ANGSTROM TECHNOLOGIES INC, POS AM, 1997-06-25

ANGSTROM TECHNOLOGIES INC
POS AM, 1997-06-25
MISCELLANEOUS CHEMICAL PRODUCTS

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<PAGE>

As filed with the Securities and Exchange Commission on June 25, 1997
Registration No. 33-86754
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

POST-EFFECTIVE AMENDMENT NO. 6
TO
FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ANGSTROM TECHNOLOGIES, INC.
----------------------------
(Name of small business issuer as specified in its charter)

3823
----------------------------
Primary Standard Industrial Classification Code Number

31-1065350
----------------------------
I.R.S. Employer Identification Number

DELAWARE
----------------------------
(State of Incorporation)

1895 Airport Exchange Boulevard, Suite 110
Erlanger, Kentucky 41018
(606) 282-0020
- --------------------------------------------------------------------------------
(Address, including Zip Code, and Telephone Number, Including Area Code of
Registrant's Principal Executive Offices)

Daniel A. Marinello
Chief Executive Officer
Angstrom Technologies, Inc.
1895 Airport Exchange Boulevard, Suite 110, Erlanger, KY 41018
(606) 282-0020
- --------------------------------------------------------------------------------
(Name, Address including Zip Code, and Telephone Number, including
Area Code, of principal place of business)

Copy to:
Edward I. Tishelman, Esq.

Hartman & Craven LLP
460 Park Avenue
New York, NY 10022
(212) 836-4940
----------------------------

Approximate date of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.

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

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

================================================================================
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE>

Cross Reference Sheet Showing Location in the Prospectus of Information
Required by Items of Form SB-2

<TABLE>
<CAPTION>
Item Number and Caption Prospectus Page
- ----------------------- ---------------

<S> <C>
Item 1. Front of Registration Statement and
Outside Front Cover of Prospectus................... Cover
Item 2. Inside Front and Outside Back Cover
Pages of Prospectus................................... Inside Front Cover; Outside Back Cover
Item 3. Summary Information and Risk Factors.................. Prospectus Summary; Risk Factors
Item 4. Use of Proceeds....................................... Inapplicable
Item 5. Determination of Offering Price....................... Inapplicable
Item 6. Dilution.............................................. Inapplicable
Item 7. Selling Security Holders.............................. Selling Stockholders and Plan of Distribution
Item 8. Plan of Distribution.................................. Cover; Selling Stockholders and Plan of Distribution
Item 9. Legal Proceedings..................................... Inapplicable
Item 10. Directors, Executive Officers,
Promoters and Control Persons....................... Management - Directors
Item 11. Security Ownership of Certain Beneficial
Owners and Management................................. Principal Stockholders and Holdings of Management
Item 12. Description of Securities............................. Description of Securities
Item 13. Interests of Named Experts and Counsel................ Legal Matters; Experts
Item 14. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities..................................... Management-Limitation
of Liability and Indemnification
Item 15. Organization within Last Five Years................... The Company; Business of the Company
Item 16. Description of Business............................... The Company; Business
Item 17. Management's Discussion and Analysis
or Plan of Operation ............................... Management's Discussion and Analysis
Item 18. Description of Property............................... Business - Property
Item 19. Certain Relationships and
Related Transactions................................ Management - Certain Transactions and Agreements;
Legal Matters.
Item 20. Market for Common Equity and
Related Stockholder Matters......................... Description of Securities; Shares Eligible for Future
Sale; Dividends; Price Range of Common Stock
Item 21. Executive Compensation................................ Management - Executive Compensation
Item 22. Financial Statements.................................. Financial Statements
Item 23. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure............................ Inapplicable
</TABLE>

<PAGE>

PROSPECTUS

ANGSTROM TECHNOLOGIES, INC.

1,400,000 Shares of Common Stock,
$.01 par value per share

This prospectus relates to the sale, from time to time hereafter, by
certain stockholders of shares of an aggregate of up to 700,000 shares of common
stock, $.01 par value ("Common Stock") acquired by them in private placements of
the Company (See "Selling Stockholders"), and (ii) the sale by certain officers
and directors holding stock options ("Holders of Certain Stock Options") of an
aggregate of up to 700,000 shares of Common Stock to be acquired by them upon
the exercise of such Stock Options. (See "Selling Stockholders and Plan of
Distribution"). The Company will not receive any proceeds from sales of Common
Stock sold either by the Selling Stockholders or by the Holders of the Stock
Options referred to hereinabove; however, if all of the Stock Options referred
to herein were exercised by the Holders thereof, the Company would receive
aggregate proceeds of $87,500.

The Company's Common Stock is publicly traded in the over-the-counter
market and quoted on the O-T-C Bulletin Board for non-NASDAQ stocks of the
National Association of Securities Dealers, Inc. ("Electronic Bulletin Board")
and listed in the "pink sheets" published by the National Quotation Bureau, Inc.
The last trade price was $.625 and the high bid and low asked prices at which
the Common Stock was quoted on June 19, 1997 was $.625 bid and $.75 asked. The
Company's Preferred Stock and Class A Warrants (and Class B Warrants, if and
when issued) and Units comprising the foregoing are also publicly traded in the
over-the-counter market.

M.H. Meyerson & Co., Inc., a market maker in shares of the Company's
Common Stock, is (together with its affiliates), a holder of approximately 23.5%
of the Company's Common Stock; it may, in its capacity as a market maker of the
Company's Common Stock, participate in the distribution and sale of the Common
Stock offered hereby. This could create a conflict of interest between such firm
and the Company's stockholders as well as restrict the activity of such
brokerage firm as a market maker in the Company's securities, both of which
should be considered additional risks to purchasers of Common Stock offered
hereby. See "Risk Factors--Possible Restriction on Market Making Activities in
the Company's Securities" and "Selling Stockholders and Plan of Distribution".
This Prospectus is also to be used by M.H. Meyerson & Co., Inc. in connection
with offers and sales related to its market-making transactions in the Company's
securities.

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE PURCHASERS SHOULD
CAREFULLY CONSIDER THE FACTORS SPECIFIED UNDER "RISK FACTORS". THE SECURITIES
OFFERED HEREBY SHOULD ONLY BE PURCHASED BY INVESTORS WHO CAN AFFORD TO LOSE
THEIR ENTIRE INVESTMENT THEREIN.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND

EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is June 25, 1997.

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Room 1400, 75 Park Place, New York, New York 10007, and
Room 3190, Kluczynski Federal Building, 230 South Dearborn Street, Chicago,
Illinois 60604, and copies of such materials can be obtained from the Pubic
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding issuers, including the
Company, that file electronically with the Commission.

The Company has filed a Registration Statement on Form SB-2
("Registration Statement") under the Securities Act of 1933, as amended ("1933
Act") with the Commission with respect to the securities being offered by this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits thereto. For further information
with respect to the Company and the securities offered hereby, reference is made
to the Registration Statement and the exhibits thereto. All of these documents
may be inspected without charge at the Public Reference Section of the
Commission, at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may be
obtained therefrom at prescribed rates. Statements contained in this Prospectus
concerning the provisions of documents filed with the Registration Statement as
exhibits are necessarily summaries of such documents, and each statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the SEC.

No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus, and if given or made, such information or representation must
not be relied upon as having been authorized by the Company or by the
Underwriter. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, by any person in any jurisdiction in which it
is unlawful for such person to make such an offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information herein is correct as
of any date subsequent to the date hereof.

Forward Looking Statements

This prospectus contains certain forward looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act, which
are intended to be covered by the safe harbors created thereby. Although the
Company believes that the assumptions underlying the forward looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward looking statements
contained in this report will prove to be accurate. Factors that could cause
actual results to differ from the results specifically discussed in the forward
looking statements included, but are not limited to, the absence of anticipated
contracts or higher than historical costs incurred in performance of contracts.

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<PAGE>

PROSPECTUS SUMMARY

This summary is qualified in its entirety by the other information and financial
statements appearing elsewhere in the Prospectus.

The Company

Angstrom Technologies, Inc. (the "Company") was incorporated under the
laws of the State of Delaware on June 3, 1983. The Company's principal executive
offices are located at 1895 Airport Exchange Boulevard, Suite 110, Erlanger,
Kentucky 41018 and its telephone number is (606) 282- 0020. See "Business - The
Company - Background" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

The Company is engaged in the development, manufacture and sale of
Electro-Optical Control Systems, consisting of an ultraviolet optical scanner
and invisible fluorescent chemical compounds. The Company has developed and
markets scanning units known as the OMNI 2000E and 2000H series). These units
can be used individually or combined with several units, working in unison to
provide statistical process control for manufacturing lines. Individually, the
unit can determine the presence or absence of the fluorescent compound. When
units are combined, a grid code is formed where information is generated and
stored, then later read for a variety of applications. In addition, the Company
produces a number of fluorescent compounds, each of which emits its own wave
length. When printed, sprayed, or stamped, the marking compounds are non-visible
under normal lighting conditions. This allows for marking over existing graphics
or on different materials without changing the appearance of the product. These
compounds are blended into a variety of materials to be applied to the
customer's product. An example of materials, among others, are printing inks,
plastic films, overprint varnish, adhesives, and hot plastic molding compounds.
Also, due to the invisible nature of the compound, the system can also be used
in a variety of security applications.

The Company's technology involves placing a mark, comprised of a
non-visible compound, on a product. These compounds emit a low level of visible
light when excited by ultraviolet light transmitted from a scanner designed and
sold by the Company. The scanner receives the visible light and converts it to
an electronic signal. Using one of the many outputs available, an operator can
be notified, an ejection device activated, and a programmable controller or
computer can be signaled to take the appropriate action. The scanner works
independent of varying background, color, shape, size, or ambient lighting
conditions. These features are intended to overcome many of the disadvantages
associated with conventional photoelectrics.

The Company's products have historically been geared for use by the
pharmaceutical and automobile parts manufacturing industries in connection with
a variety of functions including: label verification, quality control,
inspection, alignment, adhesive tracing, safety seal verification, sorting,
automatic identification, matching and inserting. In addition to the foregoing
applications, the Company has also developed and is in the process of marketing
applications in the document security field, such as identification of
counterfeit currency and verification of credit cards and other identification

cards.

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<PAGE>

The Company has developed and now offers for sale five different scanning
devices:

1. Hand-Held scanner used, among other things, for verifying tickets to
sporting and entertainment events;

2. Mid-Range scanner used for a variety of commercial applications;

3. High-End scanner, which has the ability to tie-into a computer, and is
being used for the U.S. Postal Office Certified Mail Project.

4. High-End and High-Security Document scanner, which allows modulation of
upper and lower reading limits, to be used for check sorting and check
verification applications;

5. Document Reader, which is portable and easily moveable, to be used for
verifying tickets to sporting and entertainment events, among other
things.

The Company has also been developing its chemical compounds to keep
pace with both scanner development and the needs of its customers and markets. A
significant achievement was the development of sub-micron compound number 6
which has been specified by the US Postal Service for incorporation in the
fluorescent ink used on certified mail labels; as a result, the Company recently
received a new purchase order from a subcontractor of the US Postal Service for
this compound (see "Sales and Marketing"). In addition, over 60 new ultraviolet
compounds have been developed by the Company, which is conducting performance
and related testing on the same to determine which compounds will be placed into
manufacturing for commercial use. See "Business-Products". There can be no
assurance that such pending developments will result in revenues or profits to
the Company. See "Risk Factors - New Products and Technological Change".

The Offering

There is being offered under this Prospectus 700,000 shares of Common
Stock held by the Selling Stockholders. All of such shares were acquired by the
Selling Stockholders in one of two private placements consummated by the Company
in September and October, 1993. See "Selling Stockholders". All of the proceeds
from the sale of such shares will go to the Selling Stockholders and none will
accrue to the Company. This Prospectus also relates to the offering for sale by
certain officers and directors of the Company, from time to time hereafter, of
an aggregate of up to 700,000 shares of Common Stock which are to be acquired by
such persons pursuant to their exercise of stock options. The Company will not
receive any proceeds from the sale of such shares of Common Stock; however, if
all of such Stock Options are exercised, the Company will receive from the
Holders thereof $87,500. See, "Selling Stockholders and Plan of Distribution
- -Sales by Holders of Certain Stock Options".

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<PAGE>

CAPITALIZATION

<TABLE>
<CAPTION>
Shares Outstanding As of April 30,1997
- ------------------ -------------------

<S> <C>
Shares of Common Stock . . . . . . . . . . . . . . . . . 22,917,178
Shares of Preferred Stock . . . . . . . . . . . . . . . . . 1,370,475
Class A Warrants . . . . . . . . . . . . . . . . . . . . . 1,725,000
Class B Warrants . . . . . . . . . . . . . . . . . . . . . - 0 -
</TABLE>

Statement of Operations Data:
- -----------------------------

<TABLE>
<CAPTION>
Six Months Ended Year Ended Six Months Ended Year Ended
April 30, 1997 October 31, 1996 April 30, 1996 October 31, 1995
-------------- ---------------- --------------- ----------------

<S> <C> <C> <C> <C>
Total revenues $ 855,979 869,829 442,582 1,050,281

Net income (loss) 168,829 (467,207) (180,746) (217,211)

Less dividend requirement on
preferred stock (109,600) (237,206) (106,900) (266,152)

Net income (loss) applicable to
common stock 59,229 (704,413) (287,646) (483,363)

Net income (loss) per share of common
stock -- (0.03) (0.01) (0.02)
Dividends on shares of common stock 0.00 0.00 0.00 0.00
</TABLE>

Balance Sheet Data:
- -------------------

<TABLE>
<CAPTION>
Six Months ended Year Ended
April 30, 1997 October 31, 1996
-------------- ----------------
<S> <C> <C>
Working Capital $1,400,439 $1,252,385
Total assets 1,861,492 1,717,968
Total liabilities 303,209 340,912
Stockholder's equity 1,558,384 1,377,056
</TABLE>

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<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following should be
considered carefully in evaluating the Company and its business before
purchasing the Units offered by this Prospectus.

RISKS RELATED TO THE COMPANY

1. History of Operating Losses; Accumulated Deficit.

The Company was founded in 1983 and, in 1984, consummated a public
offering of shares of its Common Stock, whereby it received net proceeds of
approximately $2,400,000. From 1984 through 1990 the Company was focused on
development activities consisting of readying for marketing and sale its
photomolecular control systems and devices whereby a combination of ultraviolet
light, fluorescent chemicals and compounds and scanning devices were used to
recognize and distinguish encoded containers and other materials. Thereafter,
the Company continued to develop its products and also became actively engaged
in marketing and sales activities. From inception through October 31, 1990, the
Company was unable to generate sufficient cash flow to maintain its operations
and service its debt. A levying creditor began attaching the Company's property
in June 1990, forcing the Company to file for protection under Chapter 11 of the
Bankruptcy Code; while operating as a Debtor-In-Possession, the Company revised
the payment terms due to such creditor and obtained dismissal of the Bankruptcy
proceedings in July, 1991. From its formation in 1983 through April 30, 1997,
the Company derived an accumulated deficit of $5,844,375, of which $467,207 was
incurred during its most recent fiscal year, the period ending October 31, 1996
("Fiscal 1996"). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the Company's Financial Statements and
Notes thereto and the Report of Independent Auditors included herein.

