ............. The Company intends to use the net proceeds of
this offering to repay approximately $4.0
million of outstanding indebtedness under its
subordinated loan agreement with Sirrom
Investments, Inc. ("Sirrom"). The remaining
net proceeds of approximately $3.9 million
will be used to complete the construction of
the warehouse and distribution center at the
Company's Gardena, California facility
(approximately $1.3 million) and equip its
newly-constructed Tijuana, Mexico
manufacturing facility (approximately $2.6
million). Pending such uses, the Company
intends to temporarily reduce approximately
$3.9 million in borrowings expected to be
outstanding under the Company's maximum $10.0
million revolving line of credit facility with
The Sumitomo Bank of California ("Sumitomo").
See "Use of Proceeds."

Nasdaq National
Market Symbol .............. CPTI

- ------------
(1) Gives effect to the exercise of outstanding stock options and warrants to
purchase an aggregate of 1,560,000 shares of Common Stock, of which stock
options and warrants to purchase 760,000 shares of Common Stock are
exercisable at $1.00 per share and a warrant to purchase 800,000 shares of
Common Stock is exercisable at a total exercise price of $2,000, which will
be effective on the date of this Prospectus. Stock options and warrants
issued to certain executive officers of the Company and AB Plastics to
purchase an aggregate of 646,932 shares of Common Stock will be exercised by
such officers by delivering to the Company $646,932 principal amount of
promissory notes (of which $600,808 principal amount of such notes delivered
by the Chairman of the Board and the President of the Company will be
without recourse to such persons), representing the amount of the aggregate
exercise price applicable to their respective stock options and warrants.
See "Certain Transactions."

(2) Does not include (i) 165,000 shares of Common Stock issuable upon exercise
of the Representatives' Warrants, (ii) 440,000 shares of Common Stock
reserved for issuance upon exercise of outstanding options with an exercise
price of $1.00 per share under the Company's 1996 Stock Option Plan and
(iii) 222,222 shares of Common Stock reserved for issuance upon exercise of
outstanding options with an exercise price equal to the initial public
offering price per share, and 577,778 shares of Common Stock reserved for
issuance upon exercise of options reserved for future grant, under the
Company's 1997 Stock Option Plan. See "Management -- Employment Agreements,"
"-- Stock Option Plans," "Certain Transactions" and "Underwriting."

5
<PAGE>

Summary Financial Data
(in thousands, except share and per share data)

<TABLE>
<CAPTION>
Predecessor(1)
---------------------------------------------------------------------------
52 Weeks Ended
----------------------------------------------------------
October 30,
1995-
October 25, October 31, October 30, October 29, September 27,
1992 1993 1994 1995 1996
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Sales ........................ $28,235 $ 29,362 $ 34,027 $ 42,679 $ 36,080
Cost of sales ............... 24,891 26,456 30,695 38,961 32,127
------- --------- --------- --------- ----------
Gross profit .................. 3,344 2,906 3,332 3,718 3,953
Selling and administrative ... 2,044 2,053 1,715 1,683 1,872
------- --------- --------- --------- ----------
Operating income ............ 1,300 853 1,617 2,035 2,081
Net interest expense ......... 214 254 225 375 386
Other (income) expense ...... 4 (35) (218) (70) (5)
------- --------- --------- --------- ----------
Income before income taxes..... 1,082 634 1,610 1,730 1,700
Income tax expense(3) ......... 441 49 48 26 (10)
------- --------- --------- --------- ----------
Net income before extraordi-
nary income .................. 641 585 1,562 1,704 1,710
Extraordinary item ............ -- 469 -- -- --
------- --------- --------- --------- ----------
Net income .................. $ 641 $ 1,054 $ 1,562 $ 1,704 $ 1,710
======= ========= ========= ========= ==========
Net income per share(4) ...... -- -- -- -- --
Weighted average number of
shares outstanding(4) ...... -- -- -- -- --
Supplemental pro forma net
income per share(5) ......... -- -- -- -- --
Other Data:
Depreciation and amortiza-
tion ......................... $ 693 $ 748 $ 746 $ 876 $ 826
EBITDA (6) .................. 1,993 1,601 2,363 2,911 2,907
Cash flows from operating
activities .................. 2,120 11 2,949 1,057 3,063
Cash flows from investing
activities .................. (829) (2,757) (1,425) (3,343) (496)
Cash flows from financing
activities .................. (672) 2,173 (1,661) 2,627 (2,718)
Pro forma net income(7) ...... 641 380 966 1,038 1,020
Pro forma net income per
share ........................ -- -- -- -- --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Company Predecessor Company
--------------- ------------- -------------
52 Weeks
Ended 26 Weeks 26 Weeks
September 28- October 27, Ended Ended
October 27, 1996 April 28, April 27,
1996 (Pro Forma)(2) 1996 1997
--------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Sales ........................ $ 3,265 $ 39,345 $ 19,410 $ 20,244
Cost of sales ............... 2,626 34,752 17,338 16,393
----------- ----------- --------- -----------
Gross profit .................. 639 4,593 2,072 3,851
Selling and administrative ... 241 2,173 1,021 1,456
----------- ----------- --------- -----------
Operating income ............ 398 2,420 1,051 2,395
Net interest expense ......... 99 1,200 226 451
Other (income) expense ...... 19 23 0 0
----------- ----------- --------- -----------
Income before income taxes .... 280 1,197 825 1,944
Income tax expense(3) ......... 117 526 12 764
----------- ----------- --------- -----------
Net income before extraordi-
nary income .................. 163 671 813 1,180
Extraordinary item ............ -- -- -- --
----------- ----------- --------- -----------
Net income .................. $ 163 $ 671 $ 813 $ 1,180
=========== =========== ========= ===========
Net income per share(4) ...... $ 0.05 $ 0.19 -- $ 0.33
Weighted average number of
shares outstanding(4) ...... 3,600,000 3,600,000 -- 3,600,000
Supplemental pro forma net
income per share(5) ......... 0.05 0.26 -- 0.33
Other Data:
Depreciation and amortiza-
tion ......................... $ 82 $ 1,151 $ 492 $ 636
EBITDA (6) .................. 480 3,388 1,543 3,031
Cash flows from operating
activities .................. 103 2,206 1,902 3,534
Cash flows from investing
activities .................. (7,216) (7,712) (700) (449)
Cash flows from financing
activities .................. 7,525 (4,807) (2,179) (3,012)
Pro forma net income(7) ...... 163 671 495 1,180
Pro forma net income per
share ........................ 0.05 0.19 -- 0.33
</TABLE>

April 27, 1997
----------------------------
Actual As Adjusted (8)
--------- ----------------
Balance Sheet Data:
Cash ........................... $ 803 $ 1,526
Working capital .................. 3,019 3,233
Total assets ..................... 19,470 20,354
Total current liabilities ......... 5,670 5,670
Total long-term liabilities ...... 9,656 2,506
Stockholders' equity ............ 4,143 12,177

- ------------
(1) In September 1996, a corporate affiliate of Michael A. Gibbs, President of
the Company, and Private Equity Partners, L.L.C. ("PEP"), an affiliate of
Geoffrey J.F. Gorman, Chairman of the Board of the Company, formed the
Company and sponsored the acquisition of all of the outstanding capital
stock of AB Plastics (prior to the acquisition, the "Predecessor"). The
acquisition and its related financing resulted in higher interest expense
and a different capital structure. Due to such differences, net income per
share is not provided for periods prior to the 52 weeks ended October 27,
1996 (pro forma). See "The Company" and Note 1 of Notes to Financial
Statements.

(2) Gives effect to the acquisition of AB Plastics, assuming such transaction
had occured as of October 30, 1995. See "Pro Forma Statements of
Operations."

(3) The Predecessor elected to be taxed as a subchapter S corporation, as a
result of which all federal income taxes were paid by the stockholders. Upon
completion of the acquisition of AB Plastics, the Company terminated such
subchapter S corporation election.

6
<PAGE>

(4) Assumes that stock options and warrants to purchase an aggreate of
1,560,000 shares of Common Stock had been exercised as of the end of such
period. See Note 1 of Notes to Financial Statements for an explanation of
the basis used to calculate net income per share.

(5) Supplemental pro forma net income per share is based on the number of shares
of Common Stock used in the calculation of net income per share plus the
number of shares required to be sold by the Company to fund the repayment of
indebtedness as set forth in "Use of Proceeds."

(6) EBITDA is earnings (net income) before interest, taxes, depreciation,
amortization and other (income) expense. The Company believes that EBITDA
provides useful information, widely used in the injection molding industry,
because (i) due to the increased trend of consolidation in the industry, it
eliminates purchase accounting treatment such as increased depreciation as a
result of a write-up of fixed assets and amortization of goodwill and
financing costs and (ii) it is a more accurate measure of operating cash
flow to meet obligations for interest, income tax and amortization of debt
before new investments in property, plant and equipment. The computation of
EBITDA as presented may not be comparable to computations presented by other
companies. EBITDA is a financial measure commonly used in financial
analysis, but should not be construed as an alternative to net income (as
determined in accordance with generally accepted accounting principles) as
an indicator of operating performance.

(7) Pro forma net income reflects the Company's net income on a pro forma basis
as though the Company had been subject to full federal income taxes in each
of fiscal 1992, 1993, 1994, 1995 and 1996, calculated using a 40% effective
tax rate.

(8) Adjusted to reflect (i) the exercise of outstanding stock options and
warrants to purchase an aggregate of 1,560,000 shares of Common Stock and
(ii) the sale by the Company of 1,200,000 shares of Common Stock offered
hereby, after deduction of underwriting discounts and commissions and
estimated offering expenses and the application of the estimated net
proceeds therefrom to the repayment of approximately $7.9 million in
indebtedness expected to be outstanding upon the consummation of this
offering. See "Use of Proceeds," "Capitalization" and "Certain
Transactions." Stockholders' equity is adjusted to reflect an anticipated
extraordinary loss of $599,000 (net of applicable income tax benefit of
$400,000) resulting from the write-off of deferred financing costs in
connection with the repayment of such indebtedness.

7
<PAGE>

RISK FACTORS

This Prospectus contains certain forward-looking statements within the
meaning of the Securities Act of 1933. Actual results could differ materially
from those projected in the forward-looking statements as a result of certain
risks and uncertainties set forth below and elsewhere in this Prospectus. An
investment in the shares of Common Stock offered hereby involves a high degree
of risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information set forth in this Prospectus, in
connection with an investment in the shares of Common Stock offered hereby.

Dependence on Computer and Consumer Electronics Industries

The Company's principal customers are OEMs of computer monitors,
televisions, electronic music keyboards and other consumer electronics
equipment. These industry segments, as well as the computer and consumer
electronics industries as a whole, are subject to economic cycles, technological
change, product obsolescence and changes in consumer demand. Discontinuance or
modification of products containing injection-molded plastic components
manufactured by the Company could adversely affect the Company's business,
financial condition and results of operations. The Company believes, for
example, that consumers are currently postponing purchases of new televisions in
anticipation of the introduction of HDTV and flat panel displays, which may
result in the postponement of OEM orders on certain television consoles. The
Company's growth has resulted, in part, from its ability to focus on customers
in these industries. There can be no assurance that the Company will continue to
be able to identify and attract customers with steady growth rates or that these
industry segments will continue to grow at their historical rates or at all.
Pricing pressures, a general downturn in the economy or any other event leading
to excess capacity in the computer and consumer electronics industries may
result in intensified price competition, reduced profit margins and a decrease
in unit volume of custom injection-molded plastic components ordered by OEMs,
all of which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Customers."

Customer Concentration

The Company's largest customer, Sony, through its computer monitor and
television manufacturing divisions, accounted for approximately 66.5% of the
Company's sales for the fiscal year ended October 27, 1996, and 72.6% of the
Company's sales for the 26 weeks ended April 27, 1997. In addition, the
Company's two largest customers, Sony and Matsushita (through its Panasonic and
Quasar brands), together accounted for approximately 84.5% and 82.3%,
respectively, of the Company's sales for such periods. The loss of, or a
significant curtailment of purchases by, either of these major customers would
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company anticipates that, by virtue of the
markets it serves, a significant portion of the Company's sales will continue to
be concentrated in a small number of customers. See "Business -- Customers."

Fluctuations in Operating Results

The Company's operating results are affected by a number of factors,
including timing of orders from major customers, process yields, timing of
capital expenditures in anticipation of future sales, economic conditions in the
computer and consumer electronics industries and the Company's mix of products.
As a result, the Company's results of operations have varied and may continue to
fluctuate significantly from period to period, including on a quarterly basis.
Historically, shipments of the Company's components have been higher in the
second and fourth fiscal quarters as a result of increased demand for computer
and consumer electronic products during the spring and year-end holiday seasons.
Operating results can also be significantly influenced by development and
introduction of new products or product models by the Company's customers. In
addition, a significant portion of the Company's operating expenses are
relatively fixed in nature and planned capital expenditures are based in part on
anticipated orders. Any inability to adjust spending quickly enough to
compensate for revenue shortfall may magnify the adverse impact of such revenue
shortfall on the Company's results of operations and cash flows. Moreover, there
can be no assurance that the industry-wide trends that have benefitted the
Company in recent periods will continue. Quarterly sales and operating results
depend in large part on the volume

8
<PAGE>

and timing of bookings received during the quarter, which are difficult to
forecast. The Company's customers generally require short production and
delivery cycles, and substantially all of the Company's backlog is typically
scheduled for delivery within 30 days. See "Business -- Industry Overview and
Trends" and " -- Customers."

Potential Significant Indebtedness and Leverage

At July 21, 1997, on an as adjusted basis after giving effect to this
offering and the application of the net proceeds therefrom, the Company
anticipates having outstanding long-term debt of approximately $1.7 million,
comprised of a $1.0 million loan from Transamerica Business Credit Corporation
("Transamerica") and approximately $660,000 in capitalized leases. In addition,
the Company will have up to an additional $10.0 million available for borrowing
under its revolving line of credit and $2.0 million available under its
equipment line of credit with Sumitomo. Subsequent to July 21, 1997, the Company
expects to spend approximately $4.8 million to purchase and expand its Gardena,
California facility and approximately $6.2 million for equipment and leasehold
improvements at its new Tijuana, Mexico facility. The Company expects to finance
the approximately $11.0 million in expansion by borrowing $3.5 million under a
conventional mortgage facility with Sumitomo, $3.0 million from General Electric
Capital Corporation under a five-year term loan and approximately $4.5 million
from the revolving line of credit and equipment line of credit with Sumitomo
(which will be temporarily reduced with a portion of the net proceeds of this
offering). Although the Company expects to continue to have sufficient earnings
from operations to satisfy its anticipated increased debt service obligations,
there can be no assurance that the Company will be able to meet its debt
obligations in the future or to pay or refinance its indebtedness as it becomes
due. Borrowings under its revolving line of credit facility bear interest at
floating rates (currently 9.0%) and are secured by a pledge of all of the
capital stock of AB Plastics. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Business -- Facilities" and "Certain Transactions."

Competition

The injection-molded plastic industry is highly fragmented and
characterized by intense competition. The Company competes principally in the
custom injection-molded plastic market in the western United States, which is
also highly competitive but is much less fragmented than the industry as a
whole. Certain of the Company's competitors have substantially greater
manufacturing, financial, marketing and/or other resources than the Company. As
a result, they may be able to respond more quickly to new or emerging
technologies and changes in customer requirements than the Company. In addition,
in recent years, several foreign plastic injection molders (primarily from the
Far East), including competitors of the Company, have established manufacturing
facilities in Tijuana, Mexico. There can be no assurance that the Company will
be able to compete successfully against present and future competitors or that
competitive pressures faced by the Company will not materially adversely affect
the Company's business, financial condition and results of operations. See
"Business -- Competition."

Variability of Customer Requirements; Nature of Customer Commitments on Orders

The level and timing of orders placed by the Company's customers varies due
to a number of factors, including customer attempts to manage inventory, changes
in customers' manufacturing strategies and variations in demand for their own
products. Since the Company typically does not obtain firm long-term purchase
orders or commitments, it must anticipate the future volume of orders based on
discussions with its customers. The Company relies on its estimate of
anticipated future volumes when making commitments regarding the level of
business that it will seek and accept, the mix of products that it intends to
manufacture, the timing of production schedules and the levels and utilization
of equipment and personnel. A variety of conditions, both specific to the
individual customer and generally affecting the customer's industry, may cause
customers to cancel, reduce or delay orders that were previously made or
anticipated. Generally, customers may cancel, reduce or delay purchase orders
and commitments without penalty, except for payment for work and materials
expended through the cancellation date. Significant or numerous cancellations,
reductions or delays in orders by a customer or group of customers could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Customers."

9
<PAGE>

Integration of New Manufacturing Facility

For the first 35 years of its existence, substantially all of the Company's
sales were made to customers located in California. In the late 1980s, many of
these customers relocated to Tijuana, Mexico, primarily due to reduced labor
costs. The Company is currently overseeing the construction of a new
manufacturing facility in Tijuana, Mexico, which it expects to lease from an
unaffiliated third-party commencing in September 1997. There can be no assurance
that the Company will be able to complete this facility in such time frame.
Consequently, if the Company is unsuccessful in Tijuana, the Company's
relationships with its most important customers could be damaged which would
have a material adverse effect on the business, financial condition and results
of operations of the Company. The Company's expanded manufacturing capacity has
and will continue to significantly increase its fixed costs, and the future
profitability of the Company will depend, in part, upon its ability to utilize
efficiently its manufacturing capacity. Gross profit margins, although partially
offset by lower labor costs in Mexico, may be adversely affected to the extent
that the Company does not fully utilize its increased manufacturing capacity.
Delays in completing construction and/or the Company's inability to generate the
additional sales necessary to utilize its additional capacity could have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, operating in Mexico subjects the Company to
certain additional risks, including unexpected changes in regulatory
requirements, political and economic conditions, difficulties in staffing and
managing international operations and other factors which could have a material
adverse effect on the Company's business, financial condition and results of
operations. Because sales from this facility and all raw material purchases for
use at this facility will be U.S. dollar-denominated and managed at the
Company's Gardena, California executive offices, the Company believes that it
will not be significantly affected by exchange rate fluctuations in the Mexican
peso relative to the U.S. dollar. The Company believes that the effects of such
fluctuations will be limited to wages for local laborers and operating supplies,
neither of which is expected to be material to the Company's results of
operations when the new facility is operational. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview" and
"Business -- Manufacturing."

Technological Change; Intellectual Property

Injection-molded plastic manufacturing technology has continued to move
toward more highly engineered processes. Technological change is continuous and,
in the future, higher margin products will be the most demanding in terms of
technological and manufacturing expertise. There is no assurance that the
Company will be able to maintain its current technological position. In
addition, the introduction of new technologies could require the Company to
substantially increase its capital expenditures. The Company's success depends
in part on its proprietary techniques and manufacturing expertise in the area of
custom injection-molded plastic components. The Company has no patents for these
proprietary techniques and chooses to rely on trade secret protection. There can
be no assurance that the Company's precautions will provide meaningful
protection from competition or that the Company's competitors will not develop
superior technology. The Company believes that although such techniques and
expertise are subject to misappropriation or obsolescence, the Company will
continue to improve methods and processes and develop new techniques on an
ongoing basis as dictated by the technological needs of the industry. See
"Business -- Manufacturing."

Management of Growth

The Company's current construction of its new manufacturing facility in
Tijuana, Mexico has placed, and is expected to continue to place, significant
demands on the Company's managerial, technical, financial and other resources.
Utilization of the Company's expanded facilities will require the Company to
continue to invest in its financial, management information, engineering and
logistics systems, and to retain, motivate and effectively manage its employees.
There can be no assurance that the management skills and systems currently in
place will be adequate to implement the Company's strategy, and the Company's
failure to manage growth effectively or to implement its strategy could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Growth Strategy" and "Management."

Dependence on Key Personnel

The Company's success depends to a significant degree upon the continued
contributions of members of its senior management team, particularly Michael A.
Gibbs, James S. Adams, G. Michael Frink, Stephen M. Adams,

10
<PAGE>

Jawed Ghias and Paul J. Iacono, as well as other key personnel, many of whom
would be difficult to replace. The Company does not possess any key-man life
insurance policies with respect to such persons. The future success of the
Company also depends on its ability to identify, attract and retain additional
qualified technical and managerial personnel. The loss of these officers or
other key personnel could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's
President, Michael A. Gibbs, is engaged in other business activities, including
acting as a consultant and business broker to other businesses which do not
compete with the Company. Although Mr. Gibbs actively manages the Company and
spends approximately two weeks per month at the Company's Gardena, California
offices, he resides in Connecticut. In addition, pursuant to Mr. Gibbs'
employment agreement, he is required to spend only 75% of his business and
professional time on the affairs of the Company. There can be no assurance that
the inability of Mr. Gibbs to devote his full time and resources to the Company
will not adversely affect the Company's business, financial condition and
results of operations. See "Management."

Acquisitions

The Company intends from time to time to pursue the acquisition of other
companies, assets or product lines that would complement or expand its existing
business. Acquisitions involve a number of risks that could adversely affect the
Company's operating results, including the diversion of management's attention,
the assimilation of the operations and personnel of the acquired companies, the
amortization of acquired intangible assets and the potential loss of key
employees of the acquired companies. See "Business -- Growth Strategy."

Equipment and Tool Failure

The Company's business involves manufacturing equipment that is subject to
failure. In the past, equipment and tool failures have occurred which have
resulted in temporary delays in product shipments. Although the Company has
in-house tooling and maintenance departments and maintains spare parts to reduce
the impact of such failures, there can be no assurance that failures will not
occur in the future. In addition, the Company currently has only one
manufacturing facility which is located in Southern California. The loss of
revenue and earnings to the Company from an equipment or tool failure, as well
as any disruption of the Company's operations resulting from a natural disaster
such as an earthquake, fire or flood, could have a material adverse effect on
its business, financial condition and results of operations.

Environmental Matters

The Company's operations and properties are subject to a wide variety of
international, federal, state and local laws and regulations, including those
governing the use, storage and handling, generation, treatment, emission,
release, discharge and disposal of certain materials, substances and wastes, the
remediation of contaminated soil and groundwater, and the health and safety of
employees. As such, the nature of the Company's operations exposes it to the
risk of claims with respect to such matters and there can be no assurance that
material costs or liabilities will not be incurred in connection with such
claims. See "Business -- Environmental Matters."

Availability of Raw Materials

Raw materials used by the Company in producing injection-molded plastic
components are purchased by the Company and, in certain limited circumstances,
the Company bears the risk of price fluctuations. In addition, shortages of
certain types of materials have occurred in the past and may occur in the
future. Future shortages or price fluctuations in raw materials or components
could have a material adverse effect on the Company's business, financial
condition and results of operations. Significant increases in the cost of
materials purchased by the Company could also have a material adverse effect on
the Company's results of operations in the event the Company is unable to pass
such price increases through to its customers. See "Business -- Raw Materials
and Supplies."

11
<PAGE>

Benefits of the Offering to Existing Stockholders

The Company intends to use approximately $4.0 million of the net proceeds
of this offering to repay the principal amount and interest outstanding under
its subordinated loan agreement with Sirrom, which will become a stockholder of
the Company upon the consummation of this offering and is a selling stockholder
in this offering. In addition, Sirrom and other stockholders of the Company,
including Geoffrey J.F. Gorman and Michael A. Gibbs, the Chairman of the Board
and the President of the Company, respectively, will purchase Common Stock prior
to the date of this Prospectus, upon exercise of outstanding stock options and
warrants, at prices significantly lower than the initial public offering price
of the shares offered hereby. Messrs. Gorman and Gibbs paid the exercise price
for such stock options and warrants by delivering 8% non-recourse promissory
notes due 2001 which are secured only by the pledge of the shares underlying
such options and warrants. In addition, certain existing stockholders will be
selling 27.3% of the shares of Common Stock offered hereby (approximately 30% if
the Underwriters' over-allotment option is exercised in full), and Messrs.
Gorman and Gibbs will receive certain benefits in connection with such sale. See
"Use of Proceeds," "Principal and Selling Stockholders" and "Certain
Transactions."

No Prior Public Market; Possible Volatility of Stock Price

Prior to this offering, there has been no public market for the Company's
Common Stock. Accordingly, there can be no assurance that an active trading
market will develop or be sustained subsequent to this offering. The initial
public offering price of the Common Stock will be determined by negotiations
among the Company and the Underwriters and may not be indicative of the prices
that may prevail in the public market. Upon commencement of this offering, the
Common Stock will be quoted on the Nasdaq National Market. This stock market
generally, and the plastics manufacturing sector in particular, have experienced
and are likely in the future to experience significant price and volume
fluctuations which could adversely affect the market price of the Common Stock
without regard to the Company's operating performance. The trading price of the
Common Stock could also be subject to significant fluctuations in response to
variations in quarterly operating results, shortfalls in sales or earnings below
analyst estimates, developments in the computer and consumer electronics
industries, stock market conditions and other factors. There can be no assurance
that the market price of the Common Stock will not experience significant
fluctuations or decline below the initial public offering price.
See "Underwriting."