2. Need for Additional Working Capital.

The Company anticipates that its existing capital resources, including
the net proceeds of its public offering consummated in December, 1993, will be
adequate to satisfy its capital requirements until at least the completion of
its current fiscal year ending October 31, 1997; this is based upon the fact
that the Company had cash and cash equivalents and short-term liquid investments
on hand as at April 30, 1997 of $799,683 which management believes is more than
sufficient to fund anticipated marketing and development expenses, and the
Company's operating loss, if any, through this period of time. In addition, in
order to further conserve its cash resources, the Board of Directors of the
Company has passed up declaring a dividend on the Preferred Stock. The Company's
future capital requirements will depend on many factors, including cash flow
from operations, continued progress in its product development programs,
competing technological and market developments, and the Company's ability to
market its product successfully. It may be necessary to raise additional funds,
through equity or debt financing. Any equity financing could result in dilution
to the Company's then existing stockholders, and any

financing, if available at all, may be on terms unfavorable to the Company. See
"Business", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Financial Statements".

3. Competition.

The market for the Company's products is highly competitive, and the
Company expects competition to increase. Many of the Company's current and
prospective competitors have significantly greater financial, technical and
marketing resources than the Company. Competitive pressures could cause the
Company's

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<PAGE>

products to lose market acceptance or result in significant price erosion, with
a material adverse effect upon the Company's results of operations. A variety of
external and internal factors could adversely affect the Company's ability to
compete. These include the relative functionality, performance and reliability
of the products offered by the Company and its competitors, the success and
timing of new product development efforts, and the Company's success in
attracting and retaining highly qualified employees. Although the Company
believes its products are competitive with those of its competitors in
functionality, performance and reliability, the Company has no quantitative data
to substantiate such belief. See "Business - Competition".

4. Dependence on Proprietary Technology; Limited Patent Protection.

The Company's success is heavily dependent upon its proprietary
technology because it deems its chemical formulae and components and structure
of its scanning devices to give it an advantage over other persons seeking to
duplicate its products. The Company relies on one or more of contractual rights,
trade secrets and copyright laws to establish or protect its rights. In
addition, from and after May 1995, the Company has been granted U.S. patents
covering an authentication system and relating to the calibration of
fluorescence detectors, respectively, in addition to its previously outstanding
patent covering ultraviolet detection technology and now holds a total of six
patents. Despite this fact, there can be no assurance that such patents or that
any future patents which may issue in the Company's favor would necessarily
protect the Company from competition or potential competition. Accordingly, the
Company anticipates reliance for the foreseeable future on both its patents and
on contractual rights, trade secrets and copyright laws. The steps taken by the
Company to protect its rights may not necessarily be adequate to deter
misappropriation, or to preclude an independent third party from developing
functionally equivalent technology. The newly issued and pending patents are
filed in the names of individual executives who are the inventors thereof and a
two-thirds interest is assigned to the Company, which has exclusive rights
thereto, subject to the payment of royalties. See "Business -Intellectual
Property Rights and Technology Protection" and "Executive Employment Agreement -
Intellectual Property Rights".

5. Uncertainty of Market Acceptance.

The Company's products have had but limited sales in recent years. For
its fiscal years ending October 31, 1996 and October 31, 1995, the Company had
sales revenues of approximately $869,800 and $1,050,280, respectively. Although
the Company has been expanding its product line and implementing a special
marketing program, market acceptance of the Company's current and proposed
products will depend upon the ability of the Company to demonstrate the
advantages of its equipment and methodology over other products that attempt to
perform similar functions. There can be no assurance that the Company will be
able to compete effectively in and develop the market for its products. See
"Business - Products; Competition; Sales and Marketing".

6. New Products and Technological Change.

The Company has recently completed the upgrading of its scanner
product to take account of microprocessor technology and has produced a family
of five scanners and readers. See "Business - Products." Management has been
able to empower some of its scanners for invisible bar code reading functions;
in addition, the Company has produced a miniaturized version of its scanner,
which is marketed as a "reader" unit, as well as a mid-range scanner which is
smaller, has less functions and is less expensive than its larger version. The
Company also is continuing its efforts to increase its chemical line by
modifying the formulas for the chemicals used in connection with its scanner and
reader products. However, there can be no assurance that such product
development will be successful or result in significant revenue or any profits
to the Company. Further, as with any technological dependent product, the
Company expects that the market for its products will

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<PAGE>

continue to be subject to frequent changes in technology and customer
preferences. As a result, the Company's growth and future financial performance
will depend upon its ability to develop and introduce new products and enhance
existing products accommodating the latest technological advances and customer
requirements. Some of the Company's products will require adaptation to specific
customer needs on a "build-to-suit" basis. There can be no assurance that any
new or modified products will be successfully developed or achieve market
acceptance, or that competitors will not develop and market products which
render obsolete or less marketable the Company's existing products or its
products under development. Any failure by the Company to anticipate or respond
adequately to the changes in technology and customer preferences, or any
significant delays in product development or introduction, could adversely
affect its business. See "Business - Products" and "Competition".

7. Key Personnel; Management of Growth.

The Company's success depends to a significant extent upon a limited
number of executive officers, technical and engineering employees and
consultants, and sales advisors and representatives working with the Company.
The loss of the services of relatively few of such persons could have a material
adverse effect on the Company. The Company entered into an employment contract
with Daniel A. Marinello, its Chief Executive Officer, and Messrs. Louis Liang

and Bill Ryan Executive Vice Presidents. At the Annual Meeting of Stockholders
held for Fiscal 1994, stockholders of the Company ratified and approved the
Employment Agreement between the Company, on the one hand, and Messrs.
Marinello, Liang and Ryan, as a management team. Such Employment Agreement thus
became effective on and as of November 1, 1994. See "Management - Executive
Compensation". All three of the foregoing persons are also directors. See
"Interests of Management and Others in Certain Transactions". The Company's
future success will also depend upon its ability to attract and retain skilled
technical, managerial and marketing personnel. Competition for such personnel is
intense. See "Business - Employees" and "Management".

8. Dependence on a few Principal Customers.

Products manufactured by the Company are presently sold to a limited
number of clients and customers under a relatively few contracts or purchase
orders. The Company markets its products to a number of different manufacturers
including pharmaceutical firms, soft drink and beer bottling firms and others.
During the Company's fiscal years ended October 31, 1996 and October 31, 1995,
respectively, the Company's principal customers (i.e, 10% or more of sales)
consisted of three customers, accounting for 15%, 17% and 17% respectively, of
sales in Fiscal 1996 and one customer accounting for approximately 45% of sales
in Fiscal 1995. The loss of any of these customers and the failure to replace
them could have a material adverse effect on the Company. See "Business -
Markets".

9. Continued Control of Company by Inside Stockholders.

The present stockholders are able to elect all of the Company's
directors and will continue to control the Company's business and affairs after
this Offering. See "Security Ownership of Certain Beneficial Owners and
Management". In addition, the Company's by-laws, among other things, protect
officers and directors by indemnifying them against losses they may incur in
legal proceedings resulting from their service to the Company. See "Management -
Directors, Executive Officers and Key Employees" and "Description of Securities
- - Directors' Liability".

-8-

<PAGE>

10. Environmental and Related Matters.

The Company's operations involve the use or handling of materials that
may be classified as environmentally hazardous substances. Laws and regulations
protecting the environment and persons engaged in processing hazardous materials
have become more stringent, and may in certain circumstances impose "strict
liability," rendering a person liable for environmental damage without regard to
negligence or fault on the part of such person. Such laws and regulations may
expose the Company to liability for the conduct of or conditions caused by
others, or for acts of the Company which were in compliance with all applicable

laws at the time such acts were taken. The Company believes that its exposure
and responsibility for environmental matters is limited by virtue of the fact
that the chemical components it receives have already been processed by the
original manufacturers thereof to a state where the same are relatively
non-hazardous. Furthermore, the Company requires its outside production
facilities to bear responsibility for environmental and other regulatory matters
during their processing of these chemicals, and to indemnify the Company against
any resultant liability. The cost of compliance with environmental laws and
regulations has not had a material adverse effect on the Company to date, and
the Company is not aware of any existing situation that it believes is likely to
have any such material adverse effect on the Company. See
"Business-Manufacture".

RISKS RELATED TO THE OFFERING

11. Shares Eligible for Future Sale.

Approximately 15,300,000 shares of Common Stock currently outstanding
are "restricted securities" as that term is defined in Rule 144 promulgated
under the 1933 Act. Ordinarily, a person holding "restricted securities" may
sell the same after two years, and in certain limited amounts without
registration pursuant to Rule 144. Virtually all of these restricted securities
are now eligible for sale under Rule 144 or Rule 144(k), subject to the
conditions and limitations provided therein.

Pursuant to the Company's public offering of securities in December
1993, the Company issued convertible preferred stock, each share being presently
convertible into four shares of Common Stock. In addition, the Company issued
Class A Common Stock Purchase Warrants, each of which entitles the holder to
acquire one share of Common Stock at a price of $1.00 per share and to
simultaneously receive 1 Class B Warrant to purchase 1 share of Common Stock at
$1.50 per share. See "Description of Securities." All of the

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<PAGE>

aforesaid underlying shares of Common Stock are required to be registered upon
delivery to the holders converting such preferred stock or exercising such
warrants, as the case may be. In addition, the underwriter of such public
offering received options to purchase 150,000 units (comprised of 1 share of
Preferred Stock and 1 Class A Warrant) exercisable for a four year period
commencing December 13, 1994 (when the underwriter will also be entitled to
certain rights to demand registration of the aforesaid securities). The sale, or
availability for sale, of substantial amounts of Common Stock, Units and/or
warrants to acquire Common Stock in the public market subsequent hereto pursuant
to Rule 144 or otherwise could adversely affect the market price of the Common
Stock, and could impair the Company's ability to raise additional capital
through the sale of its equity securities or debt financing. The availability of
Rule 144 to the holders of restricted securities of the Company would be
conditioned on, among other factors, the availability of certain public
information concerning the Company. See "Description of Securities" and "Shares
Eligible for Future Sale".

12. Possible Restrictions on "Market Making" Activities in the Company's
Securities.

The shares of Common Stock are currently traded in the
over-the-counter market and quoted on the electronic bulletin board for
non-NASDAQ stocks of the National Association of Securities Dealers, Inc.
("Electronic Bulletin Board") and listed in the "pink sheets" published by the
National Quotation Bureau, Inc. Among the broker-dealer firms making a market in
the Common Stock is M.H. Meyerson & Co. Inc. ("MHM") which is deemed to own
900,000 shares underlying securities contained in the underwriter's option to
acquire 150,000 Units, issued in connection with the Company's, December, 1993
public offering; in addition officers, directors and principal stockholders of
MHM (including Kenneth J. Koock) own, as of April 30, 1997, 5,285,496 shares of
Common Stock, although each disclaims beneficial ownership of shares owned by
the other or by MHM. Further, MHM may, as a market maker, participate in the
distribution and sale of some or all of the Common Stock being offered hereby,
which activity could require it to cease or restrict its market making
activities in the Company's securities. See "Selling Stockholders and "Plan of
Distribution", "Business-Recent Public Offering" and "Share Ownership of Certain
Beneficial Owners and Management".

13. NASDAQ Listing Not Available.

Since the Company is presently unable to satisfy NASDAQ's listing or
maintenance requirements, trading in the Common Stock is and would be conducted
in the over-the-counter market on the NASD's non-NASDAQ "Electronic Bulletin
Board". Consequently, the liquidity of the Company's securities could be
impaired, not only in the number of securities which could be bought and sold,
but also through delays in the timing of transactions, reduction in the news
media's coverage of the Company, and lower prices for the Company's securities
than might otherwise be attained. There is no assurance that such securities
will ever qualify for listing on NASDAQ.

14. Disclosure Relating to Low-Priced Stocks; Adverse Effect of "Penny
Stock" Rules on Liquidity for the Company's Common Stock.

The Company's securities are and will be subject to Rule 15c2-6 under
the Exchange Act which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with net worths in
excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together
with their spouses). For transactions covered by this rule, a broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, this
will affect the ability of broker-

-10-

<PAGE>

dealers to sell such securities and could affect the ability of purchasers in
this Offering to sell any of the Common Stock acquired hereby in the secondary

market.

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

The Company's securities are also subject to Section 15(b)(6) of the
Exchange Act, which gives the Commission the authority to prohibit any person
that is engaged in unlawful conduct while participating in a distribution of
penny stock from associating with a broker-dealer or participating in a
distribution of penny stock, if the Commission finds that such a restriction
would be in the public interest.

Because the Company's securities are subject to the rules on penny
stocks, the market liquidity for the Company's Common Stock may very likely be
adversely affected.

15. Dividends on Common Stock Not Likely.

The Company has not paid any dividends on its Common Stock in the past
and there can be no assurance that the Company will do so in the future.
Moreover, it is anticipated that earnings, if any, which might be generated from
operation of the Company will be used to finance the growth of the Company and
that cash dividends will not be paid on the Common Stock. See "Dividends". In
addition, the Company is obligated to pay annual cumulative dividends on the
Preferred Stock issued in the Offering consummated in December, 1993 which could
deplete the Company's working capital and adversely impact upon the possibility
of future cash dividends upon the Common Stock; while the Company paid the
initial dividend on its shares of Preferred Stock on December 5, 1994, it has
passed upon payment of this dividend for periods since that time, including the
current period. Management will make future decisions respecting dividends on
the Preferred Stock and Common Stock depending upon such factors as the results
of the Company's operations, its cash flow situation and the need to conserve
cash and liquidity to fund its current and future activities.

PRICE RANGE OF COMMON STOCK

The Company's shares of Common Stock are traded in the
over-the-counter market and quoted in the "pink sheets" published by the
National Quotation Bureau, Inc. ("NQB"). Such shares are presently listed on the
NASD non-NASDAQ "Electronic Bulletin Board". However, since the shares have
1traded on an inactive basis during many of the periods set forth below, the
Company does not regard such price quotations as representing prices at which
sizable transactions could have been or were effected.

-11-

<PAGE>

The following table sets forth the range of high and low bid prices
for the Company's Common Stock for each quarter during the period February 1,
1995 through April 30, 1997 as furnished by the NQB. These quotations reflect
inter-dealer prices without retail mark-up, markdown or commission and may not
necessarily represent actual transactions.