Dilution

Purchasers of the Common Stock offered hereby will incur immediate
substantial dilution in pro forma net tangible book value per share from the
initial offering price in the amount of $5.74. To the extent outstanding
options to purchase the Company's Common Stock are exercised, there will be
further dilution to such new investors. See "Dilution."

Control by Certain Existing Stockholders

Following the sale of the shares offered hereby, the directors and
executive officers of the Company and their affiliates will own 37.5% of the
outstanding Common Stock. Based on their stock ownership, such persons will
continue to have significant influence over the Company's policies and affairs
and most corporate actions requiring stockholder approval, including the
election of directors. See "-- Anti-Takeover Considerations," "Management" and
"Principal and Selling Stockholders."

Shares Eligible for Future Sale; Potential for Adverse Effect on Stock Price

Sales of substantial amounts of Common Stock in the public market following
this offering could have an adverse effect on the market price of the Common
Stock. The 1,650,000 shares offered hereby will be freely tradeable without
restriction, unless purchased by an affiliate of the Company. All of the
Company's officers, directors and principal stockholders have agreed that they
will not sell any Common Stock without the prior consent of Cruttenden Roth
Incorporated for a period of 365 days from the date of this Prospectus (the
"Lock-up Period"). The Lock-up Period may be waived by Cruttenden Roth
Incorporated without notice to the Company's stockholders or the Nasdaq National
Market, the market on which the Company's securities will be initially quoted;
however, Cruttenden Roth Incorporated has no current intention to do so.
Additionally, at July 21, 1997,

12
<PAGE>

options to purchase 662,222 shares of Common Stock were outstanding, none of
which options were exercisable. The Company intends to register all shares
reserved for issuance under its stock option plans. Shares covered by such
registration will be eligible for resale in the public market, subject to Rule
144 limitations applicable to affiliates and to the lock-up agreements described
above. See "Management -- Stock Option Plans" and "Shares Eligible for Future
Sale."

Anti-Takeover Considerations

Certain provisions of the Company's Restated Certificate of Incorporation,
By-Laws and Delaware General Corporation Law ("Delaware Law") could, together or
separately, discourage potential acquisition proposals, delay or prevent a
change in control of the Company, and limit the price that certain investors
might be willing to pay in the future for the Company's Common Stock. These
provisions include the issuance, without further stockholder approval, of
preferred stock with rights and preferences which could be senior to the Common
Stock. The Company is also subject to Section 203 of the Delaware Law, which may
also inhibit a change in control of the Company. See "Description of Securities
- -- Preferred Stock" and "-- Delaware Anti-Takeover Law."

13
<PAGE>

THE COMPANY

The Company's injection-molded plastic business began in 1952, and operated
until September 1996 as a family-owned business. In September 1996, a corporate
affiliate of Michael A. Gibbs, President of the Company, and PEP, an affiliate
of Geoffrey J.F. Gorman, Chairman of the Board of the Company, formed the
Company and sponsored the acquisition of all of the outstanding capital stock of
AB Plastics for a purchase price of $7.0 million. Of such purchase price, $2.0
million was paid by equity contributions by PEP and certain investors originated
by PEP, and $5.0 million was financed from the proceeds of a $4.0 million
subordinated loan from Sirrom and $1.0 million of borrowings under the Company's
revolving line of credit with Sumitomo. In addition, approximately $4.5 million
in bank indebtedness then outstanding of AB Plastics was refinanced by the
Company with a portion of the Sumitomo revolving line of credit, and
approximately $700,000 in equipment financing was assumed by the Company. The
acquisition was accounted for as a purchase transaction and was valued at
approximately the fair value of the net assets acquired. The Company has no
tangible assets other than the shares of Common Stock of AB Plastics.

Prior to the acquisition of AB Plastics, in October 1995, a corporate
affiliate of Mr. Gibbs entered into a letter of intent to acquire AB Plastics
and a consulting agreement to evaluate the systems and manufacturing processes
of AB Plastics. Beginning in early 1996, and accelerated by a new management
team following the September 1996 acquisition, the Company initiated a profit
improvement program to focus on reducing overtime, staffing levels, tooling and
maintenance problems, rework and excessive warehousing costs, and on increasing
the use of robotics in its manufacturing process. Since October 1995, the
Company has reduced its work force by approximately 20% and achieved annualized
cost savings in excess of $3.0 million. From October 1995 to October 1996, the
Company increased income before income taxes by 14.4% and, from April 1996 to
April 1997, increased income before income taxes by 135.6%.

14
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,200,000 shares of
Common Stock offered by the Company hereby are approximately $7,873,000, after
deducting underwriting discounts and commissions and estimated offering
expenses.

The Company intends to use the net proceeds of this offering to repay the
approximately $4.0 million in principal and accrued interest outstanding under
its subordinated loan agreement with Sirrom. The remaining net proceeds of
approximately $3.9 million will be used, in conjunction with additional lending
arrangements described below, to (i) purchase the Company's Gardena, California
facility and construct an additional 75,000 square foot warehouse and
distribution facility adjoining its existing manufacturing facility, and (ii)
equip and make leasehold improvements to the Company's newly-constructed
Tijuana, Mexico manufacturing facility.

The Company agreed to purchase its Gardena, California facility from its
current owners for $3.1 million. Such purchase was completed in August 1997. See
"Certain Transactions." The Company has additionally determined to demolish the
existing 20,000 square foot warehouse on such property and construct a new
75,000 square foot warehouse and distribution facility adjoining its existing
manufacturing facility. The Company commenced such demolition in August 1997,
with construction of the new warehouse and distribution facility to begin in
September 1997 and to be completed by the end of 1997. The cost of demolition
and construction for this project is expected to be approximately $1.7 million.
The Company intends to finance the purchase of its Gardena, California facility
and the demolition and construction for its new warehouse facility by borrowing
$3.5 million under a conventional mortgage loan with Sumitomo and using
approximately $1.3 million of the net proceeds of this offering.

The Company also plans to equip and make leasehold improvements to its
newly-constructed Tijuana, Mexico manufacturing facility, including installation
of molding, decorating and painting equipment, improvements to support plumbing
and electrical requirements, and office equipment and operating supplies to
commence operations. The Company also intends to transfer a number of molding
machines and related equipment to this facility from its Gardena, California
facility. The Company expects that construction of its Tijuana facility will be
completed in September 1997 and installation of new equipment and leasehold
improvements will be completed in October 1997, with the transfer of molding
machines and related equipment to occur through November 1997. The cost of new
equipment and leasehold improvements for the Tijuana facility is expected to be
approximately $6.2 million, which the Company intends to finance by borrowing
$3.0 million under a five-year term loan with General Electric Credit
Corporation, which the Company is currently negotiating, using approximately
$2.6 million of the net proceeds of this offering, and the balance from advances
under its revolving line of credit facility from Sumitomo.

Pending the use of the net proceeds of the offering for its facilities, the
Company intends to temporarily reduce approximately $3.9 million in borrowings
expected to be outstanding under the Company's revolving line of credit facility
with Sumitomo upon the consummation of this offering. Amounts repaid under the
Company's revolving line of credit may be reborrowed by the Company, from time
to time, based on certain percentages of eligible inventories and accounts
receivable, up to a maximum $10.0 million available under such facility. The
Company does not anticipate any limits on its ability to reborrow the full
amount of repayments made from the net proceeds of this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

The Sirrom subordinated loan matures in September 2001, subject to certain
mandatory prepayments, and has a stated interest rate of 13.5% per annum. The
repayment of the Sirrom subordinated loan will eliminate the Company's current
annual interest obligations thereunder of $540,000. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

The Company will not receive any of the proceeds from the sale of the
Common Stock offered by the Selling Stockholders. See "Principal and Selling
Stockholders."

15
<PAGE>

DIVIDEND POLICY

The Company has never paid or declared any cash dividends. The Company
intends to retain future earnings, if any, to finance the development and
expansion of its business and, therefore, does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. In addition, the
Company's revolving line of credit with Sumitomo prohibits the Company from
declaring, paying or making any dividends or distributions on its Common Stock.

CAPITALIZATION

The following table sets forth, as of April 27, 1997, the short-term debt
and capitalization of the Company on an actual basis and as adjusted to give
effect to (i) the exercise of outstanding stock options and warrants to purchase
an aggregate of 1,560,000 shares of Common Stock, of which stock options and
warrants to purchase 760,000 shares of Common Stock are exercisable at $1.00 per
share and a warrant to purchase 800,000 shares of Common Stock is exercisable at
a total exercise price of $2,000, and (ii) the sale and issuance of the
1,200,000 shares of Common Stock offered by the Company hereby (after deducting
the estimated underwriting discounts and commissions and estimated offering
expenses) and the application of the net proceeds therefrom as described in "Use
of Proceeds." This table should be read in conjunction with the Financial
Statements and Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
April 27, 1997
------------------------
Actual As Adjusted
--------- ------------
(in thousands)
<S> <C> <C>
Short-term debt ............................................. $ 283 $ 283
======== ========
Long-term debt:
Revolving line of credit .................................... $ 3,150 $ 0
Subordinated term loan ....................................... 4,000 0
Capitalized leases, less current portion ..................... 625 625
-------- --------
Total long-term debt ....................................... 7,775 625
-------- --------
Stockholders' equity:
Preferred Stock, par value $.0001; 5,000,000 shares authorized;
no shares outstanding ....................................... -- --
Common Stock, par value $.0001; 20,000,000 shares authorized;
3,560,000 shares (actual) and 4,760,000 shares (as adjusted)
issued and outstanding(1) ................................. 0 0
Additional paid-in capital ................................. 2,800 11,433
Retained earnings .......................................... 1,343 744
-------- --------
Total stockholders' equity ................................. 4,143 12,177
-------- --------
Total capitalization .................................... $11,918 $12,802
======== ========
</TABLE>

- ------------
(1) Does not include (i) 165,000 shares of Common Stock issuable upon exercise
of the Representatives' Warrants, (ii) 440,000 shares of Common Stock
reserved for issuance upon exercise of outstanding options with an exercise
price of $1.00 per share under the Company's 1996 Stock Option Plan and
(iii) 222,222 shares of Common Stock reserved for issuance upon exercise of
outstanding options with an exercise price equal to the initial public
offering price per share, and 577,778 shares of Common Stock reserved for
issuance upon exercise of options reserved for future grant, under the
Company's 1997 Stock Option Plan. See "Management-- Employment Agreements,"
"-- Stock Option Plans," "Certain Transactions" and "Underwriting."

16
<PAGE>

DILUTION

The pro forma net tangible book value of the Company as of April 27, 1997
was $1,732,253 or $0.49 per share of Common Stock. Pro forma net tangible book
value per share represents the amount of net tangible assets, less total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to (i) the exercise of outstanding stock options and warrants to
purchase an aggregate of 1,560,000 shares of Common Stock, of which stock
options and warrants to purchase 760,000 shares of Common Stock are exercisable
at $1.00 per share and a warrant to purchase 800,000 shares of Common Stock is
exercisable at a total exercise price of $2,000, and (ii) the sale by the
Company of 1,200,000 shares of Common Stock offered hereby and applying the net
proceeds thereof to the repayment in full of the Company's subordinated term
loan from Sirrom having an outstanding principal balance of $4.0 million at
April 27, 1997, and to effect a temporary reduction of the Company's revolving
line of credit with Sumitomo expected to be approximately $3.9 million upon the
consummation of this offering, the pro forma net tangible book value of the
Company as of April 27, 1997 would have been $10,764,780, or $2.26 per share.
The prepayment of the Company's subordinated term loan from Sirrom will result
in an extraordinary charge of approximately $1.0 million from the write-off of
deferred financing costs, which will increase the net tangible book value of the
Company by $400,000, representing the tax benefit of such charge. The above
represents an immediate increase in net tangible book value of $1.77 per share
to existing stockholders and an immediate dilution of $5.74 per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Initial public offering price per share .............................. $ 8.00
Pro forma net tangible book value per share at April 27, 1997 ......... $0.49
Increase in pro forma net tangible book value per share attributable to
new investors ......................................................... 1.77
------
Pro forma net tangible book value per share after this offering ...... 2.26
---------
Dilution per share to new investors ................................. $ 5.74(1)
=========
</TABLE>

The following table summarizes, as of April 27, 1997, the differences in
the number of shares of Common Stock purchased from the Company (including
1,560,000 shares issuable upon the exercise of outstanding stock options and
warrants), the total consideration paid to the Company and the average price
paid per share by existing and new investors:

<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration
----------------------- ------------------------- Price Per
Number Percent Amount Percent Share
----------- --------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1) ...... 3,560,000 74.8% $ 2,762,000 22.3% $0.78
New investors(1) ............... 1,200,000 25.2 9,600,000 77.7 8.00
--------- ------ ------------ ------
Total ........................ 4,760,000 100.0% $12,362,000 100.0%
========= ====== ============ ======
</TABLE>
- ------------
(1) Sales by the Selling Stockholders in this offering will reduce the number of
shares held by the existing stockholders to 3,110,000, or 65.3% of the total
number of shares of Common Stock to be outstanding after this offering, and
will increase the number of shares to be purchased by new investors to
1,650,000, or 34.7% of the total shares of Common Stock to be outstanding
after this offering. If the Underwriters' over-allotment option is exercised
in full, the number of shares held by new investors will increase to
1,897,500 shares, or approximately 38.9% of the total number of shares to be
outstanding after this offering. See "Principal and Selling Stockholders"
and "Underwriting."

17
<PAGE>

SELECTED FINANCIAL DATA
(in thousands, except share and per share data)

The selected financial data set forth below with respect to the Company's
statement of operations for the 52 weeks ended October 27, 1996 (pro forma) and
the period from September 28, 1996 to October 27, 1996, and with respect to the
balance sheet at October 27, 1996, are derived from the financial statements
audited by Marcum & Kliegman LLP, independent accountants, which are included
elsewhere in this Prospectus and are qualified by reference to such financial
statements. The selected financial data set forth below with respect to the
Company's statement of operations for the period from October 30, 1995 to
September 27, 1996 and for each of the 52 weeks ended October 29, 1995 and
October 30, 1994, and with respect to the balance sheet at October 29, 1995, are
derived from the financial statements audited by Block, Plant, Eisner, Fiorito &
Belak-Berger, independent accountants, which are included elsewhere in this
Prospectus and are qualified by reference to such financial statements. The
balance sheet data at October 30, 1994 and the data as of and for the 52 weeks
ended October 31, 1993 and October 25, 1992 are derived from audited financial
statements not included in this Prospectus. The statement of operations data for
the 26 weeks ended April 27, 1997 and April 28, 1996, and the balance sheet data
at April 27, 1997 are derived from unaudited financial statements included
elsewhere in this Prospectus. The unaudited financial statement data includes
all adjustments, consisting only of normal recurring adjustments, which the
Company considers necessary for a fair presentation of the financial position
and results of operations for such periods. Operating results for the 26 weeks
ended April 27, 1997 are not necessarily indicative of the results that may be
expected for the 52 weeks ending October 26, 1997. The data set forth below
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Financial Statements
together with the related notes included herein.

<PAGE>
<TABLE>
<CAPTION>
Predecessor(1)
---------------------------------------------------------------------------
52 Weeks Ended
----------------------------------------------------------
October 30,
1995-
October 25, October 31, October 30, October 29, September 27,
1992 1993 1994 1995 1996
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Sales ........................ $28,235 $ 29,362 $ 34,027 $ 42,679 $ 36,080
Cost of sales ............... 24,891 26,456 30,695 38,961 32,127
------- --------- --------- --------- ----------
Gross profit .................. 3,344 2,906 3,332 3,718 3,953
Selling and administrative ... 2,044 2,053 1,715 1,683 1,872
------- --------- --------- --------- ----------
Operating income ............ 1,300 853 1,617 2,035 2,081
Net interest expense ......... 214 254 225 375 386
Other (income) expense ...... 4 (35) (218) (70) (5)
------- --------- --------- --------- ----------
Income before income taxes..... 1,082 634 1,610 1,730 1,700
Income tax expense(3) ......... 441 49 48 26 (10)
------- --------- --------- --------- ----------
Net income before extraordi-
nary income .................. 641 585 1,562 1,704 1,710
Extraordinary item ............ -- 469 -- -- --
------- --------- --------- --------- ----------
Net income .................. $ 641 $ 1,054 $ 1,562 $ 1,704 $ 1,710
======= ========= ========= ========= ==========
Net income per share(4) ...... -- -- -- -- --
Weighted average number of
shares outstanding(4) ...... -- -- -- -- --
Supplemental pro forma net
income per share(5) ......... -- -- -- -- --
Other Data:
Depreciation and amortiza-
tion ......................... $ 693 $ 748 $ 746 $ 876 $ 826
EBITDA (6) .................. 1,993 1,601 2,363 2,911 2,907
Cash flows from operating
activities .................. 2,120 11 2,949 1,057 3,063
Cash flows from investing
activities .................. (829) (2,757) (1,425) (3,343) (496)
Cash flows from financing
activities .................. (672) 2,173 (1,661) 2,627 (2,718)
Pro forma net income(7) ...... 641 380 966 1,038 1,020
Pro forma net income per
share ........................ -- -- -- -- --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Company Predecessor Company
--------------- ------------- -------------
52 Weeks
Ended 26 Weeks 26 Weeks
September 28- October 27, Ended Ended
October 27, 1996 April 28, April 27,
1996 (Pro Forma)(2) 1996 1997
--------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Sales ........................ $ 3,265 $ 39,345 $ 19,410 $ 20,244
Cost of sales ............... 2,626 34,752 17,338 16,393
----------- ----------- --------- -----------
Gross profit .................. 639 4,593 2,072 3,851
Selling and administrative ... 241 2,173 1,021 1,456
----------- ----------- --------- -----------
Operating income ............ 398 2,420 1,051 2,395
Net interest expense ......... 99 1,200 226 451
Other (income) expense ...... 19 23 0 0
----------- ----------- --------- -----------
Income before income taxes..... 280 1,197 825 1,944
Income tax expense(3) ......... 117 526 12 764
----------- ----------- --------- -----------
Net income before extraordi-
nary income .................. 163 671 813 1,180
Extraordinary item ............ -- -- -- --
----------- ----------- --------- -----------
Net income .................. $ 163 $ 671 $ 813 $ 1,180
=========== =========== ========= ===========
Net income per share(4) ...... $ 0.05 $ 0.19 -- $ 0.33
Weighted average number of
shares outstanding(4) ...... 3,600,000 3,600,000 -- 3,600,000
Supplemental pro forma net
income per share(5) ......... 0.05 0.26 -- 0.33
Other Data:
Depreciation and amortiza-
tion.......................... $ 82 $ 1,151 $ 492 $ 636
EBITDA (6) .................. 480 3,388 1,543 3,031
Cash flows from operating
activities .................. 103 2,206 1,902 3,534
Cash flows from investing
activities .................. (7,216) (7,712) (700) (449)
Cash flows from financing
activities .................. 7,525 (4,807) (2,179) (3,012)
Pro forma net income(7) ...... 163 671 495 1,180
Pro forma net income per
share ........................ 0.05 0.19 -- 0.33
</TABLE>

18
<PAGE>
October 25, October 31, October 30,
1992 1993 1994
------------- ------------- -------------
Balance Sheet
Data:
Cash ............... $ 838 $ 265 $ 128
Working capital ... 2,516 2,334 2,590
Total assets ...... 9,336 12,796 14,349
Total current
liabilities ...... 2,737 5,105 5,479
Total long-term
liabilities ...... 2,277 2,593 3,288
Stockholders'
equity ............ 4,322 5,098 5,582
<TABLE>
<CAPTION>
April 27, 1997
October 29, September 27, October 27, ---------------------------
1995 1996 1996 Actual As Adjusted(8)
------------- --------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Balance Sheet
Data:
Cash ............... $ 468 $ 318 $ 730 $ 803 $ 1,526
Working capital ... 801 2,236 4,714 3,019 3,233
Total assets ...... 20,613 18,267 20,194 19,470 20,354
Total current
liabilities ...... 10,855 7,175 5,109 5,670 5,670
Total long-term
liabilities ...... 2,886 3,444 12,121 9,656 2,506
Stockholders'
equity ............ 6,872 7,648 2,964 4,143 12,177
</TABLE>
- ------------
(1) AB Plastics was acquired in September 1996. The acquisition and its related
financing resulted in higher interest expense and a different capital
structure. Due to such differences, net income per share is not provided for
periods prior to the 52 weeks ended October 27, 1996 (pro forma). See "The
Company" and Note 1 of Notes to Financial Statements.

(2) Gives effect to the acquisition of AB Plastics, assuming such transaction
had occurred as of October 30, 1995. See "Pro Forma Statements of
Operations."

(4) Assumes that stock options and warrants to purchase an aggregate of
1,560,000 shares of Common Stock, had been exercised as of the end of such
period. See Note 1 of Notes to Financial Statements for an explanation of
the basis used to calculate net income per share.

19
<PAGE>

PRO FORMA STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)

The following pro forma statements of operations (unaudited) for the 52
weeks ended October 27, 1996, which include the 48-week period ended September
27, 1996 ("Predecessor") and the four-week period ended October 27, 1996
("Company"), are based on the historical financial data of such companies,
assuming the Company's acquisition of AB Plastics had occurred as of October 30,
1995, the beginning of the 52 weeks ended October 27, 1996. The pro forma
statement of operations is not necessarily indicative of what the Company's
results of operations would have been had such transaction occurred at the
beginning of such period.
<TABLE>
<CAPTION>
Predecessor Company As Adjusted (6)
-------------------- ------------------ -----------------
For the 4 For the 52
For the 48 Weeks Ended Weeks Ended
Weeks Ended October 27, 1996 October 27, 1996
September 27, 1996 (Consolidated) Adjustments (Consolidated)
-------------------- ------------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
Operating Data:
Sales .............................. $36,080 $ 3,265 $ 39,345
Cost of sales ..................... 32,126 2,626 34,752
------- ---------- ----------
Gross profit ..................... 3,954 639 4,593
Operating expenses ............... 1,872 241 (4) $ 60 2,173
------- ---------- --- -------- ----------
Operating income .................. 2,082 398 (60) 2,420
Other expenses ..................... (381) (118) (1) (495) (1,223)
(2) (183)
(3) (46)
Net income before income taxes ... 1,701 280 (784) 1,197
Income tax (expense) benefit ...... 10 (117) (5) (419) (526)
------- ---------- -------- ----------
Net income ........................ $ 1,711 $ 163 $ (1,203) $ 671
======= ========== ======== ==========
Per Share Data:
Net income per share ............... $ 0.05 $ 0.19
========== ==========
Weighted average shares outstanding 3,600,000 3,600,000
</TABLE>
- ------------

(1) Adjusted to give effect to the increase in interest expense on the Sirrom
loan which was obtained in connection with the acquisition.

(2) Reflects amortization expense of loan fees of the Sirrom loan.

(3) Adjusted to give effect to the reduction of interest income from officers'
loans receivable which were paid off by the officers in connection with the
acquisition.

(4) Reflects amortization of goodwill.

(5) Reflects deferred tax expense related to the above adjustments and
conversion to subchapter C corporation status.

(6) Does not reflect an extraordinary loss of $599,000 (net of applicable income
tax benefit of $400,000) resulting from the write-off of Sirrom loan fees
which will occur upon the completion of this offering.

20
<PAGE>

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

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations includes forward-looking statements with respect to
the Company's future financial performance. These forward-looking statements are
subject to various risks and uncertainties, including the factors described
under "Risk Factors" and elsewhere in this Prospectus, that could cause actual
results to differ materially from historical results or those currently
anticipated.

Overview

The Company is a leading contract manufacturer and assembler of custom
injection-molded plastic components for computer and consumer electronics OEMs
located in Southern California and Mexico. The Company supplies plastic
exteriors for direct-tube televisions ranging from 13" to 35" and frames for 50"
and 60" projection televisions. The Company also supplies plastic exterior and
base stands for 17" computer monitors manufactured by Sony for leading PC
manufacturers, such as Gateway 2000, Dell Computer, Silicon Graphics, Sun
Microsystems and Digital Equipment Corporation, and, starting in August, the
plastic exteriors for Sony's personal computer, known as "Vaio," in both 15" and
17" models. The Company also manufactures enclosures for electronic music
keyboards.

The Company maintains approximately 125 active molds for its customers,
pursuant to which it may produce all the plastic components for a product or
only select parts. During the product life cycle, components are ordered by the
Company's customers to meet their just-in-time production requirements. Typical
lead times range from two to four weeks. Historically, shipments of the
Company's components have been higher in the second and fourth fiscal quarters
as a result of increased demand for computer and consumer electronics products
during the spring and year-end holiday seasons. As a result, sales may vary from
period to period solely dictated by the demand for the products of the Company's
customers. As product introduction and acceptance are not determined in advance,
OEM customers generally allocate molds for new components to their suppliers,
such as the Company, before they know actual volume purchase requirements.
Traditionally, once a tool is allocated to a particular molder and is in
production, it is rarely moved to a competitor. The Company is one of two
principal regional suppliers to its two largest customers, Sony and Matsushita.

For the first 35 years of its existence, substantially all of the Company's
sales were made to customers located in California. In the late 1980s, many of
these firms relocated to Tijuana, Mexico, primarily due to reduced labor costs.
There are currently approximately 350 manufacturing plants operating in Tijuana.
Four of the Company's largest customers have a total of seven plants located in
Tijuana. Trends within the computer and consumer electronics industries indicate
that OEMs based in the Far East (such as Japan, Taiwan and South Korea) will
continue to relocate the manufacturing and engineering of products for sale in
the United States, formerly manufactured in Far East facilities, to North
America, in particular Tijuana.

Sony commenced manufacturing computer monitors at its computer monitor
manufacturing division in Rancho Bernardo, California in 1994. As one of two
principal United States injection-molders for Sony computer monitors, the
Company's monitor sales rose from $2.9 million in 1994 to $15.4 million in
fiscal 1996. The Company expects to manufacture additional models in 1997 and
1998 to supply Sony's anticipated computer monitor growth, including anticipated
public response to the Sony Vaio. In fiscal 1997, Sony transferred all of its
television production and a significant portion of its computer monitor
production from its Rancho Bernardo, California facility to its Tijuana, Mexico
plant. When operational, the Company's new Tijuana, Mexico facility will
manufacture components for computer monitors and televisions for Sony's Tijuana
manufacturing and assembly plant. Because sales from this facility and all raw
material purchases for use at this facility will be U.S. dollar-denominated and
managed at the Company's Gardena, California executive offices, the Company does
not believe that it will be significantly affected by exchange rate fluctuations
in the Mexican peso relative to the U.S. dollar. The Company believes that the
effects of such fluctuations will be limited to wages for local laborers and
operating supplies, neither of which is expected to be material to the Company's
results of operations when the new facility is operational. The Company's
Gardena, California plant will continue to service Sony's Rancho Bernardo plant.

All molds held by the Company are owned by the customer but the Company is
responsible for general maintenance and safe storage during the life of the
mold. Costs for maintenance of the mold are expensed as incurred. Major tool
modifications are charged to the customer.

21
<PAGE>

Prices are quoted based on component drawings provided by customers with
estimates of part weight, resin costs, machine requirements and parts produced
per hour (cycle time). Most component prices are negotiated after initial
production runs, and weight and cycle times are verified. The Company charges
its customers a fixed price for each component it manufactures, which components
may consist of single or multiple parts. Negotiated prices include the cost of
thermoplastic resins, packaging, other materials and parts, labor and overhead.
Although thermoplastic resins have historically accounted for at least 80% of
its raw material costs, the Company does not believe that its results of
operations are subject to the risk of fluctuations in resin prices, since the
Company's arrangements with most of its customers provide that price changes in
such resins are passed through to the customer by changes in the component
prices charged by the Company. In addition, each of Sony, Matsushita and Hitachi
negotiate separate supply agreements with thermoplastic resin producers which
deliver such resins to the Company for use in their products. During periods of
rising resin prices, sales revenues tend to increase for the same number of
units while gross profit margin remains unchanged, but gross profit margin as a
percentage of sales decreases. The reverse tends to be true in periods of
declining resin prices. In fiscal 1995, resin prices increased by 20% over 1994
prices, resulting in $4.0 million of sales inflation. Resin prices declined over
18% in fiscal 1996 and have been relatively stable the first half of fiscal
1997. As customers generally seek price reductions during the product life
cycle, the Company's ability to improve operating performance is generally
dependent on increasing manufacturing efficiency through improved process
control, increased automation, engineering changes to molds and reduced
operating and labor expenses.

Results of Operations

26 Weeks ended April 27, 1997 Compared to 26 Weeks ended April 28, 1996

The Company's net sales for the 26 weeks ended April 27, 1997 were $20.2
million, an increase of $800,000, or 4.1%, from $19.4 million for the 26 weeks
ended April 28, 1996. For the 26 weeks ended April 27, 1997, net sales were
comprised of $9.7 million in computer monitor component sales, $8.4 million in
television component sales and $1.8 million in electronic music keyboard
component sales, and other component sales of approximately $280,000.

Television component sales decreased $1.3 million, or 13.4%, from sales of
$9.7 million for the 26 weeks ended April 28, 1996. This decrease was due to a
decrease in orders from Matsushita of $3.0 million (due to a periodic increase
in Matsushita's use of its internal capacity), which was partially offset by an
increase in orders from Sony of $1.6 million. The Company believes that, based
on current and expected purchase orders, annual sales to Matsushita are not
likely to return to fiscal 1996 levels in the foreseeable future. See "Business
- -- Customers." Computer monitor component sales increased $2.5 million, or
34.7%, from sales of $7.2 million for the 26 weeks ended April 28, 1996. This
increase was principally due to an increase in orders from Sony of approximately
$1.8 million, and an increase in orders from a smaller customer of approximately
$682,000. Electronic music keyboard component sales increased approximately
$112,000, or 6.6%, from sales of $1.7 million for the 26 weeks ended April 28,
1996. This increase was the result of an increase in orders from Casio. During
this time resin prices decreased and were passed on to the customers in the form
of lower prices.

The Company's gross profit for the 26 weeks ended April 27, 1997 was $3.8
million, or 19.0% of net sales, compared to $2.1 million, or 10.7% of net sales,
for the 26 weeks ended April 28, 1996. This increase was principally due to
productivity improvements through a 20% reduction in the Company's workforce and
tighter controls on operating expenses. The Company does not currently
anticipate that productivity improvements will continue at this level in the
future.

The Company's selling and administrative ("SGA") expenses for the 26 weeks
ended April 27, 1997 were $1.5 million, or 7.2% of net sales, compared to $1.0
million, or 5.3% of net sales, for the 26 weeks ended April 28, 1996. These
expenses consisted of increased administrative expenses and incentive
compensation accruals.

The Company's net interest expense for the 26 weeks ended April 27, 1997
was $451,000, or 2.2% of net sales, compared to $226,000, or 1.3% of net sales,
for the 26 weeks ended April 28, 1996. The increase in interest expense is due
to the increase in long-term debt related to the acquisition of AB Plastics by
the Company in September 1996.

The Company's net income tax expense for the 26 weeks ended April 27, 1997
was $764,000, or 3.8% of net sales, compared to $12,000 for the 26 weeks ended
April 28, 1996. Prior to the acquisition of AB Plastics

22
<PAGE>

by the Company in September 1996, the Company made an election to be taxed under
the provisions of subchapter S of the Internal Revenue Code of 1986, as amended.
Under these provisions, the Company did not pay federal corporate income taxes
on its taxable income and only paid 1.5% state income taxes. Instead, the
stockholders were liable for individual federal and state income taxes on their
respective shares of the Company's taxable income. Subsequent to the date of
acquisition, the Company terminated its subchapter S corporation election and
elected to be governed by the provisions under subchapter C of the Internal
Revenue Code. Under these provisions, the Company is liable for federal and
state income taxes on its taxable income.

Period from October 30, 1995 to September 27, 1996 and 52 Weeks ended
October 27, 1996 (Pro forma) Compared to Fiscal Year ended October 29, 1995

The discussion in this section generally compares the Company's actual
results for the fiscal year ended October 29, 1995, with (i) the results of the
Company's Predecessor for the period from October 30, 1995 to September 27, 1996
and (ii) the combined results of the Predecessor and the Company for the fiscal
year ended October 27, 1996.

The Company's net sales for the period from October 30, 1995 to September
27, 1996 were $36.1 million, a decrease of $6.7 million, or 15.5%, from $42.7
million in the fiscal year ended October 29, 1995 (the "1995 fiscal year").
Sales for the 52 weeks ended October 27, 1996 (pro forma) were $39.3 million, a
decrease of $3.3 million, or 7.7%, from the 1995 fiscal year. For the period
from October 30, 1995 to September 27, 1996 net sales were comprised of $17.5
million in television component sales, $14.4 million in computer monitor
component sales, $3.0 million in electronic music keyboard component sales, and
other component sales of $1.1 million. For the 52 weeks ended October 27, 1996
(pro forma), sales were comprised of $19.5 million in television component
sales, $15.6 million in computer monitor sales and $3.3 million in electronic
music keyboard components.

Television component sales for the period from October 30, 1995 to
September 27, 1996 decreased $6.6 million, or 27.4%, from 1995 fiscal year sales
of $24.1 million. Of the decrease, $2.0 million is attributed to the shorter
period comparison. Television component sales for the 52 weeks ended October 27,
1996 (pro forma) decreased $4.6 million, or 19.1%, from 1995 fiscal year sales.
This decrease, on a 52 week comparison basis, was due to a decrease in orders
from Sony of $3.9 million and a decrease in orders from Hitachi of $1.7 million,
slightly offset by an increase in orders from Matsushita of approximately
$800,000.

Computer monitor component sales for the period from October 30, 1995 to
September 27, 1996 increased $3.2 million, or 28.6%, from 1995 fiscal year sales
of $11.2 million. Computer monitor component sales for the 52 weeks ended
October 27, 1996 (pro forma) increased $4.3 million, or 38.3%, from 1995 fiscal
year sales. This increase was due to an increase in orders from Sony of $4.1
million and an increase from a smaller customer of approximately $179,000.

Electronic music keyboard component sales for the period from October 30,
1995 to September 27, 1996 decreased $3.2 million, or 51.6%, from 1995 fiscal
year sales of $6.2 million. Of this decrease, $300,000 is attributed to the
shorter period comparison. Sales for the 52 weeks ended October 27, 1996 (pro
forma) decreased $2.9 million, or 46.7%, from the 1995 fiscal year. This
decrease was the result of a decrease in orders from Casio. In addition, during
this time, resin prices decreased and were passed on to the customer in the form
of lower prices.

The Company's gross profit for the period from October 30, 1995 to
September 27, 1996 was $4.0 million, or 11.0% of sales, compared to $3.7
million, or 8.7% of net sales, for the 1995 fiscal year. The Company's gross
profit for the 52 weeks ended October 27, 1996 (pro forma) was $4.6 million, or
11.7% of sales. This increase in profitability was principally due to
productivity improvements through a 20% reduction in its workforce and tighter
controls on operating expenses. The Company does not currently anticipate that
productivity improvements will continue at this level in the future. These
improvements were offset by a one-time write-off and revaluation of certain
assets including $458,000 of inventory, $159,000 of disputed accounts receivable
which the Company decided not to pursue, and $80,000 of licensing fees related
to a discontinued product. These adjustments were recorded in the period from
October 30, 1995 to September 27, 1996.

The Company's SGA expenses for the period from October 30, 1995 to
September 27, 1996 were $1.9 million, or 5.2% of sales, compared to $1.7
million, or 3.9% of sales for the 1995 fiscal year. The increase in

23
<PAGE>

expenses were related to consulting and other professional services engaged to
evaluate and improve the operating performance of the Company, additional
administrative expenses relating to the sale of AB Plastics, and a change in
accounting policy which the Company will accrue in current year fees for its
year-end audit. For the 52 weeks ended October 27, 1996 (pro forma), in addition
to the above discussion, the Company began to record amortization of goodwill.

The Company's net interest expense for the period from October 30, 1995 to
September 27, 1996 was $386,000, or 1.1% of sales, compared with $375,000, or
0.9% of sales, for the 1995 fiscal year. The increase was due to an increase in
borrowings by the Company. See "-- Liquidity and Capital Resources."

The Company's income tax expense was immaterial in the historical periods
reflecting the Predecessor's election of subchapter S status. On a going forward
basis, the Company will file consolidated tax returns under subchapter C of the
Internal Revenue Code.

Four Weeks ended October 27, 1996

The Company's net sales for the four weeks ended October 27, 1996 were $3.3
million, consisting of $1.8 million of television component sales, $1.1 million
of computer monitor component sales, and $300,000 of electronic music keyboard
component sales.

The Company's gross profit for the four weeks ended October 27, 1996 was
$639,000, or 19.3% of net sales. This increase in gross profit as a percentage
of net sales compared to the periods from October 30, 1995 to September 27, 1996
and the 52 weeks ended October 27, 1996 (pro forma) was principally due to a
continuation of productivity improvements and tighter controls on operating
expenses under a program instituted earlier in 1996, and, as noted, the Company
had recorded in such earlier periods a one-time offsetting write-off and
revaluation of certain assets totaling $697,000. The Company believes that these
productivity improvements have reduced the Company's manufacturing costs,
resulting in higher gross profit percentages, and the Company believes such
costs are expected to continue at comparable levels on an ongoing basis. With
the integration of the Company's new manufacturing facility in Mexico, these
percentages may be adversely affected in the future to the extent that the
Company does not fully utilize its increased manufacturing capacity. See "Risk
Factors -- Integration of New Manufacturing Facility."

The Company's SGA expenses for the four weeks ended October 27, 1996 were
$241,000. Interest expense during this period was $99,000, a substantial portion
of which was attributable to debt related to the acquisition.

The Company's income tax expense for the four weeks ended October 27, 1996
was $117,000, reflecting the Company's change in tax status to subchapter C of
the Internal Revenue Code.

Fiscal Year ended October 29, 1995 Compared to Fiscal Year ended October
30, 1994

The Company's net sales for the 1995 fiscal year were $42.7 million, an
increase of $8.7 million, or 25.5%, from $34.0 million in the fiscal year ended
October 30, 1994 (the "1994 fiscal year"). For the 1995 fiscal year, net sales
were comprised of $24.1 million in television component sales, $11.2 million in
computer monitor component sales, and $6.2 million in electronic keyboard
component sales, and other component sales of $1.2 million.

Television component sales in the 1995 fiscal year decreased $1.5 million,
or 5.9%, from 1994 fiscal year sales of $25.6 million. This decrease was due to
a reduction in orders from Sony of $2.9 million, offset by increases from both
Matsushita of approximately $756,000 and Hitachi of approximately $591,000.
Computer monitor component sales in the 1995 fiscal year increased $8.4 million,
or 290%, from 1994 fiscal year sales of $2.9 million. This increase was due to
the growth of Sony's computer monitor business in Rancho Bernardo, California
and resin price increases which were passed on to customers in terms of higher
prices. Electronic music keyboard component sales increased $2.6 million, or
70.2%, from 1994 fiscal year sales of $3.7 million. This increase was the result
of market demand for Casio's keyboard products.

The Company's gross profit for the 1995 fiscal year was $3.7 million, or
8.7% of net sales, compared to $3.3 million, or 9.8% of net sales, for the 1994
fiscal year. This increase in gross profit was principally due to higher
revenue. The decrease in gross profit as a percentage of sales was due to higher
resin prices.

The Company's SGA expenses for the 1995 fiscal year were $1.7 million, or
3.9% of net sales, compared to $1.7 million, or 5.0% of net sales, for the 1994
fiscal year. The decrease in expense as a percentage of sales was due solely to
the increase in revenue.

24
<PAGE>

The Company's net interest expense for the 1995 fiscal year was $375,000,
or 0.9% of net sales, compared to $225,000, or 0.6% of net sales, for the 1994
fiscal year.

The Company's other income for the 1995 fiscal year was $70,000, or 0.2% of
net sales, compared to income of $218,000, or 0.6% of net sales, for the 1994
fiscal year. Other income consisted mainly of workers' compensation and other
insurance rebates.

The Company's income tax expense for the 1995 fiscal year was approximately
$26,000, or 0.1% of net sales, compared to approximately $48,000, or 0.1% of net
sales, for the 1994 fiscal year.

Liquidity and Capital Resources

As of April 27, 1997, the Company had working capital of $3.0 million
compared to $4.7 million at the end of the 1996 fiscal year. The reduction was
attributable to improved collection of accounts receivable and increased trade
payables and accrued wages and benefits. The Company used such funds to pay down
its revolving line of credit, which is classified as a long-term liability. The
Company's available borrowings under its revolving line of credit were $4.1
million at April 27, 1997.

Net cash provided by operating activities for the 26 weeks ended April 27,
1997 was approximately $3.5 million, compared to $1.9 million for the 26 weeks
ended April 28, 1996. The difference between the Company's net income of $1.2
million and operating cash flow of $3.4 million was attributable to $600,000 in
depreciation and amortization, reduction in accounts receivable of $2.3 million,
an increase in accounts payable of $600,000, less an increase in inventory of
$1.1 million.

Net cash used in investing activities for the 26 weeks ended April 27, 1997
was $449,000, compared to $700,000 for the 26 weeks ended April 28, 1996. Cash
flow for the 26 weeks ended April 27, 1997 reflects the capital expenditures
incurred in connection with the Company's routine replacement of manufacturing
and support equipment and leasehold improvements related to expansion of its
administrative offices.

Net cash used for financing activities for the 26 weeks ended April 27,
1997 was $3.0 million, compared to $2.2 million used for the 26 weeks ended
April 28, 1996. This reflects approximately $2.9 million in payments to reduce
the Company's outstanding line of credit borrowings and approximately $162,000
in principal payments related to equipment lease obligations during the 26 weeks
ended April 27, 1997. The Company also entered into $396,000 in capitalized
leases at such time relating to the addition of two molding machines.

AB Plastics is party to a loan agreement with Sumitomo, which includes (a)
a revolving line of credit facility (the "Revolver"), available through July 31,
2001, with a maximum borrowing limit equal to the lesser of $10.0 million or the
sum of (i) 85% of AB Plastics' eligible accounts receivable, plus (ii) 50% of AB
Plastics' eligible inventory, plus (iii) a supplemental amount of $5.2 million
(reducing at the rate of $100,000 per month commencing June 30, 1997), and (b)
an equipment line of credit (the "Equipment Line"), available through October
31, 1997, in an aggregate principal amount of up to $2.0 million to be utilized
for the purchase of equipment. The loans under the Sumitomo loan agreement are
secured by a first priority lien and security interest on substantially all of
the assets of AB Plastics, and by a guaranty of the Company which is secured by
a pledge of all of the outstanding capital stock of AB Plastics. The loans bear
interest at prime rate plus 0.50% per annum (or, at AB Plastics' option, at
short-term LIBOR plus 2.75% per annum) with respect to the Revolver, and at
prime rate (through October 31, 1997) and prime rate plus 0.25% per annum (from
and after November 1, 1997) under the Equipment Line. Advances under the
Revolver are repayable in full on July 31, 2001, and advances under the
Equipment Line as of October 31, 1997 are repayable in 48 equal monthly payments
from December 1, 1997 through November 1, 2001. It is contemplated that
approximately $3.9 million in principal amount of loans will be outstanding
under the Revolver upon the consummation of this offering. Pending the use of
the net proceeds of this offering for its facilities, the Company intends to use
approximately $3.9 million of the net proceeds of this offering for the
reduction of the outstanding loans under the Revolver. See "Use of Proceeds."

The Company and AB Plastics are co-borrowers under a subordinated loan
agreement with Sirrom, pursuant to which the Company and AB Plastics borrowed
from Sirrom a subordinated term loan in the original principal amount of $4.0
million, bearing interest at the rate of 13.5% per annum, and secured by a lien
and security interest on substantially all of the assets of AB Plastics and a
pledge of all of the outstanding capital stock of

25
<PAGE>

AB Plastics. The Sirrom loan and the liens, security interests and pledge
securing the Sirrom loan are subordinated to the Sumitomo loans and the liens,
security interests and pledge securing the Sumitomo loans. The interest on the
Sirrom loan is payable in monthly installments of $45,000 through September
2001, when the then outstanding principal amount matures, subject to certain
mandatory prepayments out of excess cash flow (if any) achieved in the calendar
years 1998, 1999 and 2000. As of July 21, 1997, the outstanding principal
balance of the Sirrom loan was $4.0 million. The Company intends to use a
portion of the net proceeds of this offering to repay the Sirrom loan in full.
See "Use of Proceeds."

In May 1997, AB Plastics borrowed the sum of $1.0 million from Transamerica
Business Credit Corporation ("Transamerica"). Of such $1.0 million,
approximately $535,000 was utilized to pay in full the remaining outstanding
balances of certain capitalized leases, and the remaining $465,000 was retained
by AB Plastics with the intent of utilizing such funds to acquire equipment for
the new Tijuana, Mexico facility. The loan from Transamerica bears interest at
the rate of 10.03% per annum, is repayable in 60 equal monthly installments of
combined principal and interest payable monthly through May 2002, and is secured
by a lien on the equipment acquired under the refinanced capitalized leases and
by a guaranty of the Company. In July 1997, the Company entered into an
additional $310,000 in capitalized lease obligations and received $468,000 in
proceeds from its equipment line of credit.

The contemplated repayment of approximately $7.9 million of the Company's
existing indebtedness with the net proceeds of this offering is expected to
significantly improve the Company's liquidity by reducing both the Company's
interest expense and the principal amount of indebtedness required to be repaid
by the Company in the future. The Company believes that, subsequent to this
offering and such repayments, funds generated from operations and expected
borrowing availability under the Company's revolving line of credit will be
sufficient to satisfy the Company's working capital requirements.

Capital Expenditures

At April 27, 1997, the Company's commitments for capital expenditures
totaled approximately $2.7 million related primarily to equipment for its new
Tijuana, Mexico manufacturing facility. The Company also expects to spend an
additional $3.5 million on equipment and improvements on such facility. The
Company intends to finance these expenditures through separate lending
arrangements, as well as a portion of the net proceeds of this offering. The
Company expects to spend an aggregate of approximately $4.8 million to purchase
the land and buildings at its Gardena, California manufacturing facility, which
it completed in August 1997, and to construct an additional 75,000 square foot
warehouse and distribution facility to replace an off-site leased facility of
roughly equivalent size. The Company is financing the payment of the purchase of
the Gardena, California property and construction of the new facility by
borrowing approximately $3.5 million under a conventional mortgage loan, with
the balance to be funded from a portion of the net proceeds of this offering and
advances under its revolving credit facility with Sumitomo.

Recent Accounting Pronouncements

In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 requires compensation expense to be
recorded (i) using the new fair value method or (ii) using existing accounting
rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related interpretations with pro forma
disclosure of what net income and earnings per share would have been had the
Company adopted the new fair value method. The Company intends to continue to
account for its stock-based compensation plans in accordance with the provisions
of APB 25.

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<PAGE>

BUSINESS

Overview

The Company believes that it is one of the leading contract manufacturers
and assemblers of custom injection-molded plastic components in the western
United States based on 1996 sales. The Company manufactures the plastic
exteriors of computer monitors, televisions, electronic music keyboards and
other consumer electronics equipment. In addition to injection-molded
components, the Company offers a broad range of "value-added" services,
including painting, decorating and assembly. A significant percentage of the
Company's components are manufactured using gas-assist molding technology which
reduces material usage and permits the molding of lighter and stronger parts.
The Company believes its technical and manufacturing capabilities to produce
large injection-molded plastic components on both a "just-in-time" basis and in
production volumes with low reject rates provides a significant competitive
advantage.

The Company's two major OEM customers are Sony, through its computer
monitor and television manufacturing divisions, and Matsushita, through its
Panasonic and Quasar brands. Sales to these customers represented approximately
66.5% and 18.0%, respectively, of the Company's total sales for the fiscal year
ended October 27, 1996. Of sales to Sony, computer monitor components accounted
for approximately 39.1% and television components accounted for approximately
27.4% of the Company's total sales during the fiscal year ended October 27,
1996. The Company has been an uninterrupted supplier of custom injection-molded
components to Sony since 1972, to Matsushita since 1983 and to virtually all of
its other customers for at least seven years. To improve its ability to support
major customers, in addition to its current manufacturing facility in Gardena,
California, the Company is currently completing a new "build-to-suit"
manufacturing facility in Tijuana, Mexico. This new facility has been
logistically located near many of its customers' manufacturing plants in Mexico
and is expected to add significant manufacturing capacity by September 1997.
Management believes that this facility will enable the Company to capitalize on
demand from new and existing customers which have relocated their manufacturing
operations from the Far East and the United States to Mexico in recent years due
to lower labor and transportation costs. Closer proximity to its major customers
will allow the Company to be more efficient in delivering 15 to 20 daily
truckloads of components to its customers' production facilities and eliminate
time-consuming border crossings.

Industry Overview and Trends

Custom injection-molded plastic components are essential in virtually all
computer monitors, televisions, electronic music keyboards and other consumer
electronic products that require an enclosure or cabinet. The continuing
development and refinement of these products by OEMs has created a strong demand
for injection-molded plastic components for new and replacement sales of these
products. According to Stanford Resources' Monitrak Quarterly Report, United
States sales of computer monitors, the Company's major market, rose to
approximately 21.7 million units in 1996, representing an increase of 61.9% from
sales of approximately 13.4 million units in 1994. As computer monitors are
built to incorporate more features of a television, videocassette recorder,
videophone and gameplayer, and with the anticipated introduction of cable-ready
monitors, cable modems, ISDN and 3-D graphics applications, the Company believes
that these technological advancements will spur continued growth in the computer
monitor market. In addition, according to the Consumer Electronics Manufacturers
Association ("CEMA"), United States direct-view color television sales were
approximately 22.1 million units in 1996 and, since 1991, sales have exceeded 20
million units per year. The Company believes that the anticipated availability
of digital broadcasting, Internet access, HDTV and flat panel displays has the
potential to increase significantly television sales over the next ten years.