Fiscal 1995
-----------
^
5/1/95 to 7/31/95 .25 .05
8/1/95 to 10/31/95 .50 .12

Fiscal 1996
-----------
11/1/95 to 1/31/96 .25 .18
2/1/96 to 4/30/96 .53 .25
5/1/96 to 7/31/96 .81 .50
8/1/96 to 10/31/96 .56 .38

Fiscal 1997
-----------
11/1/96 to 1/31/97 $1.06 .56
2/1/97 to 4/30/97 .97 .62
</TABLE>

On February 4, 1997, the high bid price for the Company's Common Stock
was $1.03 per share. The number of holders of the Company's Common Stock was
approximately 560 on February 3, 1997, computed by the number of record holders;
this does not take account of stockholders for whom shares are being held in the
names of brokerage houses and clearing agencies.

-12-

<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
April 30, 1997. This table should be read in conjunction with the Financial
Statements and related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
April 30,1997(1)
----------------

<S> <C>
Short Term Debt $ -0-
Long Term Debt including current portion 81,809
Stockholders' Equity:
Preferred Stock, par value $.01 per share;
5,000,000 shares authorized,
1,370,475 shares issued and outstanding 2,254,942
Common Stock, par value $.01 per share;
45,000,000 shares authorized,
22,917,178 shares issued and outstanding. 229,172
Additional paid-in capital 4,917,645
Accumulated deficit (5,844,375)
------------
Stockholders' equity 1,558,374

Total Liabilities and Capital $ 1,861,492
-----------
</TABLE>

- --------
(1) Does not include: (i) shares of Common Stock issuable upon conversion
of the 1,449,595 shares of Preferred Stock outstanding from the Units
publicly offered and sold in December, 1993, and the exercise of the
Class A and Class B Warrants included in or underlying such Units;
(ii) 150,000 shares of Preferred Stock included in the Units publicly
offered and sold in December 1993, subject to the Underwriter's Unit
Purchase Options, or the 900,000 shares of Common Stock issuable upon
conversion of such shares of Preferred Stock and upon exercise of the
Class A and Class B Warrants included in or underlying such Units;
(iii) 6,700,000 shares of Common Stock reserved for issuance under the
Company's Stock Option Plans, of which options to purchase 300,000
shares have been previously exercised and options to purchase
3,490,000 shares are outstanding; or (iv) 1,700,000 shares of Common
Stock issuable upon exercise of currently outstanding options granted
outside the Company's Stock Option Plan. See "Management," "Certain
Transactions and Agreements" and "Description of Securities".

-13-

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION

Summary of Operations

Fiscal 1997 Second Quarter Compared to Fiscal 1996

Net sales for the initial six month period of Fiscal 1997 were
approximately $856,000, an increase of approximately 193% from the approximately
$442,600 in net sales in the corresponding period of Fiscal 1996. This increase
in sales was a result of significantly higher sales of chemicals made to the
subcontractor for the U.S. Postal Service on a new order relating to the
Company's prior work on certified mail labels, as well as increased sales of
scanners and chemicals to other clients. Cost of sales decreased materially from
58.8% to 29.1% due to the higher margins associated with the high volume of
chemical sales, as well as reflecting increased efficiencies in production
methods put in place.

Selling, general and administrative expenses increased from approximately
$395,200 in the prior year's six months to approximately $452,800 in the
corresponding period of fiscal 1997. These increases were primarily due to the
increase in sales commissions, which were directly tied into the increase in
sales.

The Company generated net income of $168,829 before dividend requirements
in this six-month period of Fiscal 1997 as compared with a net loss of $180,746
before dividend requirements in the prior year's comparable period. Continuing
its policy of conserving cash to meet operating requirements, the Company has
declined to accrue a preferred stock dividend for the periods in reference.

Research and development expenses totaled approximately $142,000 during the
recent six months, as compared to approximately $268,800 in the prior year's
comparative period, as the Company completed development of hardware and
chemical advancements and continued to focus its efforts on sweeping various
electronic functions into a single microprocessor chip of special design, as
well as development of additional chemical compounds and refinements to its
existing line of scanners and readers.

Year Ended October 31, 1996 ("Fiscal 1996") compared to Year Ended October 31,
1995 ("Fiscal 1995")

Net sales of $869,829 for Fiscal 1996 reflect a decrease of 16.2% from the

$1,050,281 in net sales in Fiscal 1995. This decrease in sales was reflected
both in sales of chemicals and scanner equipment. During Fiscal 1995, sales of
both product categories to a subcontractor for the U.S. Postal Service totaled
approximately $477,000, or approximately 45% of the Company's total sales while
there were no sales during Fiscal 1996 to this party, reflecting the concluding
portion of that particular contract. However, in a recent development, the
Company has been awarded another contract by this subcontractor in connection
with an additional phase of this project by the U.S. Postal Service and revenues
derived from this customer should be reflected in the first six months of
operations during Fiscal 1997 (the current fiscal year). The cost of sales, as a
percentage of overall sales, on a year-to-year comparison increased from 34.1%
to 50.1%; this was due to the lower sales base over which to spread fixed costs,
the loss of certain economics of scale previously realizable by higher
production rates, and increased engineering costs to facilitate production of
new products.

Selling, general and administrative expenses decreased slightly from
approximately $973,850 in Fiscal 1995 to approximately $945,900 in Fiscal 1996.
This decrease was primarily due to the lower sales commissions

-14-

<PAGE>

payable on the reduced sales figures as well as to a modest reduction in
development expenses as the Company successfully completed the development of
the hand-held scanner, mid-range and remote controlled scanners as well as the
development of formulations for a variety of additional chemical compounds. Six
patents in all have been issued to the Company from the U.S. Patent Office;
costs relating thereto had previously been either capitalized or expensed by the
Company.

The Company generated a net loss of $467,207 before dividend requirements
during Fiscal 1996 as compared with a net loss of $217,211 for Fiscal 1995,
before dividend requirements.

After taking into account research and development and interest expenses,
the Company incurred operating losses (before applicable interest income) in
Fiscal 1995 of approximately $104,000 on chemicals and $193,000 on scanner and
hardware sales, while incurring operating income on chemical sales of
approximately $313,000 and a loss of $248,000 on scanners and hardware sales in
Fiscal 1996 on these items.

Net interest income of approximately $50,750 for Fiscal 1996 was slightly
less than the net interest income of approximately $63,900 in Fiscal 1995 as a
result both of lower interest rates, which gave a lesser return on investment,
and the fact that the Company's cash balances available for investment were
slightly lower.

Liquidity and Capital Resources

The Company's primary need for cash is to support its programs and its
ongoing operating activities. The Company's primary sources of liquidity have
historically been cash provided by financing activities. The Company has never

generated significant cash flows from its operations and has depended upon
financing from outside sources to maintain itself.

The Company had cash and cash equivalents, and investments of $799,683 as
at the end of the second quarter of Fiscal 1997 as compared with $840,692 as at
the end of Fiscal 1996, reflecting in a decrease in these categories of $41,009.
It experienced a slight decrease in trade accounts receivable of $13,238, while
inventory increased by $148,111; the increase in inventory reflected increased
production to meet the sales increases experienced and to also afford the
Company a lower cost of unit production and the ability to meet any future
orders on a timely basis. As indicated in Note 3 to these financial statements,
no preferred dividend has been accrued for the first two quarters of Fiscal 1997
since management has determined to conserve available funds and maintain the
Company's liquidity in light of its needs to continue developmental and
marketing expenditures referred to hereinabove. The Company anticipates that
existing funds will enable it to fund its operating and capital needs through at
least October 31, 1997, the end of its current fiscal year, and for some time
thereafter. The Company may require additional financing after such time
depending on the status of its sales efforts and whether sufficient revenues and
contractual commitments have been received from its customers to enable it to
function with sufficient liquidity. The Company is not able at this time to
predict the amount or potential source of such additional funds and has no
commitment to obtain such funds.

The Company had cash and cash equivalents, and investments, of $840,692 as
at the end of Fiscal 1996 as compared with $1,490,521 as at the end of Fiscal
1995, resulting in a decrease in these categories of $649,829, which was used to
fund operating losses as well as cover expenditures for its new computerized
operating system and molds for more efficient manufacture of scanners. It also
experienced a slight decrease in trade accounts receivable of $9,682 and an
increase in inventory of $274,589 due to the fact that it has produced a full
line of products to present to customers and potential customers. Prepaid
expenses at such dates decreased materially from $111,961 to $1,181 due to the
absence of a need to make advance payments to suppliers. It is anticipated that
the Company will continue to experience a decrease in cash and short term
investments while it

-15-

<PAGE>

is engaged in development expenses related to new products and until more
substantial sales revenues are generated. It is estimated that research and
development expenses will approximate $325,000 for Fiscal 1997 while marketing
(consisting of trade shows and advertising) will approximate $35,000 during this
period. As indicated in Note 2 to these financial statements, no dividend has
been accrued for Fiscal 1996 since management has determined to conserve
available funds and maintain the Company's liquidity in light of its needs to
continue developmental and marketing expenditures referred to hereinabove. The
Company anticipates that existing funds will enable it to fund its operating and
capital needs through at least October 31, 1997, the end of its current fiscal
year, and for some time thereafter. The Company may require additional financing

after such time depending on the status of its sales efforts and whether
sufficient revenues and contractual commitments have been received from its
customers to enable it to function with sufficient liquidity. The Company is not
able at this time to predict the amount or potential source of such additional
funds and has no commitment to obtain such funds.

Federal Income Taxes

Effective November 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". The standard
requires the use of the liability method to recognize deferred income tax assets
and liabilities, using expected future tax rates.

The tax effects of the net operating loss carryforwards and temporary
differences that give rise to deferred income tax assets and a corresponding
valuation allowance at April 30, 1997 and October 31, 1996 is presented below.

<TABLE>
<CAPTION>
Deferred tax assets: April 30, 1997 October 31, 1996
-------------- ----------------

<S> <C> <C>
Net Operating Loss $ 1,466,000 $ 1,498,000

Other Net 7,000 5,800
----------- -----------

Total deferred tax assets $ 1,474,200 1,503,800

Less: Valuation allowance (1,474,200) (1,503,800)
----------- -----------

Net deferred tax asset $ -0- $ -0-
=========== ===========
</TABLE>

The Company has cumulative net operating loss carryforwards of
approximately $3,800,000 for federal income tax purposes which expire between
the years 2000 to 2010.

Other

In the opinion of management, inflation has not had a material effect on
the operations of the Company.

-16-

<PAGE>

BUSINESS

The Company

Angstrom Technologies, Inc. (the "Company") was incorporated under the
laws of the State of Delaware on June 3, 1983. The Company derived its name from
the Angstrom units of measurement of wavelengths of light.

The Company is engaged in the development, manufacture and sale of
Electro-Optical Control Systems, consisting of an ultraviolet optical scanner
and invisible fluorescent chemical compounds. The Company has developed and
markets scanning units known as the OMNI 2000E and 2000H series. These units can
be used individually or combined with several units, working in unison to
provide statistical process control for manufacturing lines. Individually, the
unit can determine the presence or absence of the fluorescent compound. When
units are combined, a grid code is formed where information is generated and
stored, then later read for a variety of applications. In addition, the Company
produces a number of fluorescent compounds, each of which emits its own wave
length. When printed, sprayed, or stamped, the marking compounds are non-visible
under normal lighting conditions. This allows for marking over existing graphics
or on different materials without changing the appearance of the product. These
compounds are blended into a variety of materials to be applied to the
customer's product. An example of materials, among others, are printing inks,
plastic films, over-print varnish, adhesives, and hot plastic molding compounds.
Also, due to the invisible nature of the compound, the system can also be used
in a variety of security applications.

Products

The Company's products have traditionally consisted of an ultraviolet
optical scanner and various chemical compounds. During Fiscal 1994 the Company

completed the upgrading of the technology used in its products in order to
produce a scanner incorporating a microprocessor which has advanced both its
capability in (a) speed of reading, and (b) sensitivity. Among other things,
this permits the scanner to read invisible bar codes and has greatly increased
other potential applications. The Company's sales of scanners were not being
actively promoted pending the development of the advanced scanner during Fiscal
1994.

Use of outside production facilities tends to reduce the capital
expenditures necessary to effect production and help expedite full scale
production of the new units. The following are examples of expected improvements

-17-

<PAGE>

and are based on current engineering estimates: Estimated lamp life to be in
excess of 20,000 hours as compared to current life of approximately 1,000 hours;
estimated cost of electronic components (currently 66% of total cost) to be
reduced by 90%; and increase depth of field (distance from scanner to target) by
a factor of three. The Company is currently working on the commercialized
production of two new basic compounds which are intended to be marketed in the
security industry for a wide array of end-use products that will incorporate
sophisticated wavelength and non-visible encoding. Current product development
in the scanner by the Company has brought the technology into swipe bar code
readers (verifying bar codes describing document information) and the Company
has recently become enabled to produce a smaller compact hand held bar code
reader, as well as to complete reformulation of certain of the chemicals used by
the Company in conjunction with its scanners and readers.

The Company is continuing to develop improvements in its electronic
components by ultimately incorporating or "sweeping" support electronics into a
semi-conductor chip, and further developing the mechanical and optical portions
of its scanner; it has also developed improved chemical compounds to be used in
document security applications. In this regard, the Company plans to take
multiple electronic components and incorporate them into a single semiconductor
chip utilizing Complimentary Metal Oxide Semiconductor ("CMOS") technology. CMOS
technology is designed to operate at low temperatures, thereby allowing the use
of plastics for the final optical package embodiments.

The Company's first new scanner was and is being offered for sale by the
Company at prices ranging between $8,000 -$11,000 per unit, with a base price of
$8,000 and additional optional features, such as remote LCD readout, external
beeper, customized optics, customized computer programming interface and decoder
interface for bar code reading available for additional charges of $500 or more
for each such feature. More than twenty-five of the new scanning units have been
sold. The scanners carry a sales price which varies, depending on the unit and
such price, subject to volume discounts. The Company has found that many
customers or potential customers require specific customizing of these scanning
units, to meet the needs of the specific applications for which the units are
being purchased. Such customizing may result in an increase in the price
charged. In addition, existing customers who are using the Company's older
version scanners are offered a credit against the price of the new scanner for a
trade-in of their existing scanning devices.

The Company has developed and now offers for sale five different
scanning devices:

1. Hand-Held scanner used, among other things, for verifying
tickets to sporting and entertainment events;

2. Mid-Range scanner used for a variety of commercial applications;

3. High-End scanner, which has the ability to tie-into a computer,
and is being used for the U.S. Postal Office Certified Mail
Project.

4. High-End and High-Security Document scanner, which allows
modulation of upper and lower reading limits, to be used for
check sorting and check verification applications;

5. Document Reader, which is portable and easily moveable, to be
used for verifying tickets to sporting and entertainment events,
among other things.

-18-

<PAGE>

related testing on the same to determine which compounds will be placed into
manufacturing for commercial use.

Manufacture

The components of the Company scanners are manufactured by outside
contractors, in accordance with the Company's standards, pursuant to purchase
orders issued by the Company on an as needed basis. No manufacturer has been
given an exclusive retention and the Company believes that there are numerous
alternative sources for securing production of such components.

Final assembly and quality control testing of the scanners are performed
on-site with Company personnel.

The scanning compounds are manufactured off-site by a custom chemical
manufacturer under a confidentiality agreement, providing protection for the
Company's trade secrets. The custom chemical manufacturer is responsible for
EPA, NIOSH, and OSHA compliance to the extent such laws are applicable. The
Company has entered into this agreement to produce its chemicals, at a lower

unit cost and with enhanced capacity to meet the increasing production level
which may be required by the Company's new marketing efforts, should the later
result in sales increases. However, the Company believes that there are numerous
alternative sources for manufacturing its chemical compounds and that its not
dependent on the arrangement presently in effect. In an effort to enhance its
optical and general development laboratories, the Company, in July 1994,
commenced to employ a research chemist, at an annual compensation of
approximately $55,000, and is also utilizing laboratory facilities for further
development of chemical compounds at a local university at a cost of
approximately $19,000 per annum. The Company has also retained a product
engineer, at an annual cost estimated to be approximately $80,000, whose
activities involve, among other things, to sweep many of the scanner's
electronic circuits onto a chip. See "Products". It is anticipated that such
activities will continue during Fiscal 1997. The anticipated source of funds
therefore is the Company's working capital, derived from its public offering in
Fiscal 1994.

Sales and Marketing

The Company has been engaged in a program designed to upgrade its
products, expand its product lines and attempt to substantially increase its
customer base. In connection therewith, the Company commenced its sales and
marketing program in January, 1993 by the use of independent sales
representatives. However, until September, 1994, the Company's program for sales
of hardware was held in abeyance, pending the completion of development and test
marketing of its new Omni 2000H scanner. Commencing on or about February 1994,
the Company began a more intensive sales and marketing program.

For its sales efforts, the Company utilizes Messrs. Marinello and Ryan,
two of its executive officers, who allocate a significant portion of their time
to sales and marketing efforts. During Fiscal year 1995, approximately $158,000
has been paid as sales commissions to executive officers while during Fiscal
1996, approximately $133,000 was paid as sales commissions to executive officers
and $3,701 paid as royalties. It is the Company's goal to attempt to increase
its sales and marketing through the mode of entering into strategic alliances
and joint venturing endeavors with well-placed firms in various business areas
rather than expending large sums in developing the Company's own independent
direct selling structure.

The Company's sales efforts have been disappointing on a historical
basis until the third quarter of Fiscal 1995. Net sales for the fiscal year
ended October 31, 1994 totaled $531,339, a substantial increase from the
$346,026 in sales in Fiscal 1993; This trend of increased sales continued in
Fiscal 1995 when net sales equaled $1,050,281. Such increase was generated in
the main by sales to a sub-contractor for the U.S. postal service in

-19-

<PAGE>

connection with production of labels for certified mail. These customer orders
covered both the purchase of chemical compounds for use in printing ink to be
utilized in labels for certified mail as well as the sale by the Company of six

scanners for use by the subcontractor in its internal verification system in
connection with the production of certified mail labels. Such labels are to be
used by the U.S. Postal Service in connection with an automation system, using
equipment of a third party, scheduled for operation during 1996, which will
among other things, automatically sort-out certified mail from other types of
mail. During Fiscal 1996, the Company's revenues decreased to $869,829 due to
the completion of the Postal Service contract, although following the close of
Fiscal 1996 the Postal contract entered a new phase wherein the Company received
orders for additional amounts of its chemical compound. Products manufactured by
the Company are presently sold to a limited number of clients and customers
under a relatively few contracts or purchase orders. During the Company's fiscal
year ended October 31, 1995 sales to one customer, Webbcraft Technologies, Inc.,
exceeded 10% of net sales and amounted to approximately 50% of the Company's
sales while during the year ended October 31, 1996, sales to three customers in
excess of 10% were approximately 15%, 17% and 17%, respectively, such sales
being to Loctite (P.R.), International Security Printers and Sicpa Ink Systems;
other significant customers, accounting for between 4%-6% of sales, were
Webbcraft Technologies, Inc., Standard Register Company and Thomas De La Rue
Inc. The foregoing percentages aggregate sales made to the named customer and to
clients or sub-accounts of that customer. It should also be noted that sales to
Webbcraft Technologies, Inc. ranged from 50% of sales during Fiscal 1995 to
approximately 6% of sales in Fiscal 1996, and increased to approximately 58% of
sales during the first six months of Fiscal 1997; this was because sales to this
customer were derived from the U.S. Postal Service's certified mail label
printing and sorting contract which was completed early in Fiscal 1996 and
renewed and extended in the late part of Fiscal 1996, so that renewed sales were
generated therefrom in the first six months of Fiscal 1997. With the Company's
new line of scanner and reader hardware and broad-based chemicals to be used
with these items, the Company is attempting to broadly increase its sales base.
However, the Company's sales must still be regarded as below levels deemed
necessary to establish profitability. See "Management's Discussion and Analysis
or Plan of Operation Summary of Operations" for a breakdown of sales, margins
and related items respecting the Company's chemical and scanner/hardware sales,
respectively.

Markets

Among the principal industries which presently utilize or constitute
potential clients for the Company's products are pharmaceutical firms (for
labels and bottling) and automobile parts manufacturers; incident thereto, or,
as markets for additional products, are adhesive manufacturers, label
manufacturers, and stamp and paper currency manufacturers.

The foregoing applications cover a wide variety of industrial processing
including quality assurance, manufacturing and product sorting.

In the pharmaceutical industry, the Company's products are utilized to
insure the correct label is placed on the correct pharmaceutical product; in
addition, verification of label alignment and safety seal presence are employed
in the food and drug industries.

In the automotive industry, the Company's products are utilized in the
identification of correct labels on assembly parts and the detection of adhesive

presence in sub-assembly components.

In the packaging industries, the Company's products are utilized to
ensure correct label placement, in the sorting of various products and in
adhesive detection.

-20-

<PAGE>

The new improved scanners being developed by the Company, and the
compact reading devices incident thereto, are believed by management to have
applications in various facets of the document security industry, as well as in
the process control field previously serviced by the Company. Among such new
applications, would be the prevention of counterfeiting of currencies, postage
stamps and tickets to various sports and entertainment events, and marking of
items being sold to consumers through retail outlets. The Company is currently
exploring potential customers with an interest in a wide variety of security
applications under development by the Company. Among other things, the Company
is preparing for a test marketing of its technology to be used in connection
with the identification of counterfeits and sorting of bank checks. The Company
has also sold its ultraviolet chemical for use in inks being used on U.S.
government documentation, such as passports.

Competition

The Company competes with a number of companies, both in its present
line of business (labeling of pharmaceutical bottles, automotive parts and
similar items) and in the prospective business to be entered into with the new
prototype (security applications for documents). Many of such competitors have
greater financial and other resources. In the labeling and parts identification
business, among its competitors are Data Logic, Inc. and Sick Optic Electronic,
GmBh, both of which have readers capable of reading broad (rather than specific)
bands of light and do not provide either application engineering or scanning
compounds. The Company's scanners are capable of operating on a more defined
basis and can differentiate among certain colors. Accordingly, the Company
believes that its scanner is capable of sorting out various labels for different
products whereas readers produced by competitors are able to detect fluorescent
chemicals on labels but cannot sort out similar labels. The Company's existing
products are comparable in price to those of its competitors. The Company also
competes with the machine vision industry, which utilizes solid state cameras
and complex computer programs for similar applications, such as product and
label identification, that the Company offers to similar markets. The Company's
ultraviolet detection system, which can also be used for labeling applications,
is priced at approximately $8,000 per system compared to a range of
$12,000-$15,000 for video systems generally available for bottling and
production line identification. Such competing video systems are produced and
sold by (a) General Electric Vision division of General Electric Corporation;
(b) GM Fanuk, a joint venture of General Motors Corporation and Fanuk
Corporation (a Japanese firm); and (c) Penn Video, Inc.

With respect to document security, the Company's New Technology scanner
competes with a number of other products used for this purpose, including
holograms (which are three-dimensional representations designed with certain

visual attributes for the purpose of thwarting counterfeits). The Company also
competes with technology which places water marks and/or fabric threads within
paper and currency. The Company believes that, if its New Technology scanner
proves commercially feasible, it will enjoy a superiority against counterfeiting
over these other technologies since the Company's non-visible specific frequency
ultra-violet chemical compounds will be more difficult to duplicate than are
competing document security devices. The basis for this belief is that the
Company's products can differentiate its chemistry within ten nanometers of the
spectrum whereas its competitors have thus far produced sensors which
principally read in the blue area of the spectrum; by having greater specificity
in its reading capacity, the Company can blend other colors into its blue
spectrum inks and read such colors with greater particularity, thereby giving
the Company's products a broader range of application. See "Risk Factors -
Competition."

-21-

<PAGE>

Intellectual Property Rights and Technology Protection

The Company has trademark registrations in the United States for
"INVISI:GRAPHICS" and "Angstrom Technologies, Inc", and "SDR". The use and
registration rights of a trademark holder do not ensure that such holder has
superior rights to others that may have registered or used identical related
marks on related goods or services. The Company has chosen to greatly reduce the
current use of the "INVISI:GRAPHICS" and "SDR" trademarks as part of an image
upgrade featuring the new technology products in manufacturing and development.
The principal register trademark: Angstrom, Registered June 23, 1987, which
remains in effect through June 23, 2007, will still be used in the Company's new
marketing logo.

The Company's initial patent was issued for ultraviolet reader
technology, and is described as "Fluorescent object recognition system having
self-modulated light source." In addition, in May 1995, the Company was granted
patents covering an authentication system and relating to the calibration of
fluorescence detectors, respectively, and also has other patents pending. The
patent on the authentication system and methods covers 27 claims which
incorporates the technology developed by the Company for its new scanners and
bar code reader. The Company has six patents in effect at this time. Despite
this fact, there can be no assurance, that any present or future patents which
may issue in the Company's favor would necessarily protect the Company from
competition or potential competition. Accordingly, the Company anticipates
reliance for the foreseeable future on both its patents and on contractual
rights, trade secrets and copyright laws. See "Risk Factors - Dependence on
Proprietary Technology; Limited Patent Protection."

Pursuant to its Executive Employment Agreements with Messrs. Marinello,
Liang and Ryan (See "Interests of Management and Others in Certain
Transactions"), the three executives are engaged, among other things, in a plan
of activity to expand patent and intellectual property coverage for the Company.
New patents are being developed and filed in the name of the individuals, who
have agreed to assign a two-thirds interest therein to the Company, which is
obligated to cover the cost of filing fees and fees of patent counsel. The

Company will have exclusive rights to use such patents for a royalty fee of 5%
of gross profits during the term of the aforesaid employment agreements, and at
a royalty equal to 10% of gross revenues thereafter.

Employees

The Company presently employs four executives, three engineering
employees, a research chemist, an office manager and one full-time and one
part-time clerical person. It also retains an outside accounting firm to
supervise its financial records and independent consultants on business and
engineering matters, as necessary. The President assists Company personnel in
applications engineering.

Facilities

The Company maintains its executive offices in Erlanger, Kentucky,
comprising approximately 2,000 square feet. Such offices are leased for a period
through May 14, 1999 at a cost of approximately $15,000 per year, and have been
considered adequate to meet its present needs. The Company also leases adjacent
storage space on a month-to-month basis at a rate of approximately $900 per
annum.

-22-

<PAGE>

DIVIDENDS

The Company has never paid cash dividends on its Common Stock. The Board
of Directors does not anticipate paying cash dividends in the foreseeable future
as it intends to retain future earnings to finance the growth of the business.
The payment of future cash dividends, if any, will depend on such factors as
earning levels, anticipated capital requirements, the operating and financial
condition of the Company and other factors deemed relevant by the Board of
Directors. See "Risk Factors - Dividends on Common Stock Not Likely". The
Company is required to pay a $.16 cash dividend annually on each share of
Preferred Stock, to the extent legally available for payment under the laws of
Delaware, which dividend is cumulative. The Company has declared an initial cash
dividend of .15 cents per share upon its shares of 8% Convertible Preferred
Stock, such dividend being paid on December 5, 1994 to holders of record as of
the close of business on November 30, 1994. See "Description of Securities - 8%
Redeemable Convertible Preferred Stock" and "Business - Preferred Stock
Dividend." However, the Company has not paid a preferred dividend since then due
to the Company's desire to conserve cash resources for development and marketing
activities; such dividend must ultimately be paid before distributions may be
made upon shares of Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

-23-

<PAGE>

MANAGEMENT

Directors, Executive Officers and Key Employees.

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
Name Age Positions
- ---- --- ---------

<S> <C> <C>
Daniel A. Marinello 56 President, Chief Executive Officer
and Chief Financial Officer and a director

Louis Liang 53 Executive Vice President-Strategic Business and a director

William J. Ryan 57 Executive Vice President-Operations and a director

Douglas B. Kruger 53 Secretary and a director
</TABLE>

Daniel A. Marinello has been Chief Executive Officer and Chief Financial Officer
of the Company since October 28, 1992. Prior thereto and since February, 1987,
Mr. Marinello has been serving as a director of the Company and as an advisory
engineer thereto. Prior thereto, from February, 1966 through July, 1992, he held
several engineering, management and advisory positions for the IBM Corporation
in Essex Jct., Vermont.

Louis Liang has been a director since February 1, 1994 and was appointed
Executive Vice President - Strategic Business in May, 1994. Mr. Liang was most
recently Director of Subcontract Operations and Package Development Technology
of VLSI Technology Inc. for a four year period from May, 1989 to June, 1993. He
has been employed, since 1972, in various capacities in the electronic and
semiconductor industries, including positions dealing with research and
development, engineering, operations and new venture and business development
matters. He has also been active as a technical, marketing and management
consultant to companies in the Silicon Valley. Mr. Liang has a B.A. and M.S.
degrees in Applied Physics from the University of California, San Diego and
Santa Barbara campuses.

William J. Ryan has been a director and Executive Vice President - Operations
since April 1, 1994. He has served most recently, between July, 1992 and April,
1994, as an Executive Management Consultant to several high technology
semiconductor suppliers and equipment manufacturers. His responsibilities
included developing market strategy, product design and implementing cost
effective manufacturing processes. Prior to becoming engaged in the consulting
business, Mr. Ryan was employed at IBM for 27 years in various senior
engineering and technical management positions. His last assignment with IBM was
as Senior Engineering Manager of Advanced Semiconductor Equipment Engineering.
Mr. Ryan holds a B.S. degree in Mechanical Engineering from the University of
Vermont and has published technical papers and spoken extensively at executive

management and technical management seminars.