Injection-molded plastic components are used in a wide variety of
industries, including automotive, telecommunications, computer, consumer
electronics, medical and packaging. Based on information provided in Plastic
News, a leading industry publication, sales of the top 100 North American
plastic injection-molders were approximately $11.3 billion in 1994, $12.5
billion in 1995 and $14.4 billion in 1996, reflecting a 12.9% industry-wide
average annual growth rate. The Company was ranked by sales in 1996 as the 96th
largest plastic injection molder in North America, the 9th largest plastic
injection molder in the western United States (comprised of the states of
California, Arizona, Oregon and Washington), and one of the three largest custom
plastic

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<PAGE>

injection molders in Southern California. In addition, according to CIT's Sixth
Annual Plastics Industry Outlook 1997-1999, the electronics industry, which has
itself been experiencing significant growth in recent years, is expected to
increase its plastic consumption the most rapidly of all other industries
through 1999.

Management believes that the Company is well positioned to take advantage
of the following trends in the injection-molded plastic industry:

Continued Demand for Plastic Components. In recent years, OEMs have focused
their efforts on developing and employing lower-cost and lighter materials, such
as plastic, in the design of components for televisions, electronic and computer
products. Plastic provides OEMs with a number of design advantages over metal,
including increased design flexibility and aesthetic appeal and resistance to
corrosion. Substituting plastic for metal can also reduce manufacturing costs by
eliminating machining costs, reducing painting costs, facilitating assembly,
minimizing tooling costs and reducing the number of parts used in a particular
product. The continued growth of high performance engineered plastics and the
ability of resin suppliers to deliver resins with specific properties, such as
high-impact strength and flame retardancy, will allow a more diverse range of
plastics applications. The Company believes that while the majority of
opportunities for converting metal into plastic have already occurred in
computer and television exterior applications, there are significant growth
opportunities in the use of plastic in computer base stands and business
equipment that require electromagnetic and radio frequency interference
shielding.

Further Outsourcing by OEMs. Since the early 1990s, OEMs have purchased an
increasingly larger share of their total injection-molded plastic requirements
from independent manufacturers. Management believes that this trend toward
greater outsourcing is driven by increasingly sophisticated engineering and
manufacturing requirements and the substantial capital investment required to
manufacture injection-molded plastic. In addition, this trend in outsourcing of
injection-molded plastic requirements is part of another trend among OEMs toward
outsourcing manufacturing services to those suppliers which accept significant
responsibility for product management and meet strict standards for product
quality, on-time delivery and manufacturing costs.

Increased Demand for Just-in-Time Deliveries. Because production delays
resulting from undelivered or late production orders can have severe
consequences and stockpiling of inventory entails significant carrying costs,
OEMs are increasingly asking for the assistance of component manufacturers with
the management of their inventories by providing just-in-time delivery to avoid
temporary inventory shortages and unnecessary carrying costs.

Consolidation of Industry. The number of North American injection-molded
plastic manufacturers has decreased from the late 1970s due to significant
mergers and acquisitions activity. The Company believes that this consolidation
is primarily due to the substantial capital investment and the engineering and
manufacturing expertise required to remain technologically competitive and
thereby meet customer specifications for injection-molded plastic, as well as
national and global relationships with customers and price competition in the
injection-molded plastic market.

Growth Strategy

The Company's goal is to be a dominant supplier of injection-molded plastic
components to the increasing number of computer monitor and television OEMs'
plants located in Southern California and Tijuana, Mexico. Management believes
that the commencement of digital broadcasting in the television industry in the
United States, starting in 1998, will create a demand for new HDTV and flat
panel displays as consumers replace obsolete television sets unable to receive
digital braodcasting with HDTV quality. According to CEMA, at least 20 million
television sets have been sold each year since 1991 and 380 million television
sets have been sold since 1974 in the United States.

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<PAGE>

The key elements of the Company's growth strategy include the following:

Continue to Expand Computer Monitor and Television Component Business. The
Company will seek to expand its computer monitor component business through the
continuation of the overall growth of the Company's computer monitor sales to
Sony, which have grown from $2.9 million in fiscal 1994 to $15.4 million in
fiscal 1996, a 431% increase. The Company will continue to support not only
Sony's private label programs on behalf of leading computer hardware companies
such as Gateway 2000, Dell Computer, Silicon Graphics, Sun Microsystems and
Digital Equipment Corporation, but also Sony's personal computer, known as Vaio,
beginning in July 1997. In addition, the Company's recent marketing strategy
includes targeting sales to other computer monitor and television OEMs doing
business in Tijuana, Mexico.

Acquire Complementary Businesses. The Company believes that the acquisition
of manufacturers of injection-molded plastics products will enable the Company
to diversify its customer base, technical capabilities and geographic areas
served, capitalize on consolidation opportunities in its fragmented market and
on OEMs' desire to outsource their supply requirements, reduce the number of
suppliers used and use only those suppliers who can provide a broad range of
products and services. Accordingly, the Company regularly reviews acquisition
prospects that would augment or complement the Company's existing operations or
otherwise offer significant growth opportunities. At the present time, while the
Company has held exploratory discussions with several potential acquisition
candidates, the Company does not have any arrangement or agreement with respect
to any acquisition transactions.

Capitalize on Customer Demand in Tijuana Market. The Company intends to
lease and purchase equipment for a newly-constructed "build-to-suit"
manufacturing facility in Tijuana, Mexico, adjacent to its largest customer's
manufacturing facilities. Management believes the new facility will increase
existing manufacturing space by 50% and house initially 12 molding machines with
the potential to house 33 to 35 molding machines. The Company believes that the
new facility will begin to add significant manufacturing capacity by September
1997, thereby enabling the Company to capitalize on current demand from existing
customers and to attract new customers located in Tijuana, Mexico. The Company's
strategic focus will continue to be on niche markets, such as computer monitors
and televisions, as well as other business equipment and telecommunications.

Pursue Long-Term Relationships with New Customers. The Company intends to
continue to develop long-term alliances with new and existing customers in the
computer and consumer electronics industries. The Company seeks to establish and
maintain long-term relationships by providing total manufacturing solutions for
new and proposed products, just-in-time delivery services and strong engineering
support, including design for manufacturability analyses that assist customers
in the tool design phase of the development process. The Company believes that
frequent interaction with its customers in the tool design phase of their
product development process allows the Company to anticipate the customers'
future technological requirements, prepare the appropriate manufacturing
infrastructure and develop long-term relationships across a number of products
and through multiple product models.

Continue Commitment to Quality and Service. The Company strives to ensure
the highest levels of quality control in all phases of its operations, primarily
through continuous improvement of its engineering capabilities, manufacturing
processes and quality assurance systems. The Company believes that its strategy
of investing in real-time computer process and quality systems provides improved
management controls which maximize scheduling flexibility and increase product
throughput and yields. The Company is currently in the process of ISO 9002
certification.

Products and Services

The Company manufactures and assembles custom injection-molded plastic
components. These components consist primarily of the entire plastic exteriors
of computer monitors, televisions, electronic music keyboards and other consumer
electronics equipment. The Company also offers a broad range of value-added
services, including painting, decorating and assembly. The Company's three
primary lines of components are as follows:

Computer Monitor Components. The Company focuses on the production of
computer monitor components which require the molding and assembly of multiple
parts. Computer monitor components manufactured by the Company include the front
(or "bezel") assembly, the rear cover and the base stand. The bezel assembly
consists of the bezel frame, door latch, light pipe, logo badge and pad
printing. The Company manufactures these

29
<PAGE>

components pursuant to the strict color, cosmetic and dimensional specifications
of its customers and assembles the parts on automated production lines. At the
present time, the Company manufactures computer monitor components only for
Sony. Sony manufactures computer monitors for private label programs on behalf
of leading computer hardware companies such as Gateway 2000, Dell Computer,
Silicon Graphics, Sun Microsystems and Digital Equipment Corporation. Sony began
manufacturing computer monitors at its computer manufacturing division in Rancho
Bernardo, California in 1994, and sales to such division have grown from $2.9
million in the fiscal year ended October 30, 1994 to $15.4 million for the
fiscal year ended October 27, 1996. The Company has been selected to manufacture
computer monitor components beginning in July 1997 for Sony's personal computer,
known as Vaio. The Vaio computer was introduced in April 1996, in the United
States. Computer monitor components represented approximately 44.5% and 39.1% of
the Company's product sales for the 26 weeks ended April 27, 1997 and the fiscal
year ended October 27, 1996, respectively.

Television Components. Television components include the bezel and the rear
cover. For projection televisions, the Company also manufactures the exterior
frame housing the projection screen. All bezels are pad printed to include the
logo and the operating instructions. Historically, the Company's largest
customers for its television components have been Sony, Matsushita (Panasonic
and Quasar brands) and Hitachi. Television components represented approximately
40.8% and 49.0% of the Company's product sales for the 26 weeks ended April 27,
1997 and the fiscal year ended October 27, 1996, respectively.

Electronic Music Keyboards and Other Consumer Electronics Components. The
Company manufactures a variety of consumer electronics components, such as the
top and bottom covers for electronic music keyboards, and storage containers for
various consumer products. As part of this process, electronic music keyboards
are manufactured for Casio using a specialized thermal transfer process, which
automatically prints the whole surface display of logos and instructions in a
single step. Electronic music keyboards and other consumer electronics
components represented approximately 14.8% and 11.9% of the Company's product
sales for the 26 weeks ended April 27, 1997 and the fiscal year ended October
27, 1996, respectively.

Value-Added Services. In addition to injection-molded plastic components,
the Company offers a broad range of value-added services including painting,
finishing and assembly services. These services include solvent and waterborne
painting, electromagnetic and radio frequency interference shielding, hot
stamping, pad printing, silkscreening, solvent bonding, impulse welding,
ultrasonic welding and insertion, and heat staking. See "-- Manufacturing."

The Company provides design and engineering assistance in the early stages
of product development, thus assuring that tooling, process and assembly
considerations achieve reproducible, high-quality and cost effective products.
The Company evaluates customer designs for manufacturability and, when
appropriate, recommends design changes to reduce manufacturing costs or lead
times or to increase manufacturing yields and the quality of finished
components. The Company believes that by offering this range of services it has
established a "partnership" relationship with its customers.

The Company assists its customers by reducing their inventories through
just-in-time deliveries in which finished components are inspected at the
Company's facilities to conform to a pre-approved quality plan and shipped
directly to the customer for use in its manufacturing process without the need
for incoming inspection at the customer's facility.

Customers

The Company's principal customers are Sony, Matsushita, Casio and Hitachi,
for which it supplies components for computer monitors, televisions and other
consumer electronics equipment. The Company has focused its marketing efforts on
maintaining long-term relationships with its existing OEM customers while
pursuing new customers in the computer and consumer electronics industries.

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<PAGE>

Historical sales of the Company by principal customer are set forth in the
table below (dollars in thousands):
<TABLE>
<CAPTION>
52 Weeks Ended
October 27, 1996 26 Weeks Ended 26 Weeks Ended
(pro forma) April 28, 1996 April 27, 1997
---------------------- ---------------------- ----------------------
Customer Amount % Amount % Amount %
-------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Sony -- Computer manufacturing division ...... $15,373 39.1% $ 7,174 37.0% $ 8,999 44.5%
Sony -- Television manufacturing division .... 10,773 27.4 4,081 21.0 5,679 28.1
Matsushita -- Panasonic and Quasar ......... 7,093 18.0 4,918 25.3 1,954 9.7
Others ....................................... 6,106 15.5 3,237 16.7 3,612 17.8
-------- ------ -------- ------ -------- ------
Total sales .............................. $39,345 100.0% $19,410 100.0% $20,244 100.0%
======== ====== ======== ====== ======== ======
</TABLE>
The Company's customers typically have relationships with a limited number
of injection molders, and allocate the molding of individual components or parts
to one of their molders. In the Company's experience, purchase orders will be
placed with the same molder for a particular component or part generally for
three-month periods, but typically the order will remain in place until the
component is redesigned or eliminated in a model change. Customers generally
provide the Company with periodic forecasts for their requirements, which are
updated regularly. Customers give the Company non-cancellable releases from
their purchase orders based on two to four week lead times and, therefore, the
Company does not have a significant amount of backlog orders. In the event a
customer were to cancel a purchase order prior to release, the customer would be
typically obligated to reimburse the Company only for raw materials purchased
and finished goods, if any, made in reliance of the purchase order. Except for
Sony and Matsushita, no other single customer accounted for more than 10% of the
Company's sales during the fiscal year ended October 27, 1996 and the 26 weeks
ended April 27, 1997.

The Company has been selected as a supplier of a variety of
injection-molded plastic components. The following table presents an overview of
the major products for which the Company currently produces components for its
OEM customers:

Customer Product
-------- -------
Sony ........................ Computer monitors:
Private label programs--
Gateway 2000
Dell Computer
Silicon Graphics
Sun Microsystems
Digital Equipment Corporation
Vaio brand (beginning in July 1997)
Sony ........................ Television monitors
13" to 32" models
Matsushita (Panasonic) ...... Television monitors
13" to 61" models
Matsushita (Quasar) ......... Television monitors
20" to 32" models
Hitachi ..................... Television monitors
27" to 60" models
Casio ........................ Electronic music keyboards

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<PAGE>

Sony has been a customer for 25 years, Matsushita has been a customer for
14 years, and Hitachi and Casio have been customers for more than seven years.
The Company believes that, as it adds new customers and completes acquisitions
of complementary businesses, it will diversify its customer base and reduce its
dependence on these major customers. The Company anticipates, however, that a
significant portion of its sales, by virtue of the markets it serves, will
continue to be concentrated in a small number of customers.

As reflected in the first customer table above, in the first half of the
Company's 1997 fiscal year, the Company experienced a decline in sales to
Matsushita. This decrease in sales was attributable in part to Matsushita's
periodic use of internal capacity at its molding facility in Tijuana, Mexico.
The Company's rate of sales to Matsushita has increased during the second half
of the 1997 fiscal year to date (approaching on an annualized basis the rate of
sales to Matsushita for the 1996 fiscal year). The Company believes, however,
that based on current and expected purchase orders, annual sales to Matsushita
are not likely to return to fiscal 1996 levels in the foreseeable future.

Sales

The Company's primary sales strategy is to develop and maintain close
working relationships with the engineering, procurement, quality, tooling and
manufacturing departments of its customers. Sales of the Company's products to
OEMs are made directly by the Company's sales and production teams. Through
these teams, the Company services its OEM customers and manages its continuing
programs of product design improvement and development. The Company's sales and
technical teams currently consist of 14 executives and senior technical
personnel.

Since January 1996, the Company has expanded its in-house sales department
to solicit new customer accounts and has hired three full-time senior sales
executives, each with substantial experience in the injection-molded plastic
industry. With these executives, the Company has targeted 30 prospects for new
business. These prospects include computer monitor and television OEMs, as well
as other business equipment and telecommunications manufacturers that require a
plastic enclosure or cabinet as part of their products. The Company is actively
quoting terms for new business. There can be no assurance that any such new
business will be obtained.

The Company's products are typically sold on net 30-day terms under
separate purchase orders. The Company offers no formal warranty but generally
adheres to a replacement policy of products with defects in materials or
workmanship.

Customer Molds

The Company maintains an in-house tooling department. In the plastics
industry, the molds to make plastic parts are commonly referred to as "tools."
With each new project, the Company's tooling engineers may attend an initial
meeting with the OEM and contract mold maker to review drawings, specifications,
timing and other information. Following the design stage, the Company may be
asked to attend one or more mold trials to ensure the accuracy and completeness
of the mold and mold part, record process parameters and begin assuring the
capability of the process. The next milestone, the new project meeting, brings
the Company's decorating and assembly, engineering, production control, quality
assurance and tooling departments together to ensure that the entire project is
understood throughout the organization. Once the mold is received by the
Company, the mold is inspected, prepared for production and tested by the
Company. Generally, sample parts are produced initially and submitted to the
customer for final approval. The Company's tooling department frequently makes
engineering changes to the mold. For the life of the tool, the Company is
obligated to maintain it at its expense and to make major repairs at the
Customer's expense. The Company's tooling department is headed by a tooling
engineer and eight toolmakers. As of July 21, 1997, the Company held
approximately 125 molds of its customers which are being actively used to
produce injection-molded plastic components.

Manufacturing

The Company currently conducts its molding, assembly and finishing
operations at its facility in Gardena, California, which consists of
approximately 100,000 square feet of manufacturing space. The Company operates
29 injection molding machines ranging in size from 60 to 1,800 tons of clamping
pressure and processes more

32
<PAGE>

than 20 million pounds of resin per year. Since 1993, 16 of the Company's
molding machines have been purchased and all other machines have been updated
with electronic controls. The Company stores bulk resin in four silos with a
combined capacity of approximately 400,000 pounds. The Company has an automated
materials handling system that transports resin from each of the four silos to
any of the 29 molding machines. The Company also stores other resin in 1,000
pound corrugated containers. The Company's finishing equipment is "state of the
art" and includes 24 paint stations, a 1,265-foot overhead conveyor, infrared
and gas fired drying ovens, hot stamp machines, pad printing machines, silk
screen machines, ten motorized assembly lines and sonic welders.

The Company is currently completing a new "build-to-suit" manufacturing
facility in Tijuana, Mexico, which will consist of approximately 90,000 square
feet of manufacturing and warehouse space and will house initially 12 injection
molding machines, eight paint lines and four automated assembly lines. Of the 12
machines, five are newly-purchased and seven will be transferred from the
Company's Gardena facility. The Company's facility in Tijuana is leased pursuant
to a lease expiring in 2007, with a one year option and thereafter a right of
first refusal to expand its manufacturing space by 50,000 square feet, with the
capacity to house 33 to 35 molding machines. This new facility has been located
logistically near many of its customers' Tijuana manufacturing plants and is
expected to add significant manufacturing capacity by September 1997. It is
expected that the Company will relocate a significant amount of its assembly
operations to this facility, primarily due to the area's lower-cost labor pool
and customer requirements.

The Company employs six process engineers who utilize extensive CAD/CAM
(computer-aided design/computer-aided manufacturing) capabilities to transfer
design data, generate tooling processes and verify manufacturing efficiencies.
As a result of the Company's use of real-time statistical quality and process
controls and protective packaging, customers report that they have fewer than
500 defects in 1,000,000 units in their production lines. The Company has a
fully integrated management information system which enhances its inventory
control scheduling and machine efficiency. The Company implements a continuous
quality improvement program to ensure that competitive advantages through
cost-efficient operations are maintained. The Company is currently in the
process of ISO 9002 certification.

A significant percentage of the Company's components are manufactured using
gas-assist molding technology, which is a low-pressure process that works in
conjunction with injection molding. In this process, nitrogen gas is injected
into the plastic exterior part to hollow out that part, which saves on material
usage and creates a more cosmetically appealing part by eliminating flow marks,
surface splay and warp. Using this technology, the Company is able to offer its
customers the competitive advantages of (i) eliminating thicker than necessary
wall sections that control the cycle time and increase part weight, (ii)
allowing designers more freedom to incorporate thick and thin sections in the
same part and (iii) making parts stronger by creating high strength, cored-out
sections, rib patterns or box structures, all of which improve deflection or
impact strength. The Company licenses, on a non-exclusive basis, the use of
gas-assist molding technology from Melea Limited pursuant to a long-term license
under which the Company is obligated to make its last payment of $50,000 to such
licensor in May 1998. The Company has a central nitrogen generator connected to
all 29 of its molding machines to efficiently utilize this technology.

While the Company has developed proprietary techniques and manufacturing
expertise for the manufacture of injection-molded plastic components, the
Company has no patents for these proprietary techniques and chooses to rely on
trade secret protection. The Company believes that although its proprietary
techniques and expertise are subject to misappropriation or obsolescence,
development of improved methods and processes and new techniques by the Company
will continue on an ongoing basis as dictated by the technological needs of the
business.

Manufacturing occurs primarily on a 24 hour per day, three shift, seven day
per week schedule at the Company's current manufacturing facility. The Company
provides training to all of its molding, finishing and assembly personnel before
they are put on the production line and on a periodic basis thereafter. The
Company provides such training in accordance with ISO 9002 certification
standards. The Company believes that its manufacturing work force is
well-trained and is comprised of a dedicated staff of experienced personnel,
approximately 40% of whom have been employees of the Company for at least ten
years.

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<PAGE>

Raw Materials and Supplies

The Company orders certain materials and supplies based on its purchase
orders and seeks to minimize its inventory of other materials that are not
identified for use in filling specific orders. Raw materials used in connection
with the Company's components consist mainly of thermoplastic resins such as
high impact, ignition resistant polystyrene and acrylonitrile-butadiene-styrene,
and paint and ink, as well as corrugated cardboard packaging. Although the
Company uses a select group of suppliers, the materials used in manufacturing
injection-molded plastic components are generally readily available in the open
market. The Company has not experienced any significant raw material shortages
in the past ten years and does not anticipate raw material shortages in the
foreseeable future.

Although thermoplastic resins have historically accounted for at least 80%
of its raw material costs, the Company does not believe that its results of
operations are subject to the risk of fluctuations in resin prices, since the
Company's arrangements with most of its customers provide that increases or
decreases in the price of such resins are passed through to the customer by
changes in the component prices charged by the Company. In addition, each of
Sony, Matsushita and Hitachi negotiate separate supply agreements with
thermoplastic resin producers which deliver such resins to the Company for use
in their products.

Competition

The injection-molded plastic industry is highly fragmented and
characterized by intense competition. According to Plastic News, sales of the
top 100 plastic injection-molders in North America were approximately $14.4
billion in 1996. The Company's competitive market, however, is regional due to
the significant relative impact of freight costs. As a result, the Company
believes that it has only six principal competitors, two of which are also
located in California and five of which are already located in Tijuana, Mexico.
The Company believes that none of its competitors has a dominant position in the
market, although certain of the Company's competitors have substantially greater
manufacturing, financial, marketing and/or other resources than the Company. As
a result, they may be able to respond more quickly to new or emerging
technologies and changes in customer requirements than the Company. The Company
believes that the primary bases of competition in the market for
injection-molded plastic are product quality, responsiveness to customers,
delivery time, volume capabilities, advanced manufacturing technology and
engineering skills and price. The Company further believes that the Company's
primary competitive strengths include its ability to provide technologically
advanced design and manufacturing services, to hire and retain experienced
product managers and a skilled manufacturing work force, maintain superior
product quality and deliver finished products on a just-in-time or scheduled
lead-time basis. See "Risk Factors -- Competition."

Environmental Matters

The Company's operations and properties are subject to a wide variety of
international, federal, state and local laws and regulations, including those
governing the use, storage and handling, generation, treatment, emission,
release, discharge and disposal of certain materials, substances and wastes, the
remediation of contaminated soil and groundwater, and the health and safety of
employees (collectively, "Environmental Laws"). As such, the nature of the
Company's operations exposes it to the risk of claims with respect to such
matters and there can be no assurance that material costs or liabilities will
not be incurred in connection with such claims. The Company has taken steps to
reduce the environmental risks associated with its operations and believes that
it is currently in substantial compliance with applicable Environmental Laws.

The Company is also subject to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state
laws which impose liability, without regard to fault or to the legality of the
original action, on certain classes of persons (referred to as potentially
responsible parties or "PRPs") associated with the release or threat of release
of certain hazardous substances to the environment. Generally, liability of PRPs
to the government under CERCLA is joint and several. Financial responsibility
for the remediation of contaminated property or for natural resources damage can
extend to properties owned by third parties. The Company believes that it is in
substantial compliance with all Environmental Laws applicable to its business.

34
<PAGE>

Employees

As of July 21, 1997, the Company had approximately 379 full-time employees,
of which 361 were engaged in manufacturing activities and 18 in sales, office
administration and management functions. None of the employees is represented by
a union and the Company believes there is an adequate pool of labor available to
satisfy its foreseeable hiring needs. The Company has not experienced any
labor-related work stoppage and considers its relations with employees to be
good.

Facilities

The Company maintains its principal executive offices and conducts its
molding, assembly and finishing operations from two adjacent buildings in
Gardena, California (approximately 15 miles south of Los Angeles), which consist
of a 100,000 square foot manfacturing facility and a 20,000 square foot
warehouse on eight acres of land. This facility was leased from an entity
affiliated with the former owners of AB Plastics under a lease expiring in 2006
and providing for rent of $35,200 per month. See "Certain Transactions." The
Company also maintains an off-site leased facility in Compton, California
consisting of approximately 60,000 square feet, from which the Company's
warehousing and distribution activities are conducted. The Compton facility is
leased from an unaffiliated entity under a lease expiring in December 2000 and
providing for rent of $19,465 per month.

The Company exercised its option to purchase the Gardena, California
facility for $3.1 million from a partnership whose interests are held by certain
members of the Adams family, who include the former principal stockholders of AB
Plastics. Following the purchase in August 1997, the Company commenced the
demolition of the 20,000 square foot warehouse and the construction of a 75,000
square foot warehouse and distribution facility attached to the existing
manufacturing facility. Construction costs for such warehouse and distribution
facility are anticipated to be approximately $1.7 million, for a total capital
expenditure of $4.8 million at such site. Subsequent to the completion of the
warehouse construction, the Company intends to sublease the Compton warehouse.
The facility purchase and construction are being financed by a mortgage and
construction loan facility of $3.5 million provided by Sumitomo and the $1.3
million balance with a portion of the net proceeds of this offering. The Company
expects the annual operating savings from owning this expanded facility to be
approximately $900,000 (before mortgage payments and depreciation) from the
elimination of rent, certain personnel and other operating expenses. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Certain Transactions."

The Company is currently completing a new "build-to-suit" manufacturing
facility in Tijuana, Mexico, which will consist of approximately 90,000 square
feet of manufacturing and warehouse space and will house initially 12 injection
molding machines. The new facility will be leased from an unaffiliated entity
under a lease which will commence upon completion of construction (estimated to
be in September 1997) and expire in 2007, and which will require the payment of
approximately $38,000 per month in rent. The Company also has a one-year option
and thereafter a right of first refusal to expand the facility by 50,000 square
feet. In addition, the Company has committed to expend approximately $6.2
million to equip the new Tijuana facility, of which approximately $2.7 million
of capital expenditures have been committed as of April 27, 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Expenditures."

Legal Proceedings

The Company is not a party to any legal proceedings other than routine
litigation incidental to its business, none of which is material.

35
<PAGE>

MANAGEMENT
Executive Officers and Directors

The directors and executive officers of the Company and the executive
officers and key employees of AB Plastics, and their ages at July 21, 1997, are
as follows:
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Geoffrey J.F. Gorman ......... 40 Chairman of the Board of the Company and AB Plastics
Michael A. Gibbs ............ 61 President and Director of the Company and Chief Executive
Officer of AB Plastics
James S. Adams ............... 68 President of AB Plastics
G. Michael Frink ............ 47 Vice President -- Sales and Marketing of AB Plastics
Stephen M. Adams ............ 36 Vice President -- Technology of AB Plastics
Jawed Ghias .................. 42 Vice President -- Manufacturing of AB Plastics
Paul J. Iacono ............... 36 Vice President -- Finance of the Company and AB Plastics
Christopher H.B. Mills ...... 44 Director
Jay M. Swanson ............... 44 Director
</TABLE>

Geoffrey J.F. Gorman became the Chairman of the Board of the Company and
AB Plastics in September 1996. Mr. Gorman also serves as managing partner of
Private Equity Partners, L.L.C., an investment fund, which he founded in March
1996. From 1985 to June 1996, Mr. Gorman was a managing partner and shareholder
of Ardshiel, Inc., an investment fund specializing in leveraged buyouts. Mr.
Gorman is currently the Co-Chairman of the Board of Santa Maria Foods
Corporation, a producer and distributor of Italian specialty foods, and a
director of Analab, Inc., an environmental testing company. He was previously a
director of Golden State Vintners, Koala Springs International, Inc., Protein
Genetics, Inc. and The Swanson Company. Mr. Gorman received a B.A. from Boston
University in 1979 and an M.B.A. from the Amos Tuck School of Business
Administration at Dartmouth College in 1985.

Michael A. Gibbs became the President of the Company, Chief Executive
Officer of AB Plastics and a director of the Company and AB Plastics in
September 1996. Mr. Gibbs is also the President of Page Mill Corporation, a
consulting firm which he began in 1971. Mr. Gibbs has been involved since 1991
as an advisor and principal in the identification, evaluation, acquisition and
operation of companies in the plastics industry including Styrex Industries,
Inc., an injection-molded plastics components manufacturer which was sold in
1993 to PureTech Industries, Inc. Mr. Gibbs began his business career in 1964
with the international business consulting firm of Booz Allen & Hamilton and
spent five years as Vice President of Corporate Planning for Reliance Holdings
Corporation (formerly, Leasco Corporation) before becoming an independent
entrepreneur and business advisor in 1973. For the past 25 years, Mr. Gibbs has
served as a financial and business advisor to third parties in the
identification, financing, acquisition and operation of approximately 42
businesses, and has participated as a principal stockholder, executive officer
and director in certain of such businesses. A food distribution business and a
glass distribution business in which Mr. Gibbs was the sole stockholder and
served as chief executive officer filed for Chapter 11 reorganization under the
federal Bankruptcy Code in 1980 and 1991, respectively. From July 1991 through
October 1993, Mr. Gibbs rendered services for various corporate affiliates of
The Selzer Group and Transnational Capital Ventures, Inc., privately-owned
companies engaged in situations involving financially and/or operationally
troubled companies. In connection with providing such services, Mr. Gibbs served
in various capacities as an executive officer or director of C-B/Murray
Corporation, Inc. and American Specialty Equipment Corp., companies which filed
for Chapter 11 reorganization within the past five years. Mr. Gibbs received a
B.S. degree in Engineering from the University of Alabama in 1957 and a Masters
degree in Industrial Management from New York Polytechnic Institute in 1965.

In June 1995, Mr. Gibbs individually filed a petition for reorganization
under Chapter 11 of the Bankruptcy Code. Such filing was occasioned primarily
as a result of litigation commenced against Mr. Gibbs by a financial
institution seeking payment of a personal loan made by such institution to Mr.
Gibbs in 1989. Mr. Gibbs accepted such loan principally in reliance upon the
completion of the sale of a business in which Mr. Gibbs was a principal
stockholder and which such financial institution had committed to finance, but
which sale was not completed. Mr. Gibbs has counterclaimed against the
institution alleging breach of its financial commitment. In

36
<PAGE>

April 1997, Mr. Gibbs filed a plan of reorganization with the federal bankruptcy
court in Connecticut. Such plan, as well as the litigation between Mr. Gibbs and
the financial institution, is currently pending. Mr. Gibbs has been advised by
bankruptcy counsel that inasmuch as his investment in the securities of the
Company was made following the filing of his petition for reorganization, the
shares of Common Stock of the Company owned of record and beneficially by Mr.
Gibbs would not be part of the bankruptcy estate or be required to be used to
finance his plan of reorganization in a Chapter 11 proceeding.

James S. Adams is one of the co-founders of AB Plastics and for the past
40 years has served as a senior executive officer of AB Plastics. Since 1982,
Mr. Adams has served as President of AB Plastics. Mr. Adams received a B.S. in
Business Management from Pepperdine University in 1979. Mr. Adams is the uncle
of Stephen M. Adams.

G. Michael Frink became Vice President -- Sales and Marketing of AB
Plastics in February 1997. He previously served as a Regional Manager of
Business Development of Southern Plastic Mold, Inc., a custom plastic injection
molder, from January 1992 to November 1996, and as West Coast Regional Manager
of Tenera, Inc., a plastic and sheet metal component manufacturer, from November
1996 to February 1997. Mr. Frink also held positions in sales and program
management at Avedon Engineering, a custom plastic injection molder, from 1984
to December 1991. Mr. Frink received a B.A. in Business Administration from the
University of Oregon in 1972.

Stephen M. Adams, the son of one of the co-founders of AB Plastics, became
the Company's Vice President -- Technology in September 1996. Since 1982, Mr.
Adams has served in a number of engineering and technology-related positions
with AB Plastics, the most recent being Vice President -- Operations. Mr. Adams
received a B.S. in Industrial Technology from Chico State University in 1983
and is currently completing on a part-time basis an M.B.A. from the University
of Phoenix. Mr. Adams is the nephew of James S. Adams.

Jawed Ghias became Vice President -- Manufacturing of AB Plastics in
February 1996. From 1985 to February 1996, Mr. Ghias held a number of positions
with Industrial Molding Corporation ("IMC"), a custom plastic injection molder,
including Vice President of the Plastics Division, Plant Manager, Quality
Assurance Manager and Assembly Manager. Mr. Ghias received a B.S. in Mechanical
Engineering from N.E.D. University of Engineering and Technology in Pakistan in
1983.

Paul J. Iacono became Vice President -- Finance of the Company and AB
Plastics in October 1996. He previously served as Director of Finance of
Compounding Technology, Inc., a plastic compounding subsidiary of M.A. Hanna
Company, from March 1993 to September 1996. Mr. Iacono also served as Manager of
Business Operations of Ele Corporation, a custom plastic injection molder, from
October 1991 to February 1993, and in variety of positions in accounting and
operations including Controller and Materials Manager of IMC from 1980 to 1991.
Mr. Iacono received a B.A. in Accounting from California State University at
Fullerton in 1984 and an M.B.A. from Pepperdine University in 1996.

Christopher H.B. Mills joined the Company's Board of Directors in September
1996. Mr. Mills has been a managing director of North Atlantic Smaller Companies
Investment Trust plc, an investment trust, since 1984, and a director and senior
investment manager of JO Hambro & Partners Limited, an investment advisor, since
1993, both of which are based in London. Mr. Mills serves as a director of
American Opportunity Trust plc, an investment trust, Horace Small Apparel plc, a
manufacturer of occupational uniforms, and Oryx International Growth Food plc,
an investment fund, which are publicly-traded companies in the United Kingdom.
Mr. Mills also serves as a director of D.S. Bancor Inc., a bank holding company,
and PS Group Holdings Inc., an aircraft leasing company, which are
publicly-traded companies in the United States. Mr. Mills was educated at Eton
College and received a degree in Business Studies from the Guildhall University
in London in 1974,

Jay M. Swanson joined the Company's Board of Directors in May 1997. Since
February 1994, Mr. Swanson has been the Managing Partner of Swanson Ventures
and Blacksmith Partners, private investment firms specializing in leveraged
buyouts. Mr. Swanson currently serves as the Co-Chairman of the Board of Santa
Maria Foods Corporation, a producer and distributor of Italian specialty foods,
is on the Board of Directors of Green Acre Foods, Inc. and Northern Management
Corp. and is a partner in The Contrarion Group, an investment fund. From 1976
to January 1994, Mr. Swanson served in various roles with John Hancock
Financial Services managing portfolios of investments. In 1994, Mr. Swanson was
appointed to the Advisory Board of the Competitiveness Center of the Hudson
Institute. Mr. Swanson received a B.S. in Finance from the University of
Illinois in 1974.

37
<PAGE>

All directors are elected annually and hold office until the next annual
meeting of stockholders of the Company and until their successors have been duly
elected and qualified. The Company's By-laws provide that the Board of Directors
will consist of between three and nine members, and the number of directors is
currently set at four. Officers are elected by and serve at the discretion of
the Board of Directors. Except for the relationship between James S. Adams and
Stephen M. Adams, there are no family relationships among the directors and
officers of the Company.

Committees of the Board of Directors

The Company will establish an Audit Committee and a Compensation Committee
prior to the consummation of this offering, each of which will be comprised of
at least two independent directors. The Audit Committee will, among other
things, make recommendations to the Board of Directors regarding the independent
auditors to be nominated for ratification by the stockholders, review the
independence of those auditors and review audit results. The Compensation
Committee will recommend to the Board compensation plans and arrangements with
respect to the Company's executive officers and key personnel. It is
contemplated that the Audit Committee will initially include Michael A. Gibbs,
Christopher H.B. Mills and Jay M. Swanson, and the Compensation Committee will
initially include Geoffrey J.F. Gorman and Messrs. Mills and Swanson. The Board
of Directors does not currently have and does not intend to establish a
Nominating Committee as such functions are to be performed by the entire Board
of Directors.

Compensation of Directors

Non-employee directors of the Company currently receive no cash
compensation for serving on the Board of Directors other than reimbursement of
reasonable expenses incurred in attending meetings, except that the Company pays
JO Hambro & Partners Limited ("JO Hambro"), of which Christopher H.B. Mills, a
director of the Company, is a director, an annual fee of $50,000, payable
quarterly, as a director's fee. Under a September 1996 agreement with JO Hambro,
the Company is required to make these payments to JO Hambro as long as a
representative of JO Hambro serves on the Board of Directors of the Company or
AB Plastics and certain investors, previously introduced to the Company by JO
Hambro, hold in the aggregate in excess of 10% of the outstanding shares of the
Company's Common Stock on a full-diluted basis. See "Certain Transactions." The
Company does not intend to separately compensate employees for serving as
directors.

Limitation of Liability and Indemnification

Pursuant to the provisions of the Delaware Law, the Company has adopted
provisions in its Certificate of Incorporation which provide that directors of
the Company shall not be personally liable for monetary damages to the Company
or its stockholders for a breach of fiduciary duty as a director, except for
liability as a result of (i) a breach of the director's duty of loyalty to the
Company or its stockholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) an act
related to the unlawful stock repurchase or payment of a dividend under Section
174 of the Delaware Law, and (iv) 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's Certificate of Incorporation also authorizes the Company to
indemnify its officers, directors and other agents, in accordance with the
Company's By-laws, agreements or otherwise, to the full extent permitted under
the Delaware Law. The Company intends to enter into indemnification agreements
with its directors and officers which may, in some cases, be broader than the
specific indemnification provisions contained in the Delaware Law. The
indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance if
available on reasonable terms.

At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.

38
<PAGE>
Executive Compensation

The following table sets forth the total compensation paid by the Company
to the Company's President and to the President and Vice President-Manufacturing
of AB Plastics (collectively, the "Named Executive Officers"), the only
executive officers whose total compensation exceeded $100,000 for the fiscal
year ended October 27, 1996:

Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation(1) No. of
-------------------------------- Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation
--------------------------- ------ ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Michael A. Gibbs ............... 1996 $0(2) $ 0 200,000 $0
President of the Company and Chief
Executive Officer of AB Plastics

James S. Adams .................. 1996 $232,365 $ 0 46,124 $0
President of AB Plastics

Jawed Ghias ..................... 1996 $ 99,523 $5,000 160,000 $0
Vice President-Manufacturing of AB
Plastics
</TABLE>
(1) The column for "Other Annual Compensation" has been omitted because there is
no compensation required to be reported in such column. The aggregate amount
of perquisites and other personal benefits provided to any Named Executive
Officer did not exceed the lesser of $50,000 or 10% of the total annual
compensation paid to such officer.

(2) Mr. Gibbs and a corporate affiliate of Mr. Gibbs received in the aggregate
approximately $200,000 from the Company pursuant to a consulting agreement
commencing in February 1996, superseded by a management agreement effective
as of August 1, 1996. See "--Employment Agreements."

Options Granted During 1996

The following table sets forth certain information regarding grants of
options to purchase the Company's Common Stock made to each of the Named
Executive Officers during the fiscal year ended October 27, 1996:
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Individual Grants Annual Rates of
Number Percent of ------------------------------------------ Stock Price
of Securities Total Options Appreciated for
Underlying Granted Exercise Fair Market Option Term(1)
Options to Employees Price Value on Expiration ------------------
Name Granted in Fiscal Year Per Share Date of Grant Date 0%(2) 5% 10%
---- ------------- -------------- --------- ------------- ---------- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael A. Gibbs ...... 200,000 36.4% $1.00 $1.00 09/27/2002 0 68,019 189,743
President of the
Company and Chief
Executive Officer of AB
Plastics

James S. Adams ......... 46,124 8.4% $1.00 $1.00 09/27/2002 0 15,687 43,759
President of AB Plastics

Jawed Ghias ............ 160,000 29.1% $1.00 $1.00 09/27/2002 0 54,415 151,795
Vice President-
Manufacturing of AB
Plastics
</TABLE>
(footnotes appear on next page)

39
<PAGE>

- ------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of stock price appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.

(2) Represents the difference between the fair market value of the Common Stock
on the date of grant and the exercise price of such options.

Aggregated Fiscal Year-End Option Values

The following table sets forth information regarding the number and value
of unexercised stock options held at October 27, 1996 by each of the Named
Executive Officers. No options were exercised by the Named Executive Officers
during the fiscal year ended October 27, 1996:

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Dollar Value of Unexercised
Options at In-the-Money Options
Fiscal Year End at Fiscal Year End(1)
Name (Exercisable/Unexercisable) (Exercisable/Unexercisable)
- ---- ----------------------------- ----------------------------
<S> <C> <C>
Michael A. Gibbs ............... 200,000/0 1,600,000/0
President of the Company and Chief
Executive Officer of AB Plastics

James S. Adams .................. 46,124/0 368,992/0
President of AB Plastics

Jawed Ghias ..................... 0/160,000 0/1,280,000
Vice President-Manufacturing of AB
Plastics
</TABLE>
- ------------
(1) The value of the options is based upon the difference between the exercise
price and an assumed initial per share public offering price of $9.00.

Employment Agreements

In October 1996, the Company entered into a management agreement with PEP,
effective as of August 1, 1996, of which Geoffrey J.F. Gorman, the Chairman of
the Board of the Company, is the managing partner. Under this agreement, PEP and
Mr. Gorman have agreed to serve as consultants to the Company and AB Plastics
with primary responsibilities, subject to the direction of the Company's Board,
to review the general policies of the companies and to render assistance in
connection with various forms of financings on their behalf. In exchange for
such services, in October 1996, the Company paid PEP an aggregate of $225,000,
representing $150,000 in fees for services provided prior to the date of such
agreement and $75,000 of reimbursable expenses, and the Company and AB Plastics
have agreed jointly to pay PEP an annual consulting fee of $100,000, payable in
monthly installments, and to provide benefits to Mr. Gorman comparable to those
provided to the Company's executive officers. The management agreement extends
through September 30, 2001, and includes non-disclosure, non-competition and
non-solicitation provisions through the later of such date or so long as PEP or
Mr. Gorman continue to own shares of Common Stock of the Company or hold options
or warrants to purchase such Common Stock.

In October 1996, the Company entered into a management agreement, effective
as of August 1, 1996, with a corporate affiliate of Michael A. Gibbs, the
President of the Company, and Mr. Gibbs, individually. Under this agreement, Mr.
Gibbs and his affiliate have agreed to serve as a consultant to the Company with
primary responsibilities, subject to the direction of the Company's Board, to
review the general policies of the companies and to work with management of the
Company in all aspects of manufacturing, sales, distribution and customer
relations, the establishment of operating systems, cost savings methods and
budgets. In exchange for such services, in October 1996, the Company paid Mr.
Gibbs and his affiliate an aggregate of $183,333, representing fees for services
provided prior to the date of such agreement, and has agreed to pay Mr. Gibbs
and his affiliate an

40
<PAGE>

aggregate annual consulting fee of $200,000, payable in monthly installments
until the earlier of December 31, 1998 or the employment by the Company of a
full-time chief executive officer. Following such period (or sooner if Mr.
Gibbs' time commitment is reduced as provided below), the annual consulting fee
is to be reduced to $100,000 per annum. In addition, the Company has agreed to
provide benefits to Mr. Gibbs comparable to those provided to the Company's
executive officers. The management agreement extends through September 30, 2001,
and includes non-disclosure, non-competition and non-solicitation provisions
through the later of such date or so long as Mr. Gibbs continues to own shares
of Common Stock of the Company or hold options or warrants to purchase such
Common Stock.

Under the terms of the management agreement, Mr. Gibbs agreed to devote
approximately 66-2/3% of his business and professional time to the Company for a
period of up to six months (through January 31, 1997) and thereafter 25% of such
business and professional time. Since September 1996, Mr. Gibbs has served in
the capacity of President of the Company and Chief Executive Officer of AB
Plastics, and has devoted a minimum of 75% of his business and professional time
to the affairs of these companies.

Upon consummation of this offering, the existing management agreement
between the Company and Mr. Gibbs and his affiliate will terminate. Effective as
of the date of this Prospectus, Mr. Gibbs will enter into an employment
agreement with the Company expiring October 31, 2000. Pursuant to such
agreement, Mr. Gibbs shall serve as the President of the Company and Chief
Executive Officer of AB Plastics, and devote not less than 75% of his business
and professional time to the affairs of the Company and AB Plastics. Under the
terms of such employment agreement, Mr. Gibbs will receive a base salary of
$275,000 per year, and be entitled to receive annual bonuses of between $100,000
and $300,000 in each of the Company's fiscal years ending in 1998, 1999 and
2000, respectively, if the Company's EBITDA (as defined) shall equal or exceed
$12.0 million, $18.0 million and $24.0 million, or increments thereof, in the
fiscal years ending in 1998, 1999 and 2000, respectively. In addition, the
Company has agreed to provide benefits to Mr. Gibbs comparable to those provided
to the Company's executive officers. The employment agreement includes
non-disclosure, non-competition and non-solicitation provisions.

Pursuant to his employment agreement, the Company has granted Mr. Gibbs
options to purchase an aggregate of 222,222 shares of Common Stock of the
Company pursuant to the 1997 Stock Option Plan. Such options expire October 31,
2002 and are only exercisable at a time in which Mr. Gibbs shall be performing
services for the Company, unless such services are terminated by the Company
"without cause," as defined in his employment agreement. In addition, the
options vest and are exercisable prior to their expiration date, only to the
extent of (i) 74,074 shares if the average of the closing prices of the
Company's Common Stock, as reported on Nasdaq or any national securities
exchange for any 30 consecutive trading days (the "Average Closing Price"),
shall equal or exceed $16.00 per share, (ii) 148,148 shares if the Average
Closing Price shall equal or exceed $24.00 per share, and (iii) 222,222 shares
if the Average Closing Price shall equal or exceed $32.00 per share. See
"--Stock Option Plans."

In September 1996, in connection with the acquisition of AB Plastics, AB
Plastics entered into employment agreements with James S. Adams to serve
initially as the President of AB Plastics through June 1999 and with Stephen M.
Adams to serve as the Vice President-Technology of AB Plastics through September
1999. Pursuant to the employment agreements, James S. Adams has agreed to
continue to perform services primarily in connection with customer relations and
strategic long-term planning and Stephen M. Adams has agreed to continue to
supervise, on a day-to-day basis, the technical aspects of the Company's
business. The Company currently pays each of James S. Adams and Stephen M. Adams
an annual salary of $100,000 and provides them with customary health and medical
benefits. These individuals have also agreed not to compete with the Company for
the period through September 2001 and September 2000, respectively, and not to
disclose confidential information relating to the Company at any time.

AB Plastics has also entered into employment agreements with each of G.
Michael Frink, Jawed Ghias and Paul J. Iacono to serve as Vice President-Sales
and Marketing, Vice President-Manufacturing and Vice President-Finance of AB
Plastics, respectively. Under such agreements, AB Plastics currently pays annual
base salaries of $100,000, $140,000 and $85,000 to Messrs. Frink, Ghias and
Iacono, respectively. Mr. Iacono's annual base salary will be increased to
$100,000 in September 1997. Each of such individuals is also eligible to receive
an annual bonus, with Mr. Frink entitled to receive up to $80,000 for achieving
target performance levels based on

41
<PAGE>

sales and diversification of AB Plastics' customer base, with a minimum of
$20,000. Mr. Ghias is entitled to participate in AB Plastics' bonus pool for
executive employees, to be established by the Board, to receive up to one-half
of his annual base salary, and Mr. Iacono is entitled to receive in September
1997 a bonus in the amount of $42,500. Subject to achievement of AB Plastics'
business plan (in whole or in part), Mr. Iacono is eligible to receive a bonus
of up to $50,000 in September 1998. Each of such individuals has also agreed not
to compete with the Company during the term of his agreement and for one year
thereafter and not to disclose confidential information relating to AB Plastics
at any time.

Stock Option Plans

1996 Stock Option Plan. In September 1996, the stockholders of the Company
approved the Company's 1996 Stock Option Plan, as previously adopted by the
Company's Board of Directors (the "1996 Plan"), pursuant to which officers,
directors, key employees and consultants of the Company are eligible to receive
incentive stock options and non-qualified stock options to purchase up to an
aggregate of 800,000 shares of Common Stock. There are currently outstanding
under the 1996 Plan stock options to purchase an aggregate of 440,000 shares of
Common Stock at an exercise price of $1.00 per share, expiring on December 31,
2002. The exercise price under such outstanding stock options represents not
less than 100% of the fair market value of the underlying Common Stock as of the
date that such options were granted, as determined by the Board of Directors of
the Company on the date that such options were granted. Options to purchase
50,808 shares were granted to Mr. Gorman in 1996 at an exercise price of $1.00
per share, and options to purchase 200,000 shares were granted to Mr. Gibbs in
1996 at an exercise price of $1.00 per share, all of which options are being
exercised upon the consummation of this offering. See "Certain Transactions."

With respect to incentive stock options, the 1996 Plan provides that the
exercise price of each such option must be at least equal to 100% of the fair
market value of the Common Stock on the date that such option is granted (and
110% of fair market value in the case of stockholders who, at the time the
option is granted, own more than 10% of the total outstanding Common Stock), and
requires that all such options have an expiration date not later than that date
which is one day before the tenth anniversary of the date of the grant of such
options (or the fifth anniversary of the date of grant in the case of 10% or
greater stockholders). However, with certain limited exceptions, in the event
that the option holder ceases to be associated with the Company, or engages in
or is involved with any business similar to that of the Company, such option
holder's incentive options immediately terminate. Pursuant to the 1996 Plan, the
aggregate fair market value, determined as of the date(s) of grant, for which
incentive stock options are first exercisable by an option holder during any one
calendar year cannot exceed $100,000.

1997 Stock Option Plan. In June 1997, the stockholders of the Company
approved the Company's 1997 Stock Option Plan, as previously adopted by the
Company's Board of Directors (the "1997 Plan"), pursuant to which officers,
directors, key employees and consultants of the Company are eligible to receive
incentive stock options and non-qualified stock options to purchase up to an
aggregate of 800,000 shares of Common Stock. The Plan also provides for the
grant of stock appreciation rights, restricted stock, performance shares and
performance units at the discretion of the Company's Board of Directors. There
are currently outstanding under the 1997 Plan stock options to purchase an
aggregate of 222,222 shares of Common Stock at an exercise price equal to the
initial public offering price. See "-- Employment Agreements." The requirements
of the 1997 Plan with respect to incentive stock options are identical to the
requirements of the 1996 Plan.