Douglas B. Kruger has been a director since November 2, 1992. On January 18,
1993, Mr. Kruger was elected to serve as Secretary of the Company. Mr. Kruger is
presently and has since September, 1991 been an independent business and
marketing consultant. Prior thereto, from November, 1988 to its sale in
September, 1991, he was the Chief Executive Officer and sole stockholder of
Concept Surfaces Corp., a decorative surfacing company located in Florida.
Between June, 1964 and November, 1988, he held a variety of positions

-24-

<PAGE>

with the IBM Corporation including manufacturing technician and as an executive
with the International Procurement Group of that firm.

Each of the Company's directors has been elected at the recent Annual
Meeting of Stockholders to serve until the next such Annual Meeting and until
his successor has been elected and qualified. The Company's executive officers
are appointed annually by the Company's directors. Each of the Company's
officers continue to serve until their successors have been appointed.

Under federal securities laws, the Company's directors, its executive
officers and any person holding more than 10% of the Company's Common Stock are
required to report their ownership of the Company's Common Stock and any changes
in that ownership to the Securities and Exchange Commission ("SEC") on the SEC's
Forms 3, 4 and 5. Based on its review of the copies of such forms it has
received, the Company believes that all of its officers, directors and greater
than 10% beneficial owners complied with all filing requirements applicable to
them with respect to transactions during Fiscal 1996.

Executive Compensation

The following Summary Compensation Table shows compensation paid by the
Company for services rendered during Fiscal Years 1996 and 1995 for Daniel A.
Marinello, who was the Chief Executive Officer and President and Chief Operating
Officer at the end of such fiscal years. No other executive officers of the
Company received salary and bonus compensation which exceeded $100,000 in such
fiscal years.

Summary Compensation Table

<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Award
------------ -----
Securities
Underlying All Other
Name and Principal Position Year Salary Options Compensation
=========================================================================================================================
<S> <C> <C> <C> <C>
Daniel A. Marinello, Chief Executive 1996 --- ----(3) $93,058(2)
Officer and Chief Financial and 1995 --- ---- $96,172(2)
Accounting Officer(1)
=========================================================================================================================
</TABLE>

- ------------------------------------
(1) Commenced to serve as such on October 28, 1992. See "Daniel A. Marinello
- Employment Agreement" below for a description of the terms of Mr.
Marinello's compensation.
(2) Comprised of accrued commissions.
(3) Options covering 1,000,000 shares at a price of $.125 per share were
granted in November, 1994 constituting the fair market value of such
shares as at the date .

-25-

<PAGE>

Daniel A. Marinello - Employment Agreement During Prior Fiscal Years

On October 28, 1992, Mr. Marinello entered into an employment agreement
with the Company. It provides for him to be employed as Chief Executive Officer
and Chief Financial Officer through October 28, 1995 at an annual salary of (a)
fifteen (15%) percent of sales produced by him and five (5%) percent of sales
revenues of sales representatives, payable at the end of the month in which
payment for such sales is received by the Company, and (b) a bonus payment
computed by the following percentage of the Company's pre-tax profits in excess
of a base amount equal to the Company's pre-tax profits, if any, for its fiscal
year ended October 31, 1992 during each year of the term hereof:

5% of the first $1,000,000;
4% of the second $1,000,000;
3% of the third $1,000,000;
2% of the fourth $1,000,000; and
1% of any excess of pre-tax profits over $4,000,000.

Executive Employment Agreement between the Company and
Messrs. Marinello, Liang and Ryan

The Board of Directors of the Company has approved and the stockholders

of the Company, at the Annual Meeting of Stockholders, held November 7, 1994,
ratified and approved, an Executive Employment Agreement (the "Agreement"),
between the Company, on the one hand, and Messrs. Marinello, Liang and Ryan, its
three highest ranking executive officers as a management team (the "Team"). The
Agreement has become effective on and as of November 1, 1994 and supersedes the
existing Employment Agreement with Mr. Marinello as well as the employment
arrangements with Messrs. Liang and Ryan. Since May, 1994, Messrs. Liang and
Ryan have been receiving compensation equal to $5,000 per month for each such
person. An outline of the terms of the Agreement is as follows:

Term

The term of the Agreement is initially for a three year period
commencing as of November 1, 1994 and ending October 31, 1997. The Agreement
thereafter is automatically renewed for annual consecutive renewal periods of
one year each unless terminated by notice of non-renewal sent either by the
Company or the Team, at least 60 days prior to the expiration of the initial
term or any renewal term; provided, however, that the Company may only terminate
the Agreement in the event that its net profits after taxes during the preceding
12 months is either a negative number or does not equal or exceed at least
$150,000 more than the Company's net profits after taxes for the prior 12 month
period, or its sales do not show at least a 15% increase between such periods.

Compensation

The Employment Agreement previously in effect with Mr. Marinello
provided that he shall receive compensation equal to 15% of gross sales and 5%
of the first $1,000,000 of pre-tax profits annually, with a sliding percentage
thereafter. The Agreement, which has now superseded Mr. Marinello's Employment
Agreement, provides that the Team shall receive, allocated among them, an
aggregate of 15% of gross sales plus 10% of the first $1,000,000 of pre-tax
profits in each year (so long as pre-tax profits for such year equal or exceed
$1,000,000), with a reduced percentage of pre-tax profits in excess of this
figure. The net sales

-26-

<PAGE>

component of compensation is divided among Messrs. Marinello, Ryan and Liang in
the amounts of 10.5%, 4.5% and 0%, respectively, while the 10% of the first
million dollars in pre-tax profits is apportioned 5%, 2.5% and 2.5%,
respectively, and maintained in the same ratio, as such percentage may be
reduced.

Duties

Members of the Team are to be employed in their current capacities
whereby Mr. Marinello will remain President and Chief Executive Officer, Mr.
Liang, Executive Vice President - Strategic Business and Mr. Ryan as Executive
Vice President - Operations. Each member of the Team is required to devote
substantially all of his business time and efforts in the Company's employ and
to perform such services for the Company and its subsidiaries or affiliates as
may exist from time to time. The Team will be responsible for the general and

active management of the Company's business, including its assets and
liabilities, and the direct supervision of its managers, employees and sales
agents, subject, at all times, to the direction and control of the Board of
Directors. In connection with the specific task of product development, the Team
is charged with implementing the program dealing with product performance,
enhanced consistency of operation, and refinement and improvement of the
Company's products and the commercial applications thereof. The Team will also
recruit, train, supervise and evaluate independent contractors to act as
manufacturer's representatives to market the Company's products and services in
the United States.

Termination

The Company may terminate the Agreement only for "cause", which shall
consist of (a) a violation of the non-competition provisions, (b) commission of
an act or existence of circumstances which constitute "cause" within the meaning
of Delaware law, or (c) malfeasance or the commission or omission of acts which,
in the reasonable judgment of the Board of Directors, are contrary to the
instructions of the Board of Directors.

Non-Competition

During the term of the Agreement, the Team may not compete with the
Company's business in the United States or in any foreign jurisdiction in which
the Company is then conducting business.

Additional Provisions

(a) In the event that one or two members of the Team are incapacitated
or unable to perform their duties, the other members of the Team, if still
performing his duties, shall be entitled to the entire compensation payable to
the Team under the Agreement.

(b) Each member of the Team has been granted a Stock Option covering 1
million Shares of the Company, exercisable at $.125 per Share which constitutes
the fair market value thereof, 50% of such number of shares becoming immediately
exercisable, with 250,000 exercisable after one year and the balance of the
shares becoming exercisable after the second anniversary of such grant. These
options have been granted pursuant to the Company's 1994 Stock Option Plan (the
"1994 Stock Option Plan"), which was ratified and approved at the Annual Meeting
of Stockholders referred to above.

-27-

<PAGE>

Intellectual Property Rights

The Team is required to assign to the Company a 2/3rds interest in any
patents or other intellectual property created by it which is used in the
Company's business. The Company is required to pay the Team a royalty computed
by 5% of the gross profit (difference between selling price and direct
manufacturing cost, exclusive of overhead) from use of such intellectual
property. In the event of termination of the Agreement by the Company, the

Company shall have the right to continue to retain exclusive use of the patents
and other intellectual properties by paying the Team an amount equal to 10% of
gross revenues from products sold which utilize such intellectual property;
otherwise, the Company may retain a non-exclusive license to use such
intellectual property for a fee of 5% of gross revenues from products sold
utilizing such patents.

Take Over or Merger

In the event there is a buy out, take over or merger of the Company by a
third party (collectively called the "Takeover"), the Team shall be entitled to
receive twenty-five percent (25%) of the total value of the Takeover payable
immediately upon consummation of the Takeover, in cash or cash equivalent
acceptable to the Team, each member of the Team to receive one-third (1/3) of
the twenty-five percent (25%) payment; notwithstanding the foregoing, (A) the
aggregate payment to be made to the Team in event of a Takeover shall not exceed
$45 million, and (B) no sums on account of any such transaction shall be payable
to the Team in such event unless (i) if the Takeover occurs during the period up
to and including October 31, 1996, the Company reports net profits after taxes
in the most current fiscal year at least equal to or exceeding the Company's net
profits after taxes for the prior twelve month period by at least $150,000 (or
there are at least $150,000 in net profits if there were no net profits in the
preceding fiscal year) and the Company's sales display at least a 15% increase
in the most recent such fiscal year period over the preceding twelve month
period, or (ii) if the Takeover occurs during the period from and after November
1, 1996, the total value of the Takeover equals or exceeds $12.5 Million for the
Company's assets or capital stock, as the case may be. In the event of a payment
to the Team in respect of a Takeover of the Company, such payment shall be in
addition to any amounts otherwise received by the members of the Team in
exchange for shares in the Company sold or exchanged by them pursuant to such
Takeover.

1983 and 1985 Stock Option Plans

Under the Company's Amended 1983 Stock Option Plan and 1985 Stock Option
Plan (the "Plans"), officers and other key employees who perform services on
behalf of the Company may be granted either nonqualified stock options or
incentive stock options for the purchase of up to 700,000 shares of the
Company's Common Stock. Options to purchase 300,000 shares have been previously
exercised, options to purchase 50,000 shares have been canceled, and options to
purchase 240,000 shares are outstanding. The Plans also provide for the issuance
of stock appreciation rights in connection with the granting of stock options.
Option prices may not be less than 100% of the fair market value of the Common
Stock on the date of grant and unexercised options expire not more than ten
years from date of grant. The Plans are administered by a Stock Option Committee
("Committee") of the Board of Directors. Stock options are granted to management
and others based upon a variety of criteria including the position held by such
executive, employee or other person, the responsibilities with which such person
is charged, the person's length of service with the Company, and the necessity
and desirability to the Company of rendering an incentive to such person to
continue his relationship with the Company and to enthusiastically foster the
Company's best interests. Subject to the guidelines of the Plans, the

-28-

<PAGE>

Committee determines who options will be granted to, the type of options to be
granted, the number of shares, the option price per share, and the time when the
options may be exercised.

In addition to the options under the aforesaid Plans, the Company has
granted options to acquire 1,700,000 shares outside of such Plans at a price of
$.125 per share. On September 14, 1993, options to acquire 100,000 shares of
Common Stock at a price of $.125 per share for a three-year period were granted
to Douglas Kruger, the Company's Secretary and a director, and to each of
Messrs. Louis Liang and William J. Ryan, who were then consultants to, and are
now officers and directors of, the Company. On June 23, 1994, Mr. Kruger was
granted an option to acquire 50,000 shares of common stock at a price of $.125
per share under the Company's 1985 stock option plan.

Reference is made to the last paragraph of the discussion under "1994
Stock Option Plan" for information concerning the grants of options under that
plan to three executive officers and directors, effective as of November 7,
1994. During Fiscal 1995, options to purchase an aggregate of 100,000 shares at
a price of $.125 per share for a ten year period extending until May 18, 2005
were granted to six Company employees. During Fiscal 1996, options to purchase
75,000 shares of Common Stock at a price of $.41 per share for a ten year period
extending until August 21, 2006 were granted to Company employees, including a
grant of 25,000 options to Douglas Kruger, Secretary and a director of the
Company.

1994 Stock Option Plan

On June 23, 1994, the Board of Directors unanimously adopted the
Company's 1994 Stock Option Plan (the "1994 Plan"), subject to stockholder
approval (which has been obtained) at the Annual Meeting of Stockholders held
November 7, 1994. The Company's prior stock option plans remain in effect as
well. Under the 1994 Plan, a total of 6,300,000 Shares are reserved for issuance
to employees, including directors and officers who may not be salaried employees
("Eligible Participants"). The 1994 Plan provides that the number of Shares
subject thereto and outstanding options and their exercise prices, are to be
appropriately adjusted for mergers, consolidations, recapitalizations, stock
dividends, stock splits or combination of shares. Shares allocated to options
and stock appreciation rights which have terminated for reasons other than the
exercise thereof may be reallocated to other options and/or stock appreciation
rights. Ratification and approval of the 1994 Plan with stockholders also
constituted ratification and approval of the options to be granted thereunder to
the Company's executive officers and directors as described below.

Both incentive stock options and nonstatutory stock options may be
granted under the 1994 Plan to Eligible Participants, at a price to be
determined by the option committee, provided, however, that incentive stock
options must be granted at an exercise price not less than the fair market value
of the Shares on the date of the grant. Such exercise price may be payable in
cash or, with the approval of the committee which administers the 1994 Plan, by
a combination of cash or Shares. Shares received upon exercise of options
granted under the 1994 Plan will be subject to certain restrictions on sale or

transfer. The term of any option may not exceed ten years from the date of
grant. Conditions for the exercise of options, which must be consistent with the
terms of the 1994 Plan, are fixed by a committee appointed by the Board of
Directors, consisting of not less than two nor more than five persons.

Optionees under the 1994 Plan with incentive stock options may exercise
up to 20 percent of such options granted for each year of service to the Company
after the date of grant of the option, but the committee may accelerate the
schedule of the time or times when an option may be exercised, provided that the
fair market value of the securities subject to an incentive stock option may not
exceed $100,000 at the first time such options become exercisable.

-29-

<PAGE>

If the optionee shall die, the 1994 Plan provides that the option may be
exercised, to the extent that the holder shall have been entitled to do so at
the date of death, by the optionee's executors or administrators, or by any
person who acquired the right to exercise such option by bequest or inheritance
or by reason of the death of the optionee, at any time, or from time to time,
within one year after the date of the optionee's death, but not later than the
expiration of the option. If an optionee's employment by the Company terminates,
whether as a result of termination by the Company or by the employee, normal
retirement, early retirement, or disability retirement, the 1994 Plan provides
that the option holder may exercise such option, to the extent that he may be
entitled to do so at the date of the option holder's termination, at any time,
or from time to time, within ninety days of the date of termination of the
option holder's employment, but not later than the expiration of the option.