42
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of July 21, 1997, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby, by: (i) each of
the Named Executive Officers who beneficially owns any shares, (ii) each of the
Company's directors who beneficially owns any shares, (iii) each Selling
Stockholder, (iv) all directors and executive officers of the Company as a
group, and (v) each other person known by the Company to own beneficially more
than 5% of the Company's Common Stock. Except as otherwise noted, the persons
named in this table, based upon information provided by such persons, have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned by them.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Owned After the
the Offering(2) Number of Offering(2)
--------------------------- Shares --------------------------
Name and Address of Beneficial Owner(1) Number Percent Offered(3) Number Percent
--------------------------------------- ---------------- --------- ----------------- ---------------- --------
<S> <C> <C> <C> <C> <C>
North Atlantic Smaller Companies
Investment Trust plc ........................ 787,500 22.1% 0 787,500 16.5%
Private Equity Partners, L.P.(4) ............... 500,000 14.0 173,250 326,750 6.9
Sirrom Investments, Inc ........................ 800,000(5) 22.5 276,750 523,250 11.0
Geoffrey J.F. Gorman ........................... 700,808(6) 19.7 0 527,558(6) 11.1
Michael A. Gibbs .............................. 483,333(7) 13.6 0 454,458(7) 9.5
James S. Adams ................................. 46,124(8) 1.3 0 46,124 1.0
Stephen M. Adams .............................. 23,064(9) * 0 23,064 *
Christopher H.B. Mills ........................ 787,500(10) 22.1 0 787,500 16.5
All directors and executive officers as a group
(8 persons) ................................. 1,957,496 55.0 173,250(11) 1,784,246 37.5
</TABLE>
- ------------
* Represents less than 1% of outstanding Common Stock or voting power.

(1) The address of North Atlantic Smaller Companies Investment Trust plc is c/o
JO Hambro & Partners Limited, 10 Park Place, London SW1A 1LP, United
Kingdom. The address of Private Equity Partners, L.P. and Geoffrey J.F.
Gorman is 808 Lexington Avenue, 2nd Floor, New York, New York 10021. The
address of Sirrom Investments, Inc. is 500 Church Street, Suite 200,
Nashville, Tennessee 37219. The address of each other beneficial owner is
c/o AB Plastics Corporation, 15730 South Figueroa Street, Gardena,
California 90248.

(2) Shares beneficially owned and percentage of ownership are based on
3,560,000 shares of Common Stock outstanding before this offering and
4,760,000 shares of Common Stock to be outstanding after the consummation
of this offering, and assumes no exercise of the Underwriters'
over-allotment option. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally
includes voting or dispositive power with respect to such shares.

(3) Does not reflect 247,500 shares of Common Stock subject to the
Underwriters' over-allotment option, which, if exercised in full, will
result in Private Equity Partners, L.P. and Sirrom Investments, Inc.
selling 47,644 and 76,106 additional shares of Common Stock, respectively.
In such event, Private Equity Partners, L.P. would own 279,106 shares and
Sirrom Investments, Inc. would own 447,144 shares, or 5.7% and 9.2% of the
then outstanding shares of Common Stock, respectively.

(4) PEP is the general partner of Private Equity Partners, L.P., a Delaware
limited partnership.

(5) Represents shares of Common Stock issued on the date of this Prospectus for
$2,000 upon exercise of a warrant granted in connection with a $4.0 million
subordinated term loan made by Sirrom in connection with the original
capitalization of the Company and acquisition of AB Plastics in September
1996. See "Certain Transactions."

(6) Includes (i) 500,000 shares of Common Stock owned by Private Equity
Partners, L.P. (326,750 shares after the offering), of which Mr. Gorman is
the managing partner of PEP, its general partner, (ii) 150,000 shares

43
<PAGE>

of Common Stock issued on the date of this Prospectus upon exercise of a
warrant issued in September 1996 at $1.00 per share, and (iii) 50,808
shares of Common Stock issued on the date of this Prospectus upon exercise
of a stock option issued in September 1996 at $1.00 per share. Under the
terms of the Private Equity Partners, L.P. limited partnership agreement,
PEP is entitled to participate to the extent of 20% of the Net Profits (as
defined in such agreement) derived by certain of the limited partners from
the sale of partnership investments. See "Certain Transactions."

(7) Includes (i) 83,333 shares of Common Stock (54,458 shares after the
offering) owned beneficially through Private Equity Partners, L.P. which
were purchased for $1.00 per share in September 1996, (ii) 200,000 shares
issued on the date of this Prospectus upon exercise of a warrant issued in
September 1996 at $1.00 per share, and (ii) 200,000 shares of Common Stock
issued on the date of this Prospectus upon exercise of a stock option
issued in September 1996 at $1.00 per share. Also includes 10,000 shares of
Common Stock owned by each of David J. Gibbs, Alexandra L. Gibbs and Adam
D.J. Gibbs, the children of Mr. Gibbs, Mr. Gibbs disclaims any beneficial
interest in such shares. Does not include 222,222 shares of Common Stock
which may be issued in the future upon the occurrence of certain events
under options granted to Mr. Gibbs pursuant to the Company's 1997 Plan. See
"Management -- Employment Agreements" and "Certain Transactions."

(8) Represents shares of Common Stock issued on the date of this Prospectus
upon exercise of a stock option issued in September 1996 at $1.00 per
share. See "Certain Transactions."

(9) Represents shares of Common Stock which are issuable at $1.00 per share
upon the exercise of outstanding stock options. See "Management -- Stock
Option Plans."

(10) Represents shares owned beneficially by North Atlantic Smaller Companies
Investment Trust plc, of which Mr. Mills is a managing director.

(11) Represents 173,250 shares of Common Stock being sold by Private Equity
Partners, L.P., of which PEP, an affiliate of Geoffrey J.F. Gorman,
Chairman of the Board of the Company, is the general partner.

44
<PAGE>
CERTAIN TRANSACTIONS

In connection with the capitalization of the Company and the acquisition of
AB Plastics, in September 1996, the Company issued a $4.0 million, 13.5%
subordinated term note to Sirrom, due September 2001, and a five-year warrant to
purchase an aggregate of 800,000 shares of Common Stock of the Company, at a
total exercise price of $2,000. Sirrom has elected to exercise such warrant on
the date of this Prospectus. The Company has granted to Sirrom certain
"piggyback" and demand registration rights with respect to the shares issued to
Sirrom upon exercise of such warrant, which registration rights Sirrom has
agreed not to exercise until at least 180 days from the date of this Prospectus.
See "Shares Eligible for Future Sale."

In September 1996, the Company sold an aggregate of 500,000 shares of
Common Stock to Private Equity Partners, L.P. for $500,000, or $1.00 per share,
of which Geoffrey J.F. Gorman, the Company's Chairman of the Board is the
managing partner of PEP, the general partner of Private Equity Partners, L.P.
Michael A. Gibbs, the President of the Company, purchased an undivided one-sixth
interest in the equity holdings of Private Equity Partners, L.P. for $83,333 and
beneficially owns 83,333 of the shares owned by such limited partnership.

In September 1996, the Company issued five-year stock options and warrants
exercisable at $1.00 per share to a number of persons, including Geoffrey J.F.
Gorman, Chairman of the Board of the Company, Michael A. Gibbs, President of the
Company, and James S. Adams, President of AB Plastics. Effective on the date of
this Prospectus, each of Messrs. Gorman, Gibbs and Adams will exercise all stock
options and warrants issued to them, as a result of which Mr. Gorman will
purchase an aggregate of 200,808 shares of Common Stock for $200,808, Mr. Gibbs
will purchase an aggregate of 400,000 shares of Common Stock for $400,000, and
Mr. Adams will purchase an aggregate of 46,124 shares of Common Stock for
$46,124. The purchase price for such shares will be paid by Messrs. Gorman and
Gibbs by delivering to the Company 8% non-recourse promissory notes (secured
only by a pledge of their respective shares), and by Mr. Adams by delivering a
8% full-recourse promissory note, in each case payable semi-annually as to
interest, and as to principal on the earlier to occur of (a) the sale of the
Company to any unaffiliated third party, whether through merger, sale of assets
or like consolidation or combination, or (b) September 30, 2001. In addition, to
the extent that any of Messrs. Gorman, Gibbs or Adams shall effect any public or
private sale, transfer or other disposition of any of their shares of Common
Stock which they paid for with promissory notes, they will be obligated to apply
all cash proceeds received by them, net of applicable federal and state taxes,
to the prepayment of their respective notes, plus accrued and unpaid interest
thereon to the date of sale, transfer or disposition.

Under the terms of its partnership agreement with the limited partners of
Private Equity Partners, L.P., PEP is entitled to receive 20% of the Net Profits
(defined as all amounts received by the subject limited partners in excess of
their total cash capital investment in the partnership) derived by all limited
partners, other than Michael A. Gibbs, from the sale or disposition of
partnership investments. Under the terms of the partnership agreement, as a
result of the sale of a portion of the Company shares owned by Private Equity
Partners, L.P., PEP will receive a cash payment of $103,280 upon completion of
this offering, which may increase to as much as $159,182 if the Underwriters'
over-allotment is exercised in full. In addition, Michael A. Gibbs, who owns
16-2/3% of the limited partnership interests of Private Equity Partners, L.P.,
will receive an aggregate of $203,280 ($259,178 if the Underwriters'
over-allotment is exercised in full) from the sale of a minimum of 28,875 shares
(a maximum of 36,815 shares if the Underwriters' over-allotment option is
exercised in full) beneficially owned by him through Private Equity Partners,
L.P.

In October 1996, the Company entered into a management agreement effective
as of August 1, 1996, with PEP, of which Geoffrey J.F. Gorman, the Chairman of
the Board of the Company, is the managing partner. In October 1996, the Company
entered into a management agreement, effective as of August 1, 1996, with a
corporate affiliate of Michael A. Gibbs, the President of the Company, and Mr.
Gibbs, individually. See "Management -- Employment Agreements."

In September 1996, the Company entered into an agreement with JO Hambro &
Partners Limited ("JO Hambro"), of which Christopher H.B. Mills, a director of
the Company, is a director. Pursuant to such agreement, the Company pays JO
Hambro an annual fee of $50,000, payable quarterly, as a director's fee. The
Company is required to make these payments to JO Hambro as long as a
representative of JO Hambro serves on the Board of Directors of the Company or
AB Plastics and certain investors, previously introduced to the Company by JO
Hambro, hold in the aggregate in excess of 10% of the outstanding shares of the
Company's Common Stock on a fully-diluted basis.

45
<PAGE>

In April 1997, the Company advanced $50,000 to Michael A. Gibbs as a
personal loan evidenced by a 13.5% note payable out of any net proceeds received
by Mr. Gibbs from the sale of any shares of the Company's Common Stock. Mr.
Gibbs will retire such note upon completion of this offering.

The Company leased its principal executive offices in Gardena, California
from 15730 South Figueroa Properties, a California general partnership, of which
James S. Adams, President of AB Plastics, is a general partner and holds a 50%
interest in the partnership through a family trust. The other 50% interest in
the partnership is currently held by the estate of Robert J. Adams, the brother
of James S. Adams and father of Stephen M. Adams, who died in 1996. The Company
exercised its option to purchase this facility for $3.1 million, the fair market
value of such property as determined by two independent real estate appraisal
firms. The partnership acquired the original lot and facility in 1980, and the
side parcel in 1983, for a total of approximately $3.9 million. Such purchase
was completed in August 1997. See "Business -- Facilities."

The Company's Certificate of Incorporation provides for indemnification of
the Company's officers and directors in certain circumstances. The Company
intends to enter into indemnification agreements with each of its directors and
executive officers. See "Management -- Limitation of Liability and
Indemnification."

46
<PAGE>

DESCRIPTION OF SECURITIES

General

The Company's authorized capital stock consists of (i) 20,000,000 shares of
Common Stock, par value $.0001 per share, and (ii) 5,000,000 shares of Preferred
Stock, par value $.0001 per share. As of the date of this Prospectus, an
aggregate of 3,560,000 shares of Common Stock were outstanding and held by 16
stockholders. No shares of Preferred Stock have been issued or are outstanding.

Common Stock

The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders of the Company. In addition, such
holders are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. In the event of the dissolution, liquidation or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of all liabilities of the Company. All
outstanding shares of Common Stock are fully paid and nonassessable.

The holders of Common Stock do not have any subscription, redemption or
conversion rights, nor do they have any preemptive or other rights to acquire or
subscribe for additional, unissued or treasury shares. Accordingly, if the
Company were to elect to sell additional shares of Common Stock following this
offering, persons acquiring Common Stock in this offering would have no right to
purchase additional shares, and as a result, their percentage equity interest in
the Company would be reduced.

Pursuant to the Company's By-Laws, except for any matters which, pursuant
to the Delaware Law, require a greater percentage vote for approval, the holders
of a majority of the outstanding Common Stock, if present in person or by proxy,
are sufficient to constitute a quorum for the transaction of business at
meetings of the Company's stockholders. Holders of shares of Common Stock are
entitled to one vote per share on all matters submitted to the vote of Company
stockholders. Except as to any matters which, pursuant to Delaware Law, require
a greater percentage vote for approval, the affirmative vote of the holders of a
majority of the Common Stock present in person or by proxy at any meeting
(provided a quorum as aforesaid is present thereat) is sufficient to authorize,
affirm or ratify any act or action, including the election of directors.

The holders of Common Stock do not have cumulative rights. Accordingly, the
holders of more than half of the outstanding shares of Common Stock can elect
all of the directors to be elected in any election, if they choose to do so. In
such event, the holders of the remaining shares of Common Stock would not be
able to elect any directors. The Board is empowered to fill any vacancies on the
Board created by the resignation, death or removal of directors.

In addition to voting at duly called meetings at which a quorum is present
in person or by proxy, Delaware Law and the Company's By-Laws provide that the
stockholders may take action without the holding of a meeting by written consent
or consents signed by the holders of a majority of the outstanding shares of the
capital stock of the Company entitled to vote thereon. Prompt notice of the
taking of any action without a meeting by less than unanimous consent of the
stockholders will be given to those stockholders who do not consent in writing
to the action. The purposes of this provision are to facilitate action by
stockholders and to reduce the corporate expense associated with annual and
special meetings of stockholders. Pursuant to the rules and regulations of the
Commission, if stockholder action is taken by written consent, the Company will
be required to send to each stockholder entitled to vote on the matter acted on,
but whose consent was not solicited, an information statement containing
information substantially similar to that which would have been contained in a
proxy statement.

Preferred Stock

The Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to fix the number of shares
constituting any such series, the voting powers, designation, preferences and
relative participation, optional or other special rights and qualifications,
limitations or restrictions thereof, including the dividend rights and dividend
rate, terms of redemption (including sinking fund provisions),

47
<PAGE>

redemption price or prices, conversion rights and liquidation preferences of the
shares constituting any series, without any further vote or action by the
stockholders. The issuance of Preferred Stock by the Board of Directors could
affect the rights of the holders of Common Stock. For example, such issuance
could result in a class of securities outstanding that would have preferences
with respect to voting rights and dividends, and in liquidation, over the Common
Stock, and could (upon conversion or otherwise) enjoy all of the rights
appurtenant to Common Stock.

The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by others to obtain control of
the Company through merger, tender offer, proxy contest or otherwise by making
such attempts more difficult to achieve or more costly. The Board of Directors
may issue the Preferred Stock with voting and conversion rights that could
adversely affect the voting power of the holders of Common Stock. There are no
agreements for the issuance of Preferred Stock and the Board of Directors has no
present intention to issue Preferred Stock.

Delaware Anti-Takeover Law

The Company is subject to Section 203 of the Delaware Law, which prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless (i)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock, or (iii) on or after such date, the business combination is
approved by the board of directors and by the affirmative vote of at least
66 2/3% of the outstanding voting stock that is not owned by the interested
stockholder. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person, who, together with affiliates and associates, owns (or
within three years, did own) 15% or more of the corporation's voting stock.

Transfer Agent

The transfer agent for the Common Stock is American Stock Transfer & Trust
Company, New York, New York.

48
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has not been any public market for the Common
Stock and there can be no assurance that a significant public market for the
Common Stock will develop or be sustained after this offering. Sales of
substantial amounts of Common Stock in the public market after this offering, or
the possibility of such sales occurring, could adversely affect prevailing
market prices of the Common Stock or the future ability of the Company to raise
capital through an offering of equity securities.

Upon the completion of this offering, the Company will have outstanding
4,760,000 shares of Common Stock. Of such shares, the 1,650,000 shares of Common
Stock sold in the offering (assuming no exercise of the Underwriter's
over-allotment option) will be freely tradeable in the public market without
restriction under the Securities Act, unless purchased by "affiliates" of the
Company, as defined in Rule 144 under the Securities Act.

The remaining 3,110,000 shares of Common Stock outstanding are "restricted
securities," as defined in Rule 144 under the Securities Act (the "Restricted
Shares"). The Restricted Shares were issued and sold by the Company in private
transactions in reliance upon exemptions from registration under the Securities
Act. Restricted Shares may be sold in the public market only if they are
registered or if they qualify for an exemption from registration under Rules 144
or 701 under the Securities Act, which are summarized below.

Pursuant to certain "lock-up" agreements, all of the Company's officers,
directors and principal stockholders have agreed, subject to certain limited
exceptions, not to offer, sell, contract to sell, grant any option to purchase
or otherwise dispose of any shares of Common Stock of the Company or any
securities exercisable for or convertible into the Company's Common Stock owned
by them for a period of 365 days from the date of this Prospectus. Such
agreements provide that Cruttenden Roth Incorporated may, in its sole discretion
and at any time without notice, release all or a portion of the shares subject
to these lock-up agreements; however, Cruttenden Roth Incorporated has no
current intention to do so.

Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period requirement,
imposed under Rule 144. In general, under Rule 144, as amended, beginning 90
days after the date of this Prospectus, a person (or persons whose shares of the
Company are aggregated) who has beneficially owned Restricted Shares for at
least one year (including the holding period of any prior owner who is not an
affiliate of the Company) would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of (i) one percent of
the then outstanding shares of Common Stock (approximately 47,600 shares
following this offering), or (ii) the average weekly trading volume of the
Common Stock during the four calendar weeks preceding the filing of a Form 144
with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale and notice requirements and to the availability of current public
information about the Company. Under Rule 144(k), a person who is not deemed to
have been an affiliate of the Company at any time during the 90 days preceding a
sale and who has beneficially owned the shares proposed to be sold for at least
two years (including the holding period of any prior owner who is not an
affiliate of the Company) is entitled to sell such shares without complying with
the manner of sale, public information, volume limitation or notice provisions
of Rule 144.

49
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom Cruttenden Roth
Incorporated and Josephthal Lyon & Ross Incorporated are acting as
Representatives, have severally agreed to purchase from the Company and the
Selling Stockholders and the Company and the Selling Stockholders have agreed to
sell to the Underwriters, the respective number of shares of Common Stock set
forth opposite each Underwriter's name below:

Underwriters Number of Shares
------------ ----------------
Cruttenden Roth Incorporated ........................ 510,000
Josephthal Lyon & Ross Incorporated .................. 510,000
CIBC Wood Gundy Securities Corp. ..................... 70,000
Equitable Securities Corporation ..................... 70,000
First Albany Corporation ........................... 70,000
First of Michigan Corporation ........................ 70,000
L.H. Friend, Weinress, Frankson & Presson, Inc. ...... 70,000
Janney Montgomery Scott Inc. ........................ 70,000
The Robinson-Humphrey Company, Inc. .................. 70,000
Van Kasper & Company ................................. 70,000
Wheat, First Securities, Inc. ........................ 70,000
----------
Total ............................................. 1,650,000
==========

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent, including
the absence of any material adverse change in the Company's business and the
receipt of certain certificates, opinions and letters from the Company's counsel
and independent public accountants. The nature of the Underwriters' obligation
is such that they are committed to purchase and pay for all the shares of Common
Stock if any are purchased.

The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and to certain securities dealers at such
price less a concession not in excess of $0.43 per share. The Underwriters may
allow, and such selected dealers may reallow, a discount not in excess of $0.16
per share to certain brokers and dealers. After the initial public offering of
the shares, the public offering price and other selling terms may be changed by
the Representatives. No change in such terms shall change the amount of proceeds
to be received by the Company or the Selling Stockholders as set forth on the
cover page of this Prospectus.

The Company and the Selling Stockholders have granted an option to the
Underwriters, exercisable for a period of 45 days after the date of this
Prospectus, to purchase up to an additional 247,500 shares of Common Stock at
the public offering price set forth on the cover page of this Prospectus, less
the underwriting discounts and commissions, from the Company (123,750 shares)
and the Selling Stockholders (123,750 shares), respectively. The Underwriters
may exercise this option only to cover over-allotments, if any. To the extent
that the Underwriters exercise this option, each of the Underwriters will be
committed, subject to certain conditions, to purchase such additional shares of
Common Stock in approximately the same proportion as set forth in the above
table.

The Company has agreed to issue to the Representatives, for a total of
$165, warrants (the "Representatives' Warrants") to purchase up to 165,000
shares of Common Stock at an exercise price per share equal to 155% of the
initial public offering price. The Representatives' Warrants are exercisable for
a period of four years beginning one year from the date of this Prospectus. The
holders of the Representatives' Warrants will have no voting, dividend or other
stockholder rights until the Representatives' Warrants are exercised. In
addition, the Company has granted certain rights to the holders of the
Representatives' Warrants to register the Representatives' Warrants and the
Common Stock underlying the Representatives' Warrants under the Securities Act,
all of which are being registered as part of this offering.

The Company has agreed to pay the Representatives a non-accountable expense
allowance equal to 2.5% of the aggregate Price to Public (including with respect
to shares of Common Stock underlying the over-allotment option, if and to the
extent it is exercised) set forth on the front cover of this Prospectus for
expenses

50
<PAGE>

in connection with this offering, of which the sum of $50,000 has been paid by
the Company. The Representatives' expenses in excess of such allowance will be
borne by the Representatives. To the extent that the expenses of the
Representatives are less than the non-accountable expense allowance, the excess
may be deemed to be compensation to the Representatives.

The Representatives have advised the Company that they do not expect any
sales of the shares of Common Stock offered hereby to be made to discretionary
accounts controlled by the Underwriters.

Prior to this offering, there has been no established trading market for
the Common Stock. Consequently, the initial public offering price for the Common
Stock offered hereby has been determined by negotiation among the Company, the
Selling Stockholders and the Representatives. Among the factors considered in
such negotiations were the preliminary demand for the Common Stock, the
prevailing market and economic conditions, the Company's results of operations,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, an assessment of the Company's
management, the consideration of these factors in relation to the market
valuation of comparable companies in related businesses, the current condition
of the markets in which the Company operates, and other factors deemed relevant.
There can be no assurance that an active trading market will develop for the
Common Stock or that the Common Stock will trade in the public market subsequent
to this offering at or above the initial public offering price.

The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters and their controlling persons
against certain liabilities under the Securities Act or will contribute to
payments the Underwriters and their controlling persons may be required to make
in respect thereof.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Greenberg Traurig Hoffman Lipoff Rosen &
Quentel, New York, New York. Certain legal matters relating to the offering will
be passed upon for the Underwriters by Troop Meisinger Steuber & Pasich, LLP,
Los Angeles, California.

EXPERTS

The financial statements as of October 27, 1996 and for the 48 weeks ended
September 27, 1996 and the four weeks ended October 27, 1996 included in this
Prospectus have been so included in reliance on the report of Marcum & Kliegman
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

The financial statements as of October 29, 1995 and for the fiscal years
ended October 29, 1995 and October 30, 1994 included in this Prospectus have
been so included in reliance on the report of Block, Plant, Eisner, Fiorito &
Belak-Berger ("BPEFB"), independent accountants, given on the authority of said
firm as experts in auditing and accounting.

As approved by the Company's Board of Directors, the Company replaced BPEFB
in January 1997. The reports of BPEFB for each of the fiscal years ended October
29, 1995 and October 30, 1994 contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle. There were no disagreements on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of BPEFB
would have caused it to make reference to the subject matter of the
disagreements in conjunction with its reports.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include any amendments
thereto) on Form S-1 under the Securities Act with respect

51
<PAGE>

to the Common Stock offered hereby. This Prospectus, which constitutes a part of
the Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are contained in exhibits to
the Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement, including
the exhibits thereto, and the financial statements and notes filed as a part
thereof. Statements made in this Prospectus concerning the contents of any
document referred to herein are not necessarily complete. With respect to each
such document filed with the Commission as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved. The Registration Statement, including the exhibits thereto
and the financial statements and notes filed as a part thereof, as well as such
reports and other information filed with the Commission, may be inspected
without charge at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part thereof may be obtained from
the Commission upon the payment of certain fees prescribed by the Commission.
Such reports and other information may also be inspected without charge at a Web
site maintained by the Commission. The address of such site is
http://www.sec.gov.