The 1994 Plan also provides for stock appreciation rights, pursuant to
which the optionee may surrender to the Company all or any part of an
unexercised option and receive from the Company in exchange therefor Shares
having an aggregate market value equal to the dollar amount obtained by
multiplying (x) the number of Shares subject to the surrendered options by (y)
the amount by which the market value per Share at the time of such surrender
exceeds the exercise price per Share of the related option. The Company's
obligation arising from an exercise of stock appreciation rights may also be
settled by the payment of cash, or a combination of cash and Shares. The Board
of Directors may at any time terminate or from time to time amend or alter the
1994 Plan, subject to certain restrictions.

Each of Messrs. Marinello, Liang and Ryan has received grants under the
1994 Stock Option Plan to acquire one million Shares of the Company at a price
per Share equal to $.125, the fair market price of the Shares on both June 23,
1994, the date on which the options were granted as well as November 7, 1994 the
date on which the 1994 Stock Option Plan was ratified and approved by
stockholders at the Annual Meeting of Stockholders and such grants were
reconfirmed and reissued. Such options are exercisable to the extent of 500,000
shares immediately, an additional 250,000 of the first anniversary of the date
of grant and the balance of 250,000 shares exercisable from and after the second
anniversary of the date of grant, with such options expiring ten years from the
date of grant unless sooner terminated in accordance with its respective
provisions.

With respect to each named executive officer, the following table sets
forth information concerning all unexercised options (whether or not issued
under one of the Company's Plans) held at October 31, 1996, there having been no
options granted to him during Fiscal 1996:

Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised in-
Underlying Unexercised the-Money Options at FY-
Shares Acquired Value Options at FY-End (#) End ($) Exercisable/
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Unexercisable
- ---- --------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Daniel Marinello ----- ------ 1,200,000/250,000 $ 530,750/$ 109,375
</TABLE>

-30-

<PAGE>

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and notes thereto sets forth information regarding
the beneficial ownership of the Company's shares of Common Stock as of June 16,
1997 by (i) each person known by the Company to be the beneficial owner of more
than 5% of such voting security, (ii) each director, (iii) each of the named
executive officers of the Company, and (iv) all executive officers and directors
of the Company as a group. The percentages have been calculated by taking into
account all shares of Common Stock owned on such date as well as all such shares
with respect to which such person has the right to acquire beneficial ownership
at such date or within 60 days thereafter ("presently exercisable options").
Unless otherwise indicated, all persons listed below have sole voting and sole
investment power over the shares of Common Stock owned.

<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
of Beneficial Owner(1) Beneficial Ownership(2) Class (2)
- ------------------- -------------------- ---------
<S> <C> <C>
Kenneth J. Koock(3) 3,523,096(2) 13.8%
2 Robin Hill Road
North Caldwell, New Jersey 07006

Daniel A. Marinello 1,865,000(4) 7.3%

Louis Liang 1,004,000(5) 3.9%

William J. Ryan 950,000(6) 3.7%

Douglas Kruger 675,000(7) 2.6%

All officers and directors as a group (four persons) 4,494,000 17.6%
</TABLE>

- ----------

(1) Unless otherwise indicated, address is c/o the Company.

(2) Based on a total of 22,917,178 shares of Common Stock issued and
outstanding as of April 30, 1997 and 3,075,000 shares of Common Stock
issuable upon the exercise of presently exercisable stock options (both
qualified under the Plans and non-qualified options issued apart from
such Plans) by persons described in the foregoing table.

(3) All shares are owned directly, except for 125,000 shares held as
custodian for Mr. Koock's grown children which are included in this
total; he disclaims beneficial ownership of such shares as well as of
any shares which may be owned by other officers and/or stockholders of

M.H. Meyerson & Co., Inc.
(4) Includes presently exercisable options to acquire 1,200,000 shares.
(5) Includes presently exercisable options to acquire 850,000 shares; also
includes 4,000 shares held in custodial trust for a child, beneficial
ownership of which is disclaimed.
(6) Includes presently exercisable options to acquire 850,000 shares.
(7) Includes presently exercisable options to acquire 175,000 shares.

-31-

<PAGE>

INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

Commencing as of November 1, 1994 and following ratification and
approval of the proposed Employment Agreement by the stockholders at the Annual
Meeting on November 7, 1994, Messrs. Marinello, Ryan and Liang are, and have
been, employed under the terms and conditions contained in Employment Agreement
described hereinabove. (See "Executive Compensation"). In addition, incident
thereto, the stockholders ratified and approved the Company's 1994 Stock Option
Plan pursuant to which such three individuals each received options to acquire
one million shares of Common Stock at a price of $.125 per share. As of the date
hereof, Messrs. Marinello, Liang and Ryan have been jointly engaged in a plan of
activity designed to establish and expand the patent and other intellectual
property coverage afforded the Company's products and developments. One prior
patent which had lapsed because of technical requirements was successfully
recovered and five new patents have been granted and four other applications are
in process. While the applications are filed in the names of the individuals,
they have agreed to assign a two-thirds interest therein when any patents issue.
The Company has been paying filing fees and fees of patent counsel in connection
with this endeavor. The Company has exclusive rights to use such patents during
the term of the Employment Agreement for an aggregate royalty fee of 5% of the
gross profits of products sold utilizing such patents or other such intellectual
property; following termination of such Employment Agreement, the Company may
retain exclusive use of the patents and other intellectual property, by payment
of a royalty equal to 10% of the gross revenues of products sold utilizing the
same.

On November 7, 1994, the Board of Directors of the Company adopted a
form of Indemnity Agreement to be entered into with all executive officers and
directors of the Company, providing for indemnification to be made to them for
expenses and liabilities relating to their services for the Company, to the
fullest extent permitted under Delaware law.

-32-

<PAGE>

SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION

Private Placements

On September 13, 1993 and October 29, 1993, the Company sold an
aggregate of 2,500,000 shares of Common Stock at a price of $.125 per share to
10 investors in two private placements (the "Private Placements" and "Private
Placement Stock", respectively). An aggregate of up to all such 2,500,000 shares
of Private Placement Stock were offered and sold pursuant to this Prospectus by
the stockholders who purchased such shares. The Company has agreed to register
the pubic offering of the Private Placement Stock under the Securities Act and
to pay all expenses in connection therewith (except costs of counsel and
brokerage discounts and commissions, if any). The Registration Statement of
which this Prospectus forms a part will be kept effective until the earlier of
(i) the date that all of the shares of Common Stock covered hereby have been
sold, or (ii) such unsold shares may be sold without registration pursuant to
Rule 144 promulgated under the Securities Act. None of the following described
stockholders has ever held any position or office with the Company or had any
other material relationship with the Company except for Messrs. William J. Ryan
and Louis Liang, who became officers and directors of the Company subsequent to
their acquiring such shares. Four stockholders who purchased Shares under the
Private Placement have sold an aggregate of 1,800,000 shares in this Offering
and are excluded from the table set forth below, which now covers an aggregate
of 700,000 shares of Private Placement Stock. The Company will not receive any
of the proceeds from the sale of such shares. The following table sets forth
certain information with respect to the stockholders selling the Private
Placement Stock:

<TABLE>
<CAPTION>
Total Number of Shares Number of Shares of Beneficial Ownership
of Common Stock Private Placement of Shares of Common
Beneficially Owned Stock Being Offered Stock after the
Shareholder Prior to Sale For Sale Hereby Offering (1)(2)
- ----------- ------------------------------ ---------------------- ---------------

Number Percentage(2)
------ -------------

<S> <C> <C> <C> <C>
Equity Interest Inc. 100,000 100,000 0 --
Universal Solutions Inc. 200,000 200,000 0 --
William J. Ryan(3) 700,000 100,000 600,000 2.39%
Louis Liang(3) 759,000 100,000 659,000 2.62%
Steven B. Rosner 200,000 200,000 0 --
</TABLE>

- ------------------------------
(1) Assumes all shares are sold by such Selling Stockholder and no
additional shares are acquired.
(2) Only calculated if one percent or greater.
(3) See "Share Ownership of Certain Beneficial Owners and Management", and

"Sales by Holders of Certain Stock Options" under this caption.

-33-

<PAGE>

Sales by Holders of Certain Stock Options

The following officers and directors of the Company are offering for
sale, from time to time hereafter, an aggregate of up to 700,000 shares of
Common Stock, to be acquired by such holders, upon exercise of stock options
issued by the Company to such Holders. See "Management" for a further
description of the Holders, and their positions with the Company and "Management
- - Stock Options" for a description of the terms of the stock options held by
such Holders. The following table describes the name and relationship to the
Company of each Holder, and the number of shares of Common Stock presently
beneficially owned by each Holder, the number covered for resale by this
Prospectus, and the number of shares (and percentage holding of the outstanding
shares of Common Stock if more than one percent) which would be retained by each
Holder if all of the Holder's shares covered by this Prospectus were sold:

<TABLE>
<CAPTION>
Total Number of Shares Number of Shares of Beneficial Ownership
of Common Stock Common Stock Under- of Shares of Common
Beneficially Owned lying Options to be Stock after the
Shareholder Prior to Sale Offered For Sale Hereby Offering (1)
- ----------- ------------------------------ ----------------------- ------------

Number Percentage(2)
------ -------------

<S> <C> <C> <C> <C>
Daniel A. Marinello, 1,615,000(4) 400,000 1,215,000 4.83%
President, Chief
Executive Officer
and a director

Louis Liang, 759,000(4) 100,000 659,000(3) 2.62%
Executive Vice President -
Strategic Business
and a director

William J. Ryan 700,000(4) 100,000 600,000 2.39%
Executive Vice President -
Operations and a director

Douglas B. Kruger 650,000 100,000 550,000 2.19%
Secretary and a director
</TABLE>

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

(1) Assumes all shares are sold by such Selling Stockholder and no

additional shares are acquired.
(2) Only calculated if one percent or greater.
(3) Includes 4,000 shares held in trust for a child, the beneficial
ownership of such shares being disclaimed by Mr. Liang.
(4) Includes 500,000 shares presently exercisable which were granted under
the 1994 Stock Option Plan.

-34-

<PAGE>

Plan of Distribution

The shares of Common Stock covered hereby may be offered and sold from
time to time as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices related to the
then-current market price, or in negotiated transactions. Such shares may be
sold by one or more of the following methods, without limitation: (a) a block
trade in which a broker or dealer so engaged will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus; (c)
ordinary brokerage transactions and transactions in which the broker solicits
purchase; and (d) face-to-face transactions between sellers and purchasers
without a broker/dealer. In effecting sales, brokers or dealers engaged by the
Selling Stockholders may arrange for other brokers or dealers to participate.
Such brokers or dealers may receive commissions or discounts from Selling
Shareholders in amounts to be negotiated. Such brokers and dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales. Since MHM, which
together with its affiliates, is a substantial holder of the Company's
securities (See "Share Ownership of Certain Beneficial Owners and Management"),
is a market maker with respect to shares of Common Stock, such firm may
participate in the distribution of shares offered hereby. See "Cover" and "Risk
Factors--Possible Restriction on Market Making Activities in the Company's
Securities". In addition, this Prospectus shall also be used by MHM in
connection with offers and sales related to market-making transactions effected
by it in the Company's securities.

DESCRIPTION OF SECURITIES

The Company's authorized capital stock consists of 45,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock,
par value $.01 per share. As of April 30, 1997, 22,917,178 shares of Common
Stock and 1,370,475 shares of Preferred Stock were outstanding.

Common Stock

Subject to the rights and preferences of any holders of Preferred Stock
that may be issued, the holders of Common Stock are entitled to one vote per
share on all matters on which stockholders are entitled to vote, to receive pro
rata such dividends as are available from the net assets of the Company upon

liquidation, after distribution of such amounts to holders of Preferred Stock as
are required by the terms thereof. There are no cumulative voting, pre-emptive,
conversion or redemption rights applicable to the Common Stock.

8% Redeemable Convertible Preferred Stock

The Board has designated 1,875,000 shares of the Preferred Stock as 8%
Redeemable Convertible Preferred Stock (the "Preferred Stock"), out of which
1,370,475 shares are issued and outstanding as of April 30, 1997 with the
following rights, designations and preferences:

Conversion. Each share of Preferred Stock may be converted at any time,
at the holder's option, into four (4) shares of Common Stock, subject to
adjustment in certain events, including (i) subdivisions or combinations of
shares of Common Stock, and (ii) reclassifications, consolidations, mergers and
similar transactions.

Dividends. Holders of the Preferred Stock are entitled to receive, out
of funds legally available therefor, annual cash dividends at the rate of $.16
per share (8% of the liquidation value) in preference to and priority over
dividends (other than stock dividends) upon shares of Common Stock. Dividends on
the Preferred Stock,

-35-

<PAGE>

which are cumulative, accrue quarterly and are payable annually, beginning with
the last day of November, to the holders of record 15 days prior to such date.
No dividends have been paid thereon since the start of Fiscal 1995. The first
and only Dividend Payment Date occurred on November 30, 1994 when a dividend of
$.15 per share was paid on each share of Preferred Stock. Since that time no
dividends have been declared or paid. The aggregate dollar value of unpaid
preferred dividends as at April 30, 1997 was approximately $600,000. All such
dividends have not been paid and have been passed by the Company in order to
conserve working capital.

Unpaid accumulated dividends on Preferred Stock are forfeited upon
conversion and no adjustment is made on the conversion ratio to compensate for
loss of any unpaid dividends. Paragraph 7 of the Company's Certificate of
Designation relating to the Preferred Stock which deals with "conversion"
provides that, except where conversion revolves around a Dividend Payment Record
Date, no account is taken for any dividends. The Certificate is quite clear in
this regard and further provides, in the last sentence of the third paragraph of
Section ( b) thereof:

"Except as provided in this paragraph, the Company shall make no

payment or allowance for unpaid dividends, whether or not in
arrears, on converted shares of Preferred Stock or for dividends
on the shares of Common Stock issued upon such conversion."

Accordingly, upon conversion of shares of Preferred Stock, unpaid
dividends on such shares of Preferred Stock will be extinguished unless and to
the extent that at the time of conversion a dividend has been declared to be due
and payable by the Company.

If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of indebtedness or
assets of the Company, but generally not stock dividends or rights to subscribe
for Common Stock) and pursuant to the antidilution provisions relating to the
Preferred Stock the nominal conversion price thereof is reduced, for federal
income tax purposes such reduction may be deemed to be the payment of a taxable
dividend to holders of the Preferred Stock.

The Company has passed upon the declaration of preferred dividends
rather than accruing the same in a technical sense and any reference to accrual
is a misnomer. The ramifications of this policy are that there is no balance
sheet effect but the unpaid dividends on the Preferred Stock flow through the
profit and loss statement as a reduction before calculating profit or, as an
addition, in the calculation of loss per share of common stock. Other
ramifications of this treatment are that, unlike the status in conversions, the
cumulative unpaid preferred dividends must be paid by the Company in the event
of a redemption of the Preferred Stock and, in addition, the cumulative unpaid
dividends must be paid before any dividends may be declared and paid upon shares
of Common Stock. The Company's policy has been to withhold payment of dividends
on Preferred Stock as a means of increasing working capital and the board of
directors reexamines this decision on a quarterly basis in terms of
then-existing conditions.

Voting Rights. Holders of the Preferred Stock have no voting rights
except as may be required by law.

Liquidation Rights. Upon any liquidation, dissolution or winding-up of
the Company, whether voluntary or involuntary, the holders of the Preferred
Stock shall have preference and priority over any Common Stock upon liquidation,
dissolution or winding up, for payment out of the assets of the Company or
proceeds thereof available for distribution to stockholders of $2.00 per share,
plus all dividends payable and unpaid thereon to the date of such distribution,
and after such payment the holders of the Preferred Stock shall be entitled to
no other payments. If, in the case of any such liquidation, dissolution or
winding up of the Company, the assets of

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<PAGE>

the Company or proceeds thereof shall be insufficient to make the full
liquidation payment of $2.00 per share plus all payable and unpaid dividends on
the Preferred Stock and full liquidation payments on any other series of
preferred stock ranking as to liquidation on a parity with the Preferred Stock,
then such assets and proceeds shall be distributed among the holders of the
Preferred Stock and any such other preferred stock ratably in accordance with
the respective amounts which would be payable upon liquidation, dissolution or
winding-up on such shares of Preferred Stock and any such other series of
preferred stock if all amounts payable thereof were paid in full. Neither the
consolidation nor merger of the Company into or with another corporation or
corporations, nor the sale of all or substantially all of the assets of the
Company, shall be deemed a liquidation, dissolution or winding up of the affairs
of the Company.

Redemption. The Preferred Stock is subject to redemption by the Company
commencing December 12, 1994, in whole or in part, at the redemption price of
$2.00 per share, provided that the closing high bid price for the Company's
Common Stock is in excess of $1.00 per share for any 10 consecutive trading days
ending within fifteen (15) days of the date of mailing the notice of redemption,
as provided below.

Any redemption shall be effected by mailing notices of such redemption
to the holders of the Preferred Stock to be redeemed at their respective
addresses as the same may appear on the record of stockholders of the Company,
specifying the time and place of redemption, such notice to be mailed at least
30 days and not more than 60 days prior to the date specified therein for
redemption. From and after the date specified in any such notice as the
redemption date, unless the Company shall fail to provide monies at the time and
place specified in such notice for the payment of the redemption price, all
rights of the holders thereof as stockholders of the Company, except the right
to receive the redemption price, shall terminate. Any redemption hereunder shall
be had in the manner determined by the Board of Directors of the Company and in
accordance with all applicable provisions of law.

If less than all of the outstanding shares of Preferred Stock not
previously called for redemption are to be redeemed, shares to be redeemed shall
be selected by the Company from outstanding shares not previously called for
redemption by lot or pro rata as determined by the Board of Directors of the
Company. The Company may not redeem any outstanding shares of Preferred Stock
unless all dividends required to have been paid shall have been declared and
paid or set apart for payment upon all outstanding shares of Preferred Stock.
Shares of Preferred Stock redeemed for cash by the Company will be restored to
the status of authorized but unissued shares of Preferred Stock, without
designation as to series, and may thereafter be reissued.

Other. Holders of Preferred Stock are not entitled to any preemptive
rights and no sinking fund provisions are applicable to such shares.

Other Preferred Stock

The other shares of preferred stock may be issued by resolutions of the
Company's Board of Directors from time to time without any action of the
stockholders. Such resolutions may authorize issuances in one or more classes or

series and may fix and determine any liquidation preferences, voting rights,
conversion privileges, redemption terms, and other privileges and rights of the
stockholders of each class or series so authorized. Such actions could adversely
affect the voting power of the holders of the Company's Common Stock. Under
certain circumstances, the Preferred Stock could have the effect of acting as an
anti-takeover device to prevent a change of control of the Company.

-37-

<PAGE>

Warrants

Class A Warrants. There are 1,725,000 Class A Warrants issued and
outstanding as of January 31, 1997. The holder of each Class A Warrant is
entitled, upon payment of the exercise price of $1.00, to purchase one share of
Common Stock and one Class B Warrant. Unless previously redeemed, the Class A
Warrants are exercisable at any time until December 12, 1998, provided that at
such time a current prospectus relating to (i) the Common Stock to be issued
upon exercise of the Class A Warrants, and (ii) the Class B Warrants to be
issued upon exercise of the Class A Warrants, is in effect and such shares of
Common Stock and Class B Warrants are qualified for sale or exempt from
qualification under applicable state securities laws. The Class A Warrants are
subject to redemption, as described below.

Class B Warrants. No Class B Warrants are issued and outstanding as of
January 31, 1997. The holder of each Class B Warrant is entitled to purchase one
share of Common Stock at an exercise price of $1.50. Unless previously redeemed,
the Class B Warrants are exercisable at any time after they are issued (upon
exercise of the Class A Warrants) until December 12, 1998, provided that at such
time a current prospectus relating to the Common Stock to be issued upon
exercise thereof is then in effect and such shares of Common Stock are qualified
for sale or exempt from qualification under applicable state securities laws.
The Class B Warrants are subject to redemption, as described below.

Redemption. The Warrants are subject to redemption by the Company, upon
30 days' written notice, at a price of $.001 per Warrant, if the closing high
bid price of the Common Stock for any 10 consecutive business days ending within
15 days of the date on which the notice of redemption is given shall have
exceeded $1.50 per share with respect to the Class A Warrants and $2.00 per
share with respect to the Class B Warrants. Holders of Warrants will
automatically forfeit their rights to purchase the shares of Common Stock
issuable upon exercise of such Warrants unless the Warrants are exercised before
the close of business on the business day immediately prior to the date set for
redemption. All of the outstanding Warrants of a class, except for those in the
Underwriter's Unit Purchase Option, must be redeemed if any of that class are
redeemed. A notice of redemption shall be mailed to each of the registered
holders of the Warrants by first class mail, postage prepaid, no earlier than
the sixtieth nor later than the thirtieth day before the date fixed for
redemption. The notice of redemption shall specify the redemption price, the
date fixed for redemption, the place where the Warrant certificates shall be
delivered and the redemption price to be paid, and that the right to exercise
the Warrants shall terminate at 5:00 p.m. (New York time) on the business day
immediately preceding the date fixed for redemption.

General. The Warrants may be exercised upon surrender of the
certificate(s) therefor on or prior to the expiration of the redemption date (as
explained above) at the offices of the Company's warrant agent (the "Warrant
Agent") with the form of "Election to Purchase" on the reverse side of the
certificate(s) filled out and executed as indicated, accompanied by payment (in
the form of certified or cashier's check payable to the order of the Company) of
the full exercise price for the number of Warrants being exercised.

The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price in certain events, such as stock
dividends, stock splits, mergers, sale of substantially all of the Company's
assets, and other extraordinary events.

The Company is not required to issue fractional shares of Common Stock,
and in lieu thereof will make a cash payment based upon the current market value
of such fractional shares. The holder of the Warrants will not possess any
rights as a stockholder of the Company unless and until he exercises the
Warrants.

-38-

<PAGE>

Directors' Liability. As authorized by the Delaware General Corporation
Law (the "GCL"), the Company's Certificate of Incorporation (the "Company
Certificate") provides that no director of the Company shall be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or repurchases or (iv) for any transaction from which the
director derived an improper personal benefit. The effect of the provision in
the Company Certificate is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of the fiduciary duty
of care as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
(iv) above. This provision does not limit nor eliminate the rights of the
Company or any stockholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. In addition,
the Company Certificate provides that if the GCL is amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of the directors shall be eliminated or limited to the fullest extent
permitted by the GCL as so amended. On November 7, 1994, the Board of Directors,
at the Annual Meeting, adopted and approved an Indemnity Agreement to be entered
into and between the Company, on the one hand, and each of its executive
officers and directors, on the other hand. This Indemnity Agreement provides
that the Company shall indemnify such persons to the fullest extent permitted
under the laws of the state of Delaware, (including reimbursement for expenses
incurred) from and against claims, suits or proceedings arising by reason of the
fact that such person is or was a director, officer, employee or agent of the
Company or any subsidiary or joint venture thereof. Indemnification is not

provided where such person has been adjudicated to have been engaged in conduct
which is fraudulent or constitutes willful misconduct, or in certain other
circumstances. Such persons have also been advised that it is the position of
the Securities and Exchange Commission that indemnification for liabilities
arising under the federal securities laws is against public policy and is,
therefore, unenforceable, and that claims for indemnification therefor should be
submitted to the appropriate court for adjudication). The foregoing provisions
will not alter the liability of directors under federal securities laws.

Section 203 of the Delaware General Corporation Law. The Company is
subject to the provisions of Section 203 of the GCL. That section provides, with
certain exceptions, that a Delaware corporation may not engage in any of a broad
range of business combinations with a person or affiliate or associate of such
person who is an "interested stockholder" for a period of three years from the
date that such person became an interested stockholder unless: (i) the
transaction resulting in a person's becoming an interested stockholder, or the
business combination, is approved by the board of directors of the corporation
before the person becomes an interested stockholder, (ii) the interested
stockholder acquires 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes it an interested stockholder
(excluding certain employee stock ownership plans); or (iii) on or after the
date the person becomes an interested stockholder, the business combination is
approved by the corporation's board of directors and by the holders of at least
66 2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder. An "interested
stockholder" is defined as any person that is (i) the owner of 15% or more of
the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within the three year period
immediately prior to the date on which it is sought to be determined whether
such person is an interested stockholder.

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<PAGE>

TRANSFER AGENT AND WARRANT AGENT

The Registrar and Transfer Agent for the Common Stock is American Stock
Transfer and Trust Company, 40 Wall Street, New York, New York 10005.

SHARES ELIGIBLE FOR FUTURE SALE

The Company's Common Stock has been publicly traded in the over-the-
counter market and is quoted on the NASD's non-NASDAQ "Electronic Bulletin
Board". See "Price Range of Common Stock". The shares of Preferred Stock and the
Class A Warrants have been publicly traded in the over-the-counter market.
Future sales of substantial amounts of Common Stock in the public market could
adversely affect the prevailing market prices.

The Company had outstanding as of April 30, 1997, 22,917,178 shares of
Common Stock, 1,370,475 shares of Preferred Stock and 1,725,000 Class A
Warrants. See "Capitalization". The shares of Common Stock to be sold in this
Offering will be freely tradeable in the public market without restriction or
further registration under the Securities Act unless purchased by "affiliates"
of the Company within the meaning of Rule 144 under the Securities Act ("Rule
144"). Of the shares of Common Stock outstanding, approximately 15,300,000 are
"restricted securities" within the meaning of Rule 144. All of such restricted
shares, have been held for two years or more and are thus qualified for sale by
the holders under Rule 144, may be sold free of the volume and reporting
requirements and limitations contained in Rule 144, pursuant to the provisions
of Rule 144(k). In addition, holders of stock options could exercise their
options and sell certain of the shares issued upon exercise as described below.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year (including the holding period of any prior owner other than an affiliate)
is entitled to sell in "broker's transactions" or to market makers, within any
three-month period commencing 90 days after the date of this Prospectus, a
number of shares that does not exceed the greater of (i) one percent of the
number of shares of Common Stock then outstanding (or approximately 224,689
shares immediately after this Offering) or (ii) generally, the average weekly
trading volume in the Common Stock during the four calendar weeks preceding the
required filing of a Form 144 with respect to such sale. Sales under Rule 144
are generally subject 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, is entitled to sell such shares without compliance with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.

As of the date hereof, there are options outstanding to officers,
directors and employees covering 1,990,000 shares issued under the Company's
Stock Option Plans, which are immediately exercisable. Both such stock options
and the shares of Common Stock to be issued upon exercise thereto are covered by
a current registration statement making such shares of Common Stock to be

acquired upon exercise of such stock options immediately saleable. In addition
to the options outstanding under the Company's Stock Option Plans, there are
options outstanding to acquire 700,000 shares of Common Stock which are held by
officers and directors (See "Plan of Distribution - Sales by Holders of Certain
Stock Options); the shares of Common Stock underlying such options, when and if
they are to be publicly offered and sold, are among the shares covered by this
Prospectus. In addition, the underwriter of the Company's December, 1993 public
offering of Units of Preferred Stock and Class A Warrants, M.H. Meyerson & Co.,
Inc. and/or its controlling persons, holds options to

-40-

<PAGE>

purchase 150,000 Units at a price of $2.40 per Unit, for a four year period
commencing December 12, 1994; the holders thereof also hold rights to compel the
Company to register such Units and/or underlying securities. See "Security
Ownership of Certain Beneficial Owners and Management".

LITIGATION

The Company is not involved in any material litigation.

LEGAL MATTERS

The validity of the Common Stock being offered hereby, which has been or
will be issued pursuant to the laws of Delaware, will be passed upon for the
Company by Hartman & Craven LLP, 460 Park Avenue, New York, New York 10022.
Edward I. Tishelman, a member of the firm of Hartman & Craven LLP, owns shares
of the Company's Common Stock.

EXPERTS

The financial statements of Angstrom Technologies, Inc. at October 31,
1996 and for each of the two years in the period ended October 31, 1996,
included in this Prospectus and Registration Statement of which this Prospectus
is a part, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

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<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
TITLE PAGE
----- ----
<C> <C>

Audited Financial Statements
- ----------------------------

1. Report of Independent Auditors .................................................................. F-1

2. Balance Sheet as of October 31, 1996............................................................. F-2

3. Statements of Operations for the Years Ended
October 31, 1996 and 1995........................................................................ F-3

4. Statements of Capital for the
Years Ended October 31, 1996 and 1995............................................................ F-4

5. Statements of Cash Flows for the Years Ended
October 31, 1996 and 1995........................................................................ F-5

6. Notes to Financial Statements.................................................................... F-6

Unaudited Financial Statements
- ------------------------------

7. Balance Sheet as at April 30, 1997............................................................... F-12

8. Statements of Operations for Six Months ended April 30, 1997..................................... F-14

9. Statements of Cash Flows as at April 30, 1997.................................................... F-15

10. Notes to Financial Statements.................................................................... F-16
</TABLE>

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<PAGE>

Report of Independent Auditors

The Board of Directors
Angstrom Technologies, Inc.