52
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS ................................................ F-2

FINANCIAL STATEMENTS

Balance Sheet as of October 29, 1995 (Predecessor), Consolidated Balance Sheets as
of October 27, 1996 and as of April 27, 1997 (Unaudited) (Company) ............ F-4

Statements of Operations for the Fifty-Two Weeks Ended October 30, 1994 and
October 29, 1995, Twenty-Six Weeks Ended April 28, 1996 (Unaudited) and for
the Forty-Eight Weeks Ended September 27, 1996 (Predecessor) .................. F-6

Consolidated Statements of Operations for the Four Weeks Ended October 27, 1996
and for the Twenty-six Weeks Ended April 27, 1997 (Unaudited) (Company) ......... F-6

Statements of Stockholders' Equity for the Fifty-Two Weeks Ended October 30, 1994
and October 29, 1995, and for the Forty-Eight Weeks Ended September 27, 1996
(Predecessor) .................................................................. F-7

Consolidated Statements of Stockholders' Equity for the Four Weeks Ended
October 27, 1996 and for the Twenty-Six Weeks Ended April 27, 1997
(Unaudited) (Company) ......................................................... F-7

Statements of Cash Flows for the Fifty-Two Weeks Ended October 30, 1994, and
October 29, 1995, Twenty-Six Weeks Ended April 28, 1996 (Unaudited) and for
the Forty-Eight Weeks Ended September 27, 1996 (Predecessor) .................. F-8

Consolidated Statements of Cash Flows for the Four Weeks Ended October 27, 1996
and for the Twenty-Six Weeks Ended April 27, 1997 (Unaudited) (Company) ......... F-8

NOTES TO FINANCIAL STATEMENTS ...................................................... F-10
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Compass Plastics & Technologies, Inc. (formerly
AB Plastics Holding Corporation) and Subsidiary

We have audited the accompanying consolidated balance sheet of Compass
Plastics & Technologies, Inc. (formerly AB Plastics Holding Corporation) and
Subsidiary as of October 27, 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the forty-eight weeks ended
September 27, 1996 ("Predecessor") and for the four weeks ended October 27, 1996
("Company"). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements of Predecessor as of
October 29, 1995 and October 30, 1994, and for the fifty-two week periods then
ended, were audited by other auditors, whose report dated June 19, 1997,
expressed an unqualified opinion on those statements.

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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Compass
Plastics & Technologies, Inc. (formerly AB Plastics Holding Corporation) and
Subsidiary as of October 27, 1996 and the results of their operations and their
cash flows for the forty-eight weeks ended September 27, 1996 and the four weeks
ended October 27, 1996 in conformity with generally accepted accounting
principles.

MARCUM & KLIEGMAN LLP

Woodbury, New York
December 31, 1996, except for
Note 12, as to which the date is July 18, 1997

F-2
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
AB Plastics Corporation
Gardena, California

We have audited the accompanying balance sheet of AB Plastics Corporation
(an S Corporation) as of October 29, 1995 and the related statements of
operations, shareholders' equity and cash flows for the fifty-two weeks ended
October 29, 1995 and October 30, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AB Plastics Corporation (an
S Corporation) as of October 29, 1995, and the results of its operations and its
cash flows for the fifty-two weeks ended October 29, 1995 and October 30, 1994
in conformity with generally accepted accounting principles.

BLOCK, PLANT, EISNER, FIORITO & BELAK-BERGER

Encino, California
June 19, 1997

F-3
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)
BALANCE SHEETS

ASSETS

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)
BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Predecessor Company
------------- ----------------------------------
October 29, October 27, April 27,
1995 1996 1997
------------- ---------------- ---------------
(Consolidated) (Consolidated)
(Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses ..................... $ 5,919,615 $ 4,181,770 $ 4,436,526
Accrued wages ............................................. 494,743 498,717 784,757
Current portion of capitalized lease obligations ............ 312,087 286,705 282,789
Payroll taxes payable ....................................... 61,886 65,648 165,856
Income taxes payable ....................................... 21,423 76,300 -0-
Notes payable, other ....................................... 140,000 -0- -0-
Current portion of long-term debt ........................... 3,677,498 -0- -0-
Distributions payable ....................................... 227,800 -0- -0-
------------ ------------ ------------
Total Current Liabilities ................................. 10,855,052 5,109,140 5,669,928
------------ ------------ ------------
OTHER LIABILITIES
Capitalized lease obligations, net of current portion ...... 673,740 387,034 625,004
Long-term debt ............................................. 2,129,171 10,000,000 7,150,000
Deferred income taxes payable .............................. 82,768 1,734,437 1,881,434
------------ ------------ ------------
Total Other Liabilities .................................... 2,885,679 12,121,471 9,656,438
------------ ------------ ------------
TOTAL LIABILITIES ...................................... . 13,740,731 17,230,611 15,326,366
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock ............................................. -- -- --
Common stock ................................................ 110,840 200 200
Additional paid-in capital ................................. -0- 2,799,800 2,799,800
Retained earnings .......................................... 6,761,268 163,590 1,343,494
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY ................................. 6,872,108 2,963,590 4,143,494
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ................................................... $20,612,839 $20,194,201 $19,469,860
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Predecessor Company Predecessor Company
---------------------------------------------- ---------------- ------------- -------------
For the 48 For the 26
For the 52 Weeks Ended Weeks For the 4 Weeks For the 26
-------------------------------- Ended Weeks Ended Ended Weeks Ended
October 30, October 29, September October 27, April 28, April 27,
1994 1995 27, 1996 1996 1996 1997
--------------- --------------- ------------ ---------------- ------------- -------------
(Consolidated) (Unaudited) (Consolidated)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
SALES ........................ $34,026,925 $42,678,959 $36,080,237 $3,265,206 $19,409,976 $20,244,365
COST OF SALES ............... 30,695,123 38,960,968 32,126,687 2,625,813 17,337,835 16,393,249
----------- ----------- ----------- ---------- ----------- -----------
GROSS PROFIT .................. 3,331,802 3,717,991 3,953,550 639,393 2,072,141 3,851,116
----------- ----------- ----------- ---------- ----------- -----------
OPERATING EXPENSES
Selling ..................... 431,992 443,916 478,866 36,922 223,637 294,133
Administrative ............... 1,283,188 1,239,549 1,393,184 203,906 797,067 1,162,066
----------- ----------- ----------- ---------- ----------- -----------
TOTAL OPERATING
EXPENSE .................. 1,715,180 1,683,465 1,872,050 240,828 1,020,704 1,456,199
----------- ----------- ----------- ---------- ----------- -----------
OPERATING INCOME ......... 1,616,622 2,034,526 2,081,500 398,565 1,051,437 2,394,917
----------- ----------- ----------- ---------- ----------- -----------
OTHER INCOME (EXPENSE)
Other income ............... 284,183 130,676 48,296 -0- -0- -0-
Interest expense ............ (290,837) (434,761) (429,216) (98,742) (226,088) (451,243)
Other expenses ............... -0- -0- -0- (19,397) -0- -0-
----------- ----------- ----------- ---------- ----------- -----------
TOTAL OTHER EXPENSE ....... (6,654) (304,085) (380,920) (118,139) (226,088) (451,243)
----------- ----------- ----------- ---------- ----------- -----------
INCOME BEFORE INCOME
TAXES ........................ 1,609,968 1,730,441 1,700,580 280,426 825,349 1,943,674
INCOME TAX (EXPENSE)
BENEFIT ..................... (48,127) (26,457) 9,526 (116,836) (12,445) (763,770)
----------- ----------- ----------- ---------- ----------- -----------
NET INCOME .................. $ 1,561,841 $ 1,703,984 $ 1,710,106 $ 163,590 $ 812,904 $ 1,179,904
=========== =========== =========== ========== =========== ===========
Net income per share ......... $ 0.05 $ 0.33
Weighted average common stock ========== ===========
and common stock equivalents
outstanding .................. 3,600,000 3,600,000
PRO FORMA INCOME TAX DATA ========== ===========
INCOME BEFORE INCOME
TAXES ..................... $ 1,609,968 $ 1,730,441 $ 1,700,580 $ 825,349
PROVISION FOR INCOME
TAXES (UNAUDITED) ......... (643,987) (692,176) (680,232) (330,140)
----------- ----------- ----------- -----------
NET INCOME (Unaudited) ...... $ 965,981 $ 1,038,265 $ 1,020,348 $ 495,209
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Additional Total
Number of Common Paid-In Retained Stockholders'
Predecessor Shares Stock Capital Earnings Equity
----------- --------------- ------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, November 1, 1993 ............ 9,965.40 $ 110,840 $ -0- $ 4,987,020 $ 5,097,860
Net Income ........................... -0- -0- -0- 1,561,841 1,561,841
Distributions ........................ -0- -0- -0- (1,077,977) (1,077,977)
------------ ---------- ----------- ------------ ------------
Balance, October 30, 1994 ............ 9,965.40 110,840 -0- 5,470,884 5,581,724
Net Income ........................... -0- -0- -0- 1,703,984 1,703,984
Distributions ........................ -0- -0- -0- (413,600) (413,600)
------------ ---------- ----------- ------------ ------------
Balance, October 29, 1995 ............ 9,965.40 110,840 -0- 6,761,268 6,872,108
Net Income ........................... -0- -0- -0- 1,710,106 1,710,106
Distributions ........................ -0- -0- -0- (933,868) (933,868)
------------ ---------- ----------- ------------ ------------
Balance, September 27, 1996 ............ 9,965.40 110,840 -0- 7,537,506 7,648,346
Company
-------
Recapitalization ..................... -0- $ -0- $ -0- $ (7,537,506) $(7,537,506)
Net Income ........................... -0- -0- -0- 163,590 163,590
Issuance of warrants .................. -0- -0- 799,950 -0- 799,950
Stock retirement ..................... (9,965.40) (110,840) -0- -0- (110,840)
Issuance of stock ..................... 500,000.00 50 2,000,000 -0- 2,000,050
Stock split ........................... 1,500,000.00 150 (150) -0- -0-
------------ ---------- ----------- ------------ ------------
Consolidated Balance, October 27, 1996 2,000,000.00 200 2,799,800 163,590 2,963,590
Net Income ........................... -0- -0- -0- 1,179,904 1,179,904
------------ ---------- ----------- ------------ ------------
Consolidated Balance, April 27, 1997
(Unaudited) ........................... 2,000,000.00 $ 200 $ 2,799,800 $ 1,343,494 $ 4,143,494
============ ========== =========== ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Predecessor
---------------------------------------------------
For the 48
For the 52 Weeks Ended Weeks
---------------------------------- Ended
October 30, October 29, September 27,
1994 1995 1996
---------------- ---------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income ........................ $ 1,561,841 $ 1,703,984 $ 1,710,106
------------ ------------ -------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
(Gain) loss on sale of
equipment ..................... (59,961) 7,975 -0-
Depreciation and amortization 746,137 875,651 826,238
Deferred income taxes ............ 27,390 5,775 (1,587)
Changes in assets - (increase) decrease:
Accounts receivable, net ......... (81,220) (2,562,502) 325,737
Accounts receivable, other ......... (6,723) 184 10,892
Inventories ........................ (703,138) (708,385) 1,285,098
Prepaid expenses .................. 65,911 17,566 434,866
Prepaid income taxes ............... 30,422 24,749 -0-
Income tax refund receivable ...... -0- -0- (78,220)
Deposits ........................... (206,893) (75,008) (167,953)
Other assets ..................... (50,000) (160,208) 132,060
Changes in liabilities - increase
(decrease):
Accounts payable and accrued
expenses ........................ 1,731,337 1,865,574 (1,417,354)
Accrued wages and payroll taxes
payable ........................ (97,316) 65,521 10,602
Income taxes payable ............... (9,203) (4,067) (7,939)
------------ ------------ -------------
TOTAL ADJUSTMENTS .................. 1,386,743 (647,175) 1,352,440
------------ ------------ -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ............ 2,948,584 1,056,809 3,062,546
------------ ------------ -------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds from sale of equipment ... 65,400 91,462 -0-
Purchase of equipment and
improvements ..................... (1,625,162) (3,490,848) (764,287)
Collection on note receivable, other 134,791 145,979 268,845
Proceeds from notes receivable,
other .............................. -0- (90,000) -0-
Investment in subsidiary ............ -0- -0- -0-
------------ ------------ -------------
NET CASH USED IN
INVESTING ACTIVITIES ............ $ (1,424,971) $ (3,343,407) $ (495,442)
------------ ------------ -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Company Predecessor Company
---------------- --------------- ---------------
For the 26
For the 4 Weeks For the 26
Weeks Ended Ended Weeks Ended
October 27, April 28, April 27,
1996 1996 1997
---------------- --------------- ---------------
(Consolidated) (Unaudited) (Consolidated)
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income ........................ $ 163,590 $ 812,904 $ 1,179,904
------------ ------------- -------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
(Gain) loss on sale of
equipment ..................... 19,397 -0- -0-
Depreciation and amortization 82,385 491,704 635,963
Deferred income taxes ............ 38,142 1,343 146,997
Changes in assets - (increase) decrease:
Accounts receivable, net ......... 253,360 3,237,602 2,346,239
Accounts receivable, other ......... (34,353) (244) (57,976)
Inventories ........................ 118,037 (34,146) (1,097,669)
Prepaid expenses .................. (305,967) 128,355 62,072
Prepaid income taxes ............... 15,878 -0- 18,515
Income tax refund receivable ...... -0- -0- (42,942)
Deposits ........................... -0- 159,862 (221,646)
Other assets ..................... 13,298 51,078 -0-
Changes in liabilities - increase
(decrease):
Accounts payable and accrued
expenses ........................ (320,491) (2,977,858) 254,756
Accrued wages and payroll taxes
payable ........................ (2,866) 20,254 386,248
Income taxes payable ............... 62,816 11,102 (76,300)
------------ ------------- -------------
TOTAL ADJUSTMENTS .................. (60,364) 1,089,052 2,354,257
------------ ------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ............ 103,226 1,901,956 3,534,161
------------ ------------- -------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds from sale of equipment ... 6,000 -0- -0-
Purchase of equipment and
improvements ..................... (15,930) (769,511) (399,068)
Collection on note receivable, other 431,165 69,429 -0-
Proceeds from notes receivable,
other .............................. -0- -0- (50,000)
Investment in subsidiary ............ (7,637,555) -0- -0-
------------ ------------- -------------
NET CASH USED IN
INVESTING ACTIVITIES ............ $ (7,216,320) $ (700,082) $ (449,068)
------------ ------------- -------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-8
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

<TABLE>
<CAPTION>
Predecessor
-----------------------------------------------
For the 48
For the 52 Weeks Ended Weeks
------------------------------ Ended
October 30, October 29, September 27,
1994 1995 1996
--------------- ------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from long-term debt ......... $ 184,600 $3,615,439 $ -0-
Proceeds from line of credit ......... -0- -0- 2,050,000
Repayment of long-term debt ......... (511,886) (490,000) (3,545,419)
Repayment of capitalized lease
obligations ........................ (255,961) (312,358) (288,349)
Repayment of line of credit ......... -0- -0- -0-
Proceeds from issuance of stock ...... -0- -0- -0-
Distributions to shareholders ......... (1,077,977) (185,800) (933,868)
------------- ---------- -------------
NET CASH (USED IN)
PROVIDED BY FINANCING
ACTIVITIES ........................... (1,661,224) 2,627,281 (2,717,636)
------------- ---------- -------------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS ........................ (137,611) 340,683 (150,532)
CASH AND CASH
EQUIVALENTS - Beginning ............ 265,272 127,661 468,344
------------- ---------- -------------
CASH AND CASH
EQUIVALENTS (CASH
OVERDRAFT) - Ending .................. $ 127,661 $ 468,344 $ 317,812
============= ========== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest .............................. $ 293,452 $ 396,569 $ 389,328
Income taxes ........................ $ 50,057 $ -0- -0-
Noncash investing and financing
activities:
Sale of equipment for a note
receivable ........................... $ -0- $ -0- -0-
Issuance of warrants .................. $ -0- $ -0- $ -0-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Company Predecessor Company
---------------- --------------- ---------------
For the 26
For the 4 Weeks For the 26
Weeks Ended Ended Weeks Ended
October 27, April 28, April 27,
1996 1996 1997
---------------- --------------- ---------------
(Consolidated) (Unaudited) (Consolidated)
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from long-term debt ......... $ 4,000,000 $ -0- $ -0-
Proceeds from line of credit ......... 6,000,000 -0- -0-
Repayment of long-term debt ......... (4,451,250) (1,545,000) -0-
Repayment of capitalized lease
obligations ........................ (23,739) (171,920) (162,189)
Repayment of line of credit ......... -0- -0- (2,850,000)
Proceeds from issuance of stock ...... 2,000,000 -0- -0-
Distributions to shareholders ......... -0- (461,801) -0-
------------- ------------- -------------
NET CASH (USED IN)
PROVIDED BY FINANCING
ACTIVITIES ........................... 7,525,011 (2,178,721) (3,012,189)
------------- ------------- -------------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS ........................ 411,917 (976,847) 72,904
CASH AND CASH
EQUIVALENTS - Beginning ............ 317,812 468,344 729,730
------------- ------------- -------------
CASH AND CASH
EQUIVALENTS (CASH
OVERDRAFT) - Ending .................. $ 729,729 $ (508,503) $ 802,634
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest .............................. $ -0- $ 231,558 $ 451,470
Income taxes ........................ $ -0- $ -0- $ 717,500
Noncash investing and financing
activities:
Sale of equipment for a note
receivable ........................... $ 27,631 -0- $ -0-
Issuance of warrants .................. $ 800,000 $ -0- $ -0-
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-9
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS

For the fifty-two weeks ended October 30, 1994 and October 29, 1995,
twenty-six weeks ended April 28, 1996 (unaudited), forty-eight weeks ended
September 27, 1996, four weeks ended October 27, 1996 and for the
twenty-six weeks ended April 27, 1997 (unaudited)

NOTE 1 - Summary of Significant Accounting Policies

Description of Business

Compass Plastics & Technologies, Inc. (formerly AB Plastics Holding
Corporation) and Subsidiary (collectively, the "Company") manufactures plastic
parts to customer specifications using custom-made injection molds. The Company
has a concentration of credit risk in accounts receivable from Japanese-owned
television and computer manufacturing companies. Most of the Company's revenues
are derived from several major Japanese television and computer manufacturers.

Business Combination

Compass Plastics & Technologies, Inc. (formerly AB Plastics Holding
Corporation) ("Compass") was formed on May 30, 1996 for the purpose of acquiring
the stock of AB Plastics Corporation ("AB Plastics"). The acquisition was
accounted for as a purchase effective September 27, 1996. Compass did not have
any activities during the period from May 30, 1996 to September 27, 1996. All
financial statements for periods subsequent to September 27, 1996, the date the
acquisition was consummated, will include the accounts of Compass and its
wholly-owned subsidiary, AB Plastics. The Predecessor refers to AB Plastics
prior to the consummation of the acquisition.

The aggregate purchase price for the acquisition of AB Plastics stock was
$7,637,555, which includes the cost of the acquisition, was financed through
equity capital infusion, refinancing of long-term debt and issuance of a
promissory note payable, and has been allocated to the assets purchased and the
liabilities assumed of AB Plastics based upon the fair value on the date of
acquisition. The excess of the purchase price over the fair value of the net
assets acquired was $1,381,797 and has been recorded as goodwill on the books of
AB Plastics.

General Accounting Policies

The Company's accounting policies are substantially the same as that of the
Predecessor.

Principles of Consolidation

The consolidated financial statements for the four weeks ended October 27,
1996 and for the twenty-six weeks ended April 27, 1997 (unaudited) include the
accounts of Compass and its wholly-owned subsidiary, AB Plastics. All
significant intercompany transactions have been eliminated in consolidation.

Fiscal Year

The Company maintains its books on a 52/53 week year ending on the last
Sunday in October. Fiscal years in the three-year period including the fiscal
years ended October 27, 1996, October 29, 1995 and October 30, 1994, each
contained 52 weeks.

Goodwill

Goodwill is being amortized on a straight-line basis over a twenty-year
period. Amortization of goodwill charged to operations for the fifty-two weeks
ended October 30, 1994 and October 29,1995, twenty-six weeks ended April 28,
1996 (unaudited), forty-eight weeks ended September 27, 1996, four weeks ended
October 27, 1996 and for the twenty-six weeks ended April 27, 1997(unaudited)
amounted to $0, $0, $0, $0, $5,274 and $34,557, respectively.

F-10
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 1 - Summary of Significant Accounting Policies -- (Continued)

Advertising

The Company expenses advertising costs as incurred.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
short-term investments with an original maturity of three months or less to be
cash equivalents.

The Company has cash balances in banks in excess of the maximum amount
insured by the FDIC as of October 27, 1996, October 29, 1995 and April 27, 1997
(unaudited).

Use of Estimates

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

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or
market.

Equipment and Improvements

Equipment and improvements are stated at cost. Depreciation is being
provided on the straight-line and accelerated methods over the estimated useful
lives of the assets.

Deferred Income Taxes

Deferred income taxes result mainly from temporary differences resulting
from using straight-line depreciation for financial statement reporting and
accelerated depreciation for income tax purposes.

Stock Options

In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 requires compensation expense to be
recorded (i) using the new fair value method or (ii) using existing accounting
rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related interpretations with pro forma
disclosure of what net income and earnings per share would have been had the
Company adopted the new fair value method. The Company intends to continue to
account for its stock based compensation plans in accordance with the provisions
of APB 25 (see Notes 9 and 12).

Interim Financial Information

Financial information as of and for the twenty-six weeks ended April 27,
1997 and April 28, 1996 is unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of the results for such period
have been included; all adjustments are of a normal and recurring nature.
Interim results are not necessarily indicative of results for a full year.

F-11
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 1 - Summary of Significant Accounting Policies -- (Continued)

Fair Value of Financial Instruments

The Company's financial instruments include cash, accounts receivable and
accounts payable. Due to the short-term nature of these instruments, the fair
value of these instruments approximate their recorded value. The Company has
long-term debt which it believes is stated at estimated fair market value.

Revenue Recognition

Revenue from sales of products is recognized when products are shipped to
the customer.

Proforma Income Tax Provision (Unaudited)

The unaudited income tax provision presented for the fifty-two weeks ended
October 30, 1994 and October 29 1995, twenty-six weeks ended April 28, 1996 and
forty-eight weeks ended September 27, 1996 have been prepared assuming an
effective combined federal and state tax rate of 40%.

Proforma Operating Results (Unaudited)

The following are the proforma operating results for the fifty-two week
period ended October 27, 1996 and October 29, 1995, as if the acquisition by the
Company described above had occurred on October 30, 1995 and October 31, 1994,
respectively. The proforma results give effect to changes in amortization and
deferred income taxes from valuing the acquired net assets at estimated fair
value and recording the excess of purchase price over the net assets acquired.
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended
October 27, 1996 October 29, 1995
(Unaudited) (Unaudited)
------------------ -----------------
<S> <C> <C>
Revenue .................................... $ 39,345,443 $ 42,678,959
Operating income ........................... $ 2,420,065 $ 2,034,526
Other expenses .............................. $ 1,223,059 $ 1,065,390
Net income ................................. $ 670,644 $ 535,450
Net income per share ........................ $ 0.19 $ 0.15
Weighted average common stock and common stock
equivalents outstanding .................. 3,600,000 3,600,000
</TABLE>
The proforma results of operations are not necessarily indicative of the
actual operating results that would have occurred had the acquisition been
consummated at the beginning of the period.

Earnings per Share

The computation of earnings per share is based on the weighted average
number of outstanding common stock and common stock equivalents (stock options)
and warrants of 3,600,000 for all periods. The number of outstanding common
shares reflects a 4-for-1 stock split and the dilutive effects of 1,600,000
common stock equivalents (subsequent to the stock split) related to the
Company's stock option plan and stock purchase warrants using the modified
treasury stock method (see Notes 9, 10 and 12). The number of common shares
outstanding is applied retroactively to all periods presented for earnings per
share purposes to reflect earnings per share as if the common stock equivalent
shares were outstanding for all periods presented.

F-12
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 1 - Summary of Significant Accounting Policies -- (Continued)

Accounts Receivable

Accounts receivable at October 29, 1995, October 27, 1996 and April 27,
1997 (unaudited) is shown net of allowance for doubtful accounts of $12,400.

NOTE 2 -- Inventories

Inventories consist of the following:
<TABLE>
<CAPTION>
Predecessor Company
------------- ----------------------------
October 29, October 27, April 27,
1995 1996 1997
------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Raw materials ........................... $1,944,202 $ 912,708 $1,291,472
Finished goods and work in-process ...... 1,352,601 980,960 1,699,865
----------- ----------- -----------
Total ................................ . $3,296,803 $1,893,668 $2,991,337
=========== =========== ===========
</TABLE>
NOTE 3 -- Prepaid Expenses

Prepaid expenses consist of the current portion of deferred financing costs
and various other prepaid expenses. Deferred financing costs are being amortized
over the life of the respective loan and other prepaid expenses are being
amortized over their useful lives.

NOTE 4 -- Equipment and Improvements

Equipment and improvements consist of the following:
<TABLE>
<CAPTION>
Predecessor Company
------------- ----------------------------
October 29, October 27, April 27,
1995 1996 1997
------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Equipment .............................. $15,520,169 $7,947,016 $7,954,306
Mobile equipment ..................... 131,669 29,979 30,177
Office furniture and equipment ......... 554,572 353,935 401,373
Leasehold improvements ............... 633,513 367,880 367,880
Construction in progress ............... -0- -0- 747,890
------------ ----------- -----------
16,839,923 8,698,810 9,501,626
Less: accumulated depreciation ..... . 8,040,836 75,883 612,901
------------ ----------- -----------
Equipment and Improvements, Net. $ 8,799,087 $8,622,927 $8,888,725
============ =========== ===========
</TABLE>
Depreciation expense charged to operations for the fifty-two weeks ended
October 30, 1994 and October 29,1995, twenty-six weeks ended April 28, 1996
(unaudited), forty-eight weeks ended September 27, 1996, four weeks ended
October 27, 1996 and for the twenty-six weeks ended April 27, 1997(unaudited)
amounted to $706,141, $808,984, $456,704, $822,103, $75,883 and $537,017,
respectively.

On September 27, 1996, equipment and improvements were revalued in
accordance with the purchase method of accounting.

F-13
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 5 -- Other Assets

Other assets are stated at cost and consist of the following:
<TABLE>
<CAPTION>
Predecessor Company
------------- ----------------------------
October 29, October 27, April 27,
1995 1996 1997
------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Deferred financing costs, net ...... $ -0- $178,442 $160,558
Other asset ........................ 26,465 7,505 -0-
License fee, net .................. 130,833 17,500 -0-
--------- --------- ---------
$157,298 $203,447 $160,558
========= ========= =========
</TABLE>
Amortization expense charged to operations for the fifty-two weeks ended
October 30, 1994 and October 29,1995, twenty-six weeks ended April 28, 1996
(unaudited), forty-eight weeks ended September 27, 1996, four weeks ended
October 27, 1996 and for the twenty-six weeks ended April 27, 1997(unaudited)
amounted to $39,996, $66,667, $35,000, $4,135, $1,228 and $64,389, respectively.

NOTE 6 -- Long-Term Debt

On October 29, 1995, AB Plastics had a note payable to Manufacturers Bank,
with an outstanding principal balance of $1,306,669, payable in monthly
principal installments of $40,833 plus interest at either the prime rate plus
.50% or the Libor rate plus 2.75%, with all unpaid principal and interest due in
May 1998. AB Plastics also had a revolving line of credit with Manufacturers
Bank of which $3,000,000 was outstanding under this line of credit on October
29, 1995, payable in monthly installments of interest only at either the prime
rate plus .25% or the bank's Libor rate plus 2.50%. Beginning in March 1996, the
line of credit was extended until March 15, 1997.

AB Plastics also had an additional line of credit from Manufacturers Bank
for the purchase of equipment which provided for monthly payments of interest
and principal of $37,161 beginning March 1996 through March 2000. At October 29,
1995, $1,500,000 was outstanding under the equipment line of credit. In
connection with the acquisition of the AB Plastics stock by Compass, all of the
outstanding debt payable to Manufacturers Bank was repaid on September 27, 1996.

On September 27, 1996, AB Plastics entered into a line of credit agreement
(the "Credit Agreement"), with a bank (the "Bank") to borrow up to the lesser of
$10,000,000 or the borrowing base, which consists of 85% of eligible accounts
receivable and 50% of eligible inventory (the "Borrowing Base") plus a Borrowing
Base supplemental amount under a revolving line of credit (the "Line of
Credit"). The Borrowing Base supplemental amount at October 27, 1996 was
$6,000,000 and commencing October 31, 1996 is to be reduced by $100,000 monthly.
The Line of Credit matures on July 3, 2001, at which time the outstanding
principal balance will be due and payable. The interest rate under the Line of
Credit is 1/2% above the Bank's prime rate which was 8 1/4% on October 27, 1996,
unless AB Plastics elects an optional interest calculation based on Eurodollars.
At October 27, 1996, $6,000,000 was outstanding under the Line of Credit.

In accordance with the Credit Agreement, AB Plastics also has an available
equipment Line of Credit for $2,000,000 for which there was no outstanding
balance at October 27, 1996. The interest rate on this line is 1/4% above the
Bank's prime rate which was 8 1/4% on October 27, 1996. Interest is payable
monthly and principal payments are to be repaid in 36 equal monthly installments
provided that the last payment shall be made no later than July 31, 2000. AB
Plastics will also pay a commitment fee of .25% annually, payable quarterly on
the unused line.

F-14
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 6 -- Long-Term Debt -- (Continued)

The Credit Agreement is collateralized by substantially all of the assets
of AB Plastics. Compass has guaranteed the Credit Agreement and the guaranty is
secured by a pledge of all of the capital stock of AB Plastics. The Bank
requires that AB Plastics maintain a stated net worth amount, and other
financial ratios requirements, which AB Plastics met at October 27, 1996.

On September 27, 1996, Compass and AB Plastics entered into a loan
agreement with a financial institution (the "Lender") in the amount of
$4,000,000, which is evidenced by a promissory note (the "Note") which bears
interest at 13.5% per annum with interest only payable monthly commencing on
November 1, 1996. Annual principal payments are required on April 1, 1999, April
1, 2000 and April 1, 2001 equalling the lesser of excess cash flows as defined
in the Note or $1,000,000. The remaining unpaid principal balance will be due
and payable on September 27, 2001. The debt, which was recorded on Compass's
books, was utilized by Compass to purchase the stock of AB Plastics. The Note,
which has restrictions as to payment of dividends and issuance of stock rights,
is subordinated to the Credit Agreement and is secured by substantially all the
assets of AB Plastics.

In consideration of making the loan, the Lender was granted the right (the
"Warrant") to purchase up to 800,000 shares (after giving effect to the
Company's 4-for-1 stock split) of the Company's common stock at a total exercise
price of $2,000 (see Note 10). The Warrant is exercisable at any time until
October 31, 2001. The Warrant, which was valued at $800,000 on September 27,
1996, has been recorded as deferred loan fees and is being amortized over the
life of the loan. The Company's fair value determination was based on several
commonly used methodologies for the determination of fair market value of the
Warrant.

At April 27, 1997, the outstanding balance under the Credit Agreement and
the Line of Credit was $3,150,000. There was no outstanding balance under the
equipment line. At April 27, 1997, the outstanding balance with the Lender was
$4,000,000.

The following is a schedule of the future minimum principal payment
requirements on the Company's long-term debt:

Fifty-Two Weeks ending
last Sunday in October Amount
---------------------- ------
1997 .................. $ -0-
1998 .................. -0-
1999 .................. 1,000,000
2000 .................. 1,000,000
2001 .................. 8,000,000
------------
Total ............... $10,000,000
============

NOTE 7 -- Capitalized Lease Obligations

The Company is the lessee of equipment under capital leases expiring
through the year 2000. The assets and liabilities are recorded at fair-market
value. The assets are being depreciated over their estimated useful lives.
Depreciation of assets under capital leases charged to expense for the fifty-two
weeks ended October 30, 1994 and October 29, 1995, twenty-six weeks ended April
28, 1996 (unaudited), forty-eight weeks ended September 27, 1996, four weeks
ended October 27, 1996 and for the twenty-six weeks ended April 27,
1997(unaudited) amounted to $50,592, $62,072, $39,072, $72,132, $6,012 and
$39,072, respectively. The following is a summary of property held under capital
leases included in equipment:

F-15
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 7 -- Capitalized Lease Obligations -- (Continued)

<TABLE>
<CAPTION>
Predecessor Company
------------- ------------------------------
October 29, October 27, April 27,
1995 1996 1997
------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C>
Equipment ........................... $1,980,334 $1,351,859 $1,735,644
Less: accumulated depreciation ...... (419,472) (6,012) (45,084)
---------- ---------- ----------
Total ........................... $1,560,862 $1,345,847 $1,690,560
========== ========== ==========
</TABLE>
Minimum future lease payments under capital leases as of October 27, 1996
for each of the next four years, and in the aggregate, are as follows:

Fifty-Two Weeks ending
last Sunday in October Amount
---------------------- ------
1997 ............................................. $ 331,208
1998 ............................................. 225,419
1999 ............................................. 124,620
2000 ............................................. 83,080
---------
Total minimum lease payments ..................... 764,327
Less: amount representing interest ............... (90,588)
---------
Present value of net minimum lease payments ...... $ 673,739
---------
Current portion ................................. $ 286,705
Long-term portion ................................. 387,034
---------
Total ............................................. $ 673,739
=========

Interest rates on capitalized leases vary from 7.5% to 8.35% and are
imputed based on the lessor's implicit rate of return.

NOTE 8 -- Income Tax Expense and Deferred Income Taxes

Prior to its acquisition by Compass, AB Plastics was taxed under the
provisions of subchapter "S" of the Internal Revenue Code. Under these
provisions, AB Plastics was not imposed Federal corporate income taxes and only
paid 1.5% of state income taxes. When AB Plastics was acquired by Compass, it
became a "C" corporation. The differences in depreciation methods and estimated
lives used by AB Plastics for book and tax purposes resulted in a deferred tax
liability upon AB Plastics becoming a "C" corporation. Accordingly, the
principal components of the deferred tax liability consist primarily of
temporary differences in depreciation expense. These same temporary differences
for depreciation methods and estimated lives create ongoing deferred tax
adjustments. Income taxes are allocated between the parent and subsidiary based
on the taxable income and loss of each entity. A summary of income tax expense
is as follows:

F-16
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 8 -- Income Tax Expense and Deferred Income Taxes -- (Continued)
<TABLE>
<CAPTION>
Predecessor Company
------------------------------------------------------------- ----------------------------------
For the 26 For the 48 For the 4 For the 26
For the 52 Weeks Ended Weeks Ended Weeks Ended Weeks Ended Weeks Ended
-------------------------- ---------------- ------------- ---------------- ---------------
October 30, October September October 27,
1994 29, 1995 April 28, 1996 27, 1996 1996 April 27,1997
------------- ---------- ---------------- ------------- ---------------- ---------------
(Unaudited) (Consolidated) (Consolidated)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Federal ............... $ -0- $ -0- $ -0- $ -0- $ 49,000 $474,915
State .................. 25,490 20,682 12,445 (7,939) 29,694 141,858
Deferred Income taxes 22,637 5,775 -0- (1,587) 38,142 146,997
-------- -------- -------- -------- --------- ---------
Total Income Taxes $48,127 $26,457 $12,445 $ (9,526) $116,836 $763,770
======== ======== ======== ======== ========= =========
</TABLE>
A reconciliation of income tax at the statutory rate to the Company's
effective rate is as follows:
<TABLE>
<CAPTION>
Predecessor Company
--------------------------------------------------------------- ---------------------------
For the 52 Weeks For the 26 For the 48 For the 4 For the 26
Ended Weeks Ended Weeks Ended Weeks Ended Week Ended
----------------------------- ------------- --------------- ------------- -----------
October 30, October 29, April 28, September 27, October 27, April 27,
1994 1995 1996 1996 1996 1997
------------- ------------- ------------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Computed at the
expected statutory
rate .................. 34.00% 34.00%
Surtax exemption ...... (0.41) (.70)
State income tax - net
of federal tax benefit 6.14 6.00
------ ------
Income tax expense -
effective rate ...... "S" Corp. "S" Corp. "S" Corp. "S" Corp. 39.73% 39.30%
====== ======
</TABLE>
Significant components of the Company's deferred income tax liabilities and
assets as of September 27, 1996 and October 27, 1996 as calculated in accordance
with FASB Statement No. 109 consist primarily of temporary differences in
depreciation relating to property and equipment.

NOTE 9 -- Commitments and Contingencies

Lease Commitments

The Company is presently obligated under two noncancelable operating leases
for buildings which it occupies, expiring between December 31, 2000 and August
20, 2004. The main building at 15730 South Figueroa Street in Gardena,
California is being leased from the prior stockholders of AB Plastics at an
annual rental of $422,400. In addition to minimum rental payments, the building
lease requires payment of real property taxes. A second building located at 1700
South Wilmington Street in Compton, California is being leased from an outside
party at an annual rental of $230,400. In addition to minimum rental payments,
the building lease requires payment of applicable operating expenses (including
property taxes and various maintenance costs).

F-17
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 9 -- Commitments and Contingencies -- (Continued)

The following is a schedule of future minimum rental payments subject to
cost of living increases:

Fifty-Two Weeks ending
last Sunday in October Amount
---------------------- ------
1997 .................. $ 652,800
1998 .................. 664,800
1999 .................. 676,800
2000 .................. 676,800
2001 .................. 464,800
Thereafter ............ 2,041,440
-----------
Total ............... $5,177,440
===========

The Company has an option to purchase the South Figueroa Street facility
from the prior stockholders at fair market value. The option is exercisable on
or before November 20, 2005. On March 10, 1997, the Company exercised its option
to purchase the South Figueroa Street facility for $3,100,000.

In addition, the Company leases mobile equipment and forklifts for monthly
payments of $1,900. Rent expense for the fifty-two weeks ended October 30, 1994,
October 29, 1995, twenty-six weeks ended April 28, 1996 (unaudited), forty-eight
weeks ended September 27, 1996, four weeks ended October 27, 1996 and for the
twenty-six weeks ended April 27, 1997 (unaudited) amounted to $830,495,
$900,623, $428,430, $834,584, $55,731 and $312,931 respectively.

Employment Agreements

The Company has employment agreements with certain key employees of the
Company, which expire at various dates through September 29, 2001. Some of the
agreements provide for incentive bonuses which are payable if specified
management goals are attained. The aggregate commitment for future salaries
under these agreements at October 27, 1996, excluding bonuses, was approximately
$1,300,000.

Management Agreements

The Company also entered into management agreements with two companies
individually owned by the Company's Chairman and President, respectively, to
provide consulting services over a five year period. The aggregate commitment
for future services under these agreements at October 27, 1996 was approximately
$1,000,000. In July 1997, the management agreement with the Company's president
was retroactively amended and restated as an employment agreement with
substantially identical terms and conditions.

Stock Option Plan and Stock Warrants

On September 29, 1996, Compass adopted a stock option plan providing for
both incentive and nonqualified stock options, pursuant to which the Company
reserved 200,000 shares of common stock of Compass ("Common Stock") for grant
under the Plan (the "1996 Plan"). The 1996 Plan required that all options be
granted at an exercise price not less than fair market value unless otherwise
determined by the option committee. On September 29, 1996, Compass granted
incentive options to various employees and officers of the Company to purchase
200,000 shares of common stock at an exercise price of $4.00 per share to be
exercised over a six year period (see Note 1). Such share amounts and exercise
price were subsequently adjusted on an arithmetic basis to reflect the 4-for-1
stock split described in Note 12.

F-18
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 9 -- Commitments and Contingencies -- (Continued)

Effective on the date of the Initial Public Offering (see Note 12), certain
of such stock options will be exercised. Pursuant to such option exercises, and
the exercises of the warrants described below, the Company will issue an
aggregate of 1,560,000 post-split shares of common stock, and will receive
aggregate proceeds of $762,000 (of which $2,000 will be in cash and $760,000
will be in the form of promissory notes).

Except for $2,000 to be received in cash from a financial institution upon
exercise of warrants for 800,000 shares, the purchase price for such shares will
be paid by delivering to the Company 8% non-recourse promissory notes by two
executive officers of the Company which are secured only by a pledge of their
respective shares and by 8% full-recourse promissory notes by the remaining
individual holders of the options and warrants, in each case payable
semi-annually as to interest, and as to principal, to occur on the earlier of
(a) the sale of the Company to any unaffiliated third party, whether through
merger, sale of assets or like consolidation or combination or (b) September 30,
2001. In addition, to the extent that such officers shall effect any public or
private sale, transfer or other disposition of any of their shares of common
stock, they will be obligated to apply all net after-tax proceeds to the payment
of their respective notes until such notes are paid in full. In accordance with
the terms of the full-recourse promissory notes, the Company intends to exercise
its rights with respect to payment of such notes. No new measurement date will
occur at the date of the notes for stock compensation purposes.

Compass issued warrants to the Chairman and President of the Company to
purchase an aggregate of 100,000 shares of common stock at $4.00 per share,
exercisable at any time and from time to time in whole or in part from the date
of grant through December 31, 2002. The Company also issued a warrant to a
financial institution to purchase 200,000 shares of common stock at $.01 per
share, exercisable on the date of grant (see Note 6).

The Company follows Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees ("APB 25"), and related interpretations in
accounting for its stock options. Under APB 25, when the exercise price of
employee stock options equals or exceeds the market price of the underlying
stock on the "measurement date," no compensation expense is recognized.

The retroactive effect of the 4-for-1 stock split on the common stock,
stock options and stock warrants is as follows:
<TABLE>
<CAPTION>
Common Stock Stock
Stock Options Warrants Total
------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Numbers of shares outstanding ...... 500,000 200,000 300,000 1,000,000
Purchase of treasury stock ......... (100,000) (100,000)
--------- -------- ---------- ---------
(Using the modified treasury stock
method) ........................... 400,000 200,000 300,000 900,000
Stock split ........................ 4 4 4 4
--------- -------- ---------- ---------
Common stock and common stock
equivalents outstanding after the
retroactive effect of stock split ... 1,600,000 800,000 1,200,000 3,600,000
========= ======== ========== =========
</TABLE>
Contingent Purchase Price

In connection with the acquisition of AB Plastics, on September 27, 1996,
the Company has a contingent liability up to $500,000. The Company cannot
determine the outcome of this matter as of the date of this report. Any amounts
to be paid in the future as a result of this contingency will be recorded as
goodwill and will be amortized in accordance with the Company's policy for
amortization of goodwill.

F-19
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 10 -- Stock Option Plan and Stock Purchase Warrants

Summary information with respect to the stock option plan is as follows:
<TABLE>
<CAPTION>
Range of Outstanding Outstanding
Exercise Options Options
Incentives Granted Exercisable
------------ ------------- ------------
<S> <C> <C> <C>
Balance, September 29, 1996
(Inception)
Activity:
- ---------
Granted ................................................ $4.00 200,000 23,063
Exercised ................................................ -0- -0- -0-
Canceled ................................................ -0- -0- -0-
------ -------- -------
Balance, October 27, 1996 ................................. $4.00 200,000 23,063
Stock split ............................................. 4 4 4
------ -------- -------
Balance after the retroactive effect of stock split ...... $1.00 800,000 92,252
====== ======== =======
</TABLE>
NOTE 11 - Economic Dependency

Major Customers

The Company sells a substantial portion of its product to several major
customers. Sales to major customers which exceeded 10% of sales in the aggregate
and accounts receivable from such customers are as follows:
<TABLE>
<CAPTION>
Predecessor Company
---------------------------------------------------------- ---------------------------------

For the 52 Weeks For the 26 For the 48 For the 4 For the 26
Ended Weeks Weeks weeks Weeks
---------------------------- Ended Ended Ended Ended
October 30, October 29, April 28, September October 27, April 27,
1994 1995 1996 27, 1996 1996 1997
------------- ------------- ------------- ------------- ---------------- ---------------
(Unaudited) (Consolidated) (Consolidated)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Sales to major customers ...... $29,881,703 $38,614,539 $16,207,292 $30,293,400 $2,707,845 $14,708,211
============ ============ ============ ============ =========== ============
Accounts receivable from
major customers ............... $ 3,207,431 $ 5,083,781 $ 2,830,510 $ 5,781,803 $5,048,887 $ 2,021,428
============ ============ ============ ============ =========== ============
</TABLE>
Major Suppliers

The Company purchased a substantial portion of its raw material from its
largest customer under their supply agreements with major resin producers.

NOTE 12 -- Initial Public Offering and Subsequent Events

Stock Split

On May 29, 1997, the Board of Directors of the Company, in connection with
the IPO, approved a 5.4-for-1 stock split of the Company's common stock. On July
18, 1997 the Board of Directors amended such resolution retroactive to May 29,
1997 to reduce such 5.4-for-1 stock split to a 4-for-1 stock split. The Board

F-20
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 12 -- Initial Public Offering and Subsequent Events -- (Continued)

of Directors additionally authorized amending Compass' certificate of
incorporation in order to change the name of Compass from AB Plastics Holding
Corporation to Compass Plastics & Technologies, Inc. and increase the number of
authorized shares of Compass from 5 million shares to 20 million shares of
common stock and from 1 million shares to 5 million shares of preferred stock.
In connection with the amendment to the certificate of incorporation the par
value of common stock and preferred stock remains at $.0001 per share.
Accordingly, all shares and per share amounts have been retroactively restated
for this stock split (see Note 1).

Initial Public Offering (unaudited)

On June 6, 1997 the Company filed a registration statement on Form S-1
offering 1.3 million shares of common stock at an estimated offering price
between $7.00 and $8.00 per share as an Initial Public Offering ("IPO"). On July
21, 1997, concurrent with the change in the stock split, the Company amended the
terms of its proposed IPO to offer 1.2 million shares at an estimated offering
price of between $8.50 and $9.50 per share. In accordance with the letter of
intent between the Company and the underwriter (the "letter of intent"), the
underwriter has received an option (the "Over-Allotment Option") to purchase an
additional number of shares from the Company or selling shareholders equal to 15
percent (15%) of the number of shares sold to the public for the purpose of
covering over-allotments in the sale of firm commitment shares. The letter of
intent also provides that the managing underwriter or its designees shall be
entitled to receive, at the closing of the IPO, purchase warrants (the
"Underwriter's Warrants") for the purchase of a number of shares equal to ten
percent (10%) of the number of shares sold to the public. The Underwriter's
Warrants were exercisable at a price per share equal to one hundred twenty
percent (120%) of the public offering price. On September 3, 1997, the Company's
Board modified the terms of the IPO to offer a total of 1,650,000 shares at an
offering price of $8.00 per share. In addition, the exercise price of the
Underwriter's Warrants was increased to one hundred fifty-five percent (155%) of
the public offering price.

Loan Amendment (Unaudited)

On June 4, 1997, AB Plastics amended its Loan Agreement with the Bank to,
among other things, extend the availability period under the Equipment Line to
October 31, 1997 and to extend the repayment terms to 48 months.

1997 Stock Option Plan (unaudited)

In June 1997, the stockholders of Compass approved Compass's 1997 Stock
Option Plan, as previously adopted by the Compass's Board of Directors (the
"1997 Plan"), pursuant to which officers, directors, key employees and
consultants of the Company are eligible to receive incentive stock options and
non-qualified stock options to purchase up to an aggregate of 800,000 shares of
Common Stock. There are 222,222 currently outstanding stock options under the
1997 Plan which expire on October 31, 2002. The options, which are variable plan
options, are exercisable at the IPO price only during the period of the
employment of the holder of the options and are exercisable only to the extent
of (a) 74,074 shares only if the average of the closing prices of the Company's
common stock, as reported on Nasdaq or any national securities exchange for any
30 consecutive trading days (the "Average Closing Price"), equals or exceeds
$17.00 per share, (b) 148,148 shares only if the Average Closing Price equals or
exceeds $25.50 per share, or (c) 222,222 shares only if the Average Closing
Price equals or exceeds $34.00 per share. (See Note 1). For the variable plan
options, compensation cost is measured as the excess, if any, of the quoted
market price of the Company's stock at the date that it becomes probable that
the options vest and become exercisable over the exercise price (the amount the
employee must

F-21
<PAGE>

COMPASS PLASTICS & TECHNOLOGIES, INC.
(Formerly AB Plastics Holding Corporation)

NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 12 -- Initial Public Offering and Subsequent Events -- (Continued)

pay to acquire the stock). The above variable plan options are evaluated with
respect to compensation costs on a quarterly basis by management. No
compensation costs have been recognized in the Company's financial statements
with respect to stock options. The minimum amount of expense the Company would
have to recognize if the target prices are met would be approximately
$3,667,000.

F-22
<PAGE>

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No dealer, salesperson or any other person has been authorized to give
any information or to make any representation other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any Underwriter.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any date subsequent to the date hereof. 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 any person to whom it is unlawful
to make such offer or solicitation.

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TABLE OF CONTENTS

Page
-----
Prospectus Summary ..................... 3
Risk Factors ........................... 8
The Company .............................. 14
Use of Proceeds ........................ 15
Dividend Policy ........................ 16
Capitalization ........................... 16
Dilution ................................. 17
Selected Financial Data .................. 18
Pro Forma Statements of Operations ...... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ........................... 21
Business ................................. 27
Management .............................. 36
Principal and Selling Stockholders ...... 43
Certain Transactions ..................... 45
Description of Securities ............... 47
Shares Eligible for Future Sale ......... 49
Underwriting ........................... 50
Legal Matters ........................... 51
Experts ................................. 51
Additional Information .................. 51
Index to Financial Statements ............ F-1

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

Until September 28, 1997 (25 days after the date of this Prospectus),
all dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligations of dealers to
deliver a Prospectus when acting as Underwriters and with respect to their
unsold allotments or subscriptions.

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<PAGE>
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1,650,000 Shares

Compass Plastics &
Technologies, Inc.

Common Stock

------------
PROSPECTUS
------------

CRUTTENDEN ROTH
INCORPORATED

JOSEPHTHAL LYON & ROSS
INCORPORATED

September 3, 1997

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