We have audited the accompanying balance sheet of Angstrom Technologies, Inc. as
of October 31, 1996, and the related statements of operations, capital and cash
flows for each of the two years in the period ended October 31, 1996. 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.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Angstrom Technologies, Inc. at
October 31, 1996, and the results of its operations and its cash flows for each
of the two years in the period ended October 31, 1996, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Cincinnati, Ohio
January 6, 1997

F-1

<PAGE>

Angstrom Technologies, Inc.

Balance Sheet
October 31, 1996

<TABLE>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 24,175
Short-term investments 816,517
Accounts receivable 110,940
Interest receivable 6,093
Inventories:
Finished goods 30,168
Work in process 12,906
Raw materials and parts 522,931
-----------
566,005
Prepaid expenses 1,181
-----------
Total current assets 1,524,911
Furniture and equipment, at cost 141,789
Less accumulated depreciation 46,609
-----------
Net furniture and equipment 95,180
Patents, less accumulated amortization of $4,518 97,877
-----------
Total assets $ 1,717,968
-----------
-----------

Liabilities and capital
Current liabilities:
Accounts payable $ 190,938
Accrued liabilities 55,520
Long-term debt due within one year 26,068
-----------
Total current liabilities 272,526
Long-term debt 68,386
Capital:
Preferred stock, $.01 par value; 5,000,000 shares authorized, 1,482,535
issued and outstanding (liquidation preference of $2.00
per share) 2,439,483
Common stock, $.01 par value; 45,000,000 shares authorized,
22,468,938 shares issued and outstanding 224,690
Additional paid in capital 4,726,086
Accumulated deficit (6,013,203)
-----------
Net capital 1,377,056
-----------
$ 1,717,968

-----------
-----------
</TABLE>

See accompanying notes.

F-2

<PAGE>

Angstrom Technologies, Inc.

Statements of Operations

<TABLE>
<CAPTION>
Year ended October 31
--------------------------
1996 1995
--------- --------

<S> <C> <C>
Net sales..................................................... $ 869,829 $ 1,050,281
Cost of sales................................................. 441,886 357,611
-------- ---------
Gross profit.................................................. 427,943 692,670
Selling, general and administrative expenses.................. 945,906 973,852
Interest expense.............................................. 12,876 15,469
Interest income............................................... (63,632) (79,440)
-------- ---------
895,150 909,881
-------- ---------
Net loss...................................................... (467,207) (217,211)
Less dividend requirement on preferred stock.................. (237,206) (266,152)
-------- ---------
Net loss applicable to common stock........................... $ (704,413) $ (483,363)
-------- ---------
-------- ---------
Net loss per common share..................................... $ (0.03) $ (0.02)
-------- ---------
-------- ---------
</TABLE>

See accompanying notes.

F-3

<PAGE>

Angstrom Technologies, Inc.
Statements of Capital

<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------- ----------------------
Shares Amount Shares Par value
--------- ------ ------ -------
<S> <C> <C> <C> <C>
Balance at October 31, 1994............. 1,711,500 $ 2,816,240 21,553,078 $ 215,531
Conversion of preferred stock..... (48,050) (79,065) 192,200 1,922
Net loss..........................
-------- --------- --------- --------
Balance at October 31, 1995............. 1,663,450 2,737,175 21,745,278 217,453
Conversion of preferred stock..... (180,915) (297,692) 723,660 7,237
Net loss..........................
-------- --------- --------- --------
Balance at October 31, 1996............. 1,482,535 $ 2,439,483 22,468,938 $ 224,690
-------- --------- --------- --------
-------- --------- --------- --------

<CAPTION>
Additional Net
Paid in Accumulated Capital
Capital Deficit (Deficiency)
--------- --------- ---------
<S> <C> <C> <C>
Balance at October 31, 1994................... $ 4,358,488 $(5,328,785) $ 2,061,474
Conversion of preferred stock........... 77,143 --
Net loss................................ (217,211) (217,211)
--------- --------- ---------
Balance at October 31, 1995................... 4,435,631 (5,545,996) 1,844,263
Conversion of preferred stock........... 290,455 --
Net loss................................ (467,207) (467,207)
--------- --------- ---------
Balance at October 31, 1996................... $ 4,726,086 $(6,013,203) $ 1,377,056
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying notes.

F-4

<PAGE>

Angstrom Technologies, Inc.
Statements of Cash Flows

<TABLE>
<CAPTION>
Year ended October 31
--------------------
1996 1995
------ ------
<S> <C> <C>
Operating activities
Net loss....................................................... $(467,207) $(217,211)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization........................ 19,624 13,994
Changes in operating assets and liabilities:
Accounts receivable.............................. 9,682 (58,825)
Interest receivable.............................. 5,396 (7,088)
Inventories...................................... (274,589) (56,573)
Prepaid expenses................................. 110,780 (66,230)
Accounts payable................................. 85,606 (11,958)
Accrued liabilities.............................. 8,297 1,348
--------- ---------
Net cash used by operating activities.......................... (502,411) (402,543)
Investing activities...........................................
Purchases of furniture and equipment........................... (73,113) (1,304)
Proceeds from sale of available-for-sale investments........... 533,208 824,205
Capitalization of patents...................................... (40,920) (61,475)
Other assets................................................... 1,237 --
--------- ---------
Net cash provided by investing activities...................... 420,412 761,426
Financing activities
Payment of preferred stock dividend............................ -- (256,725)
Principal repayments of long-term debt......................... (23,134) (20,530)
--------- ---------
Net cash used by financing activities.......................... (23,134) (277,255)
--------- ---------
Net (decrease) increase in cash................................ (105,133) 81,628
Cash and cash equivalents at beginning of year................. 129,308 47,680
--------- ---------
Cash and cash equivalents at end of year....................... $ 24,175 $ 129,308
--------- ---------
--------- ---------
Supplemental cash flow disclosures

Cash paid for interest......................................... $ 12,876 $ 15,470
Conversion of preferred stock to common stock.................. 297,692 79,065
</TABLE>

See accompanying notes.

F-5

<PAGE>

Angstrom Technologies, Inc.

Notes to Financial Statements

October 31, 1996 and 1995

1. Significant Accounting Policies

Business

Angstrom Technologies, Inc. (the Company), is a developer and manufacturer
of electro-optical scanning devices and related ultraviolet chemical compounds.
The Company sells primarily to Fortune 500 companies in a variety of industries,
and generally does not require collateral for credit sales. Credit losses are
provided for in the financial statements when necessary and have been
consistently within management's expectations.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out basis. The Company periodically reviews inventory
levels for obsolete, slowmoving and nonsalable inventory and records a reserve
against those inventories when deemed necessary. No material reserves have been
recorded.

Furniture and Equipment

Furniture and equipment is stated at cost. Depreciation is provided using
the straight-line method over the useful life of the assets.

Patents

The Company has been awarded four patents from the U.S. Patent office. The
legal fees associated with the application and approval of these patent
applications for U.S. and foreign patents have been capitalized. These patent
costs are being amortized over a life not to exceed 20 years which is deemed to
be the economic life of the patents. These do not exceed the statutory lives of
the respective patents and in no case is the economic life of a patent deemed to
exceed its statutory life.

Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less at date
of purchase to be cash equivalents.

Net Loss Per Common Share

Calculations of net loss per common share are based on the weighted average
number of shares outstanding during each year. The weighted average number of
shares outstanding was 22,084,393 for 1996 and 21,587,286 for 1995.

F-6

<PAGE>

Accounting for Stock-Based Compensation

In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation." The Statement established
financial accounting and reporting standards for stock-based employee
compensation plans. Companies may elect to account for such plans under the fair
value method or continue the previous accounting and disclose pro forma net
income and earnings per share as if the fair value method was applied. The
statement is to be applied on a prospective basis beginning in the Company's
fiscal year 1997.

The Company has not yet determined the potential financial statement impact of
the Standard.

Revenue Recognition

Revenues are recognized when a product is shipped or a service is
performed. The Company provides for product returns and warranties based on
historical experience.

Use of Estimates

The preparation of the financial statements using generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts recorded in the financial statements and accompanying notes.
Actual results could differ from those estimates.

2. Results of Operations and Management's Plans

The Company has employment agreements with its key executives (the Team)
which provides that the team receive an aggregate of 15% of gross sales plus 10%
of the first $1,000,000 of pre-tax profits in each year (so long as pre-tax
profits for such year equal or exceed $1,000,000), with a reduced percentage of
pre-tax profits in excess of this figure.

During the fiscal year ended October 31, 1994, the shareholders of the
Company approved an amendment to the Company's certificate of incorporation
increasing the authorized number of shares of common stock to 45,000,000 from
25,000,000, increasing the authorized number of shares of preferred stock to
5,000,000 from 2,000,000 and reducing the par value of the preferred stock
previously authorized to $.01 per share from $10.00 per share.

On December 22, 1993, the Company completed the issuance of 1,725,000 units
of its securities through a public offering, resulting in net proceeds of
approximately $2,838,000 after offering expenses. Each unit consists of one
share of the Company's 8% redeemable convertible preferred stock and one Class A

redeemable common stock purchase warrant. Each share of preferred stock is
convertible into four shares of the Company's common stock and each Class A
warrant entitles the holder to purchase one share of the Company's common stock
for $1.00 and to receive one Class B redeemable common stock purchase warrant
which entitles the holder to purchase one share of the Company's common stock
for $1.50. The preferred stock has a cumulative dividend rate of $0.16 per share
per annum and carries a liquidation preference of $2.00 per share plus any
dividends in arrears.

In 1996 and 1995, Management has determined that available funds are more
prudently utilized in its ongoing research and development efforts and as a
result no accrual or payment of dividends will be made until such time as
sufficient cash flows are generated from operations. Management intends to hold
the dividend payable as of November 30, 1996 ($503,358) and 1995 ($266,152), in
arrears. No dividend has been accrued for the year ended October 31, 1996 and
1995. The amount that would have been recorded at October 31, 1996 and 1995, if
a dividend had been declared, would have been $237,206 and $266,152,
respectively. The preferred stock is subject to redemption at the company's
option at $2.00 per share on 30-60 days written notice at any time after one
year from the effective date (December 22, 1993), provided that the closing high
bid price for common stock shares is at least $1.00 per share for 10 consecutive
trading days. The net proceeds of the offering were used primarily to repay
outstanding notes payable and fund operating and

F-7

<PAGE>

capital needs. Specific plans primarily include scanning system product
development, additional purchases of inventory and additional rental space and
upgraded sales and marketing efforts.

As a result of these various actions, the Company believes that it will be able
to continue its operations through its 1997 fiscal year.

3. Investments

Investments at October 31, 1996 are comprised of U.S. Treasury bills,
$367,243, classified by management as available for sale, and U.S. Treasury
bonds, $449,274, classified as held to maturity. The available for sale
securities are recorded at fair value with any aggregate net unrealized
gain/loss reported as a separate component of shareholders' equity, in
accordance with Statement of Financial Accounting Standard No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." The held to maturity
investments mature within one year and are carried at amortized cost which
approximates market value at October 31, 1996. There are no material unrealized
gains or losses with respect to any of the securities referred to herein.

Interest income of $63,632 and $79,440 includes approximately $12,000 and
$736 from the amortization of discounts on investments in 1996 and 1995,
respectively.

4. Long-term Debt

Long-term debt at October 31, 1996 consists of the following:

<TABLE>
<S> <C>
Non-interest bearing promissory note, payable in monthly installments of $3,000
through January 1, 2000, less discount of $32,412 imputed
at an annual rate of 12% $94,454
Less current maturities 26,068
-------
$68,386
-------
-------
</TABLE>

The non-interest bearing promissory note was originally an interest bearing
demand note with a principal balance of $297,940. The terms of the note have
been renegotiated to provide for repayment of the principal balance only over a
period of 97 months. The note is carried at the present value of its scheduled
payments discounted at an annual rate of 12%.

The following payments of principal are required subsequent to October 31, 1996:

1997 $26,068
1998 29,375
1999 33,100
Thereafter 5,911
-------
94,454
-------
-------

F-8

<PAGE>

5. Stock Option Plans

Under the Company's Amended 1983 Stock Option Plan and 1985 Stock Option
Plan (the Plans), officers and other key employees who perform services on
behalf of the Company may be granted either non-qualified stock options or
incentive stock options for the purchase of up to 700,000 shares of the
Company's common stock. The Plans also provide for the issuance of stock
appreciation rights in connection with the granting of stock options. Option
prices may not be less than 100% of the fair market value of the common stock on
the date of grant and unexercised options expire not more than 10 years from
date of grant. The Plans are administered by a Stock Option Committee (the
Committee) of the Board of Directors. Subject to the guidelines of the Plans,
the Committee determines who options will be granted to, the type of options to
be granted, the number of shares, the option price per share, and the time when
the options may be exercised.

On June 23, 1994, the Board of Directors unanimously adopted the Company's

1994 Stock Option Plan (the "1994 Plan"), subject to stockholder approval (which
has been obtained) at the Annual Meeting of Stockholders held November 7, 1994.
The Company's prior stock option plans remain in effect as well. Under the 1994
Plan, a total of 6,300,000 shares are reserved for issuance to employees,
including directors and officers who may not be salaried employees ("Eligible
Participants"). The 1994 Plan provides that the number of shares subject thereto
and outstanding options and their exercise prices, are to be appropriately
adjusted for mergers, consolidations, recapitalizations, stock dividends, stock
splits or combination of shares. Shares allocated to options and stock
appreciation rights which have terminated for reasons other than the exercise
thereof may be reallocated to other options and/or stock appreciation rights.
Ratification and approval of the 1994 Plan with stockholders also constituted
ratification and approval of the options to be granted thereunder to the
Company's executive officers and directors.

Each member of the Team has received grants under the 1994 Stock Option
Plan to acquire one million shares of the common stock of the Company at a price
per share equal to $.125, the fair market price of the shares on both June 23,
1994, the date on which the options were granted as well as November 7, 1994 the
date on which the 1994 Stock Option Plan was ratified and approved by
stockholders at the Annual Meeting of Stockholders and such grants were
reconfirmed and reissued. Such options are exercisable to the extent of 500,000
shares immediately, an additional 250,000 on the first anniversary of the date
of grant and the balance of 250,000 shares exercisable from and after the second
anniversary of the date of grant, with such options expiring ten years from the
date of grant unless sooner terminated in accordance with its provisions.

5. Stock Option Plans (continued)

Options expire in 2001, 2002, 2004 or 2005 based upon the date of grant.
Changes in options outstanding under the Plans are as follows:

Stock Option
Shares Price Range
---------- ---------------
Balance at October 31, 1994 3,390,000 $0.01 and $.125
Granted 100,000 $.125
----------
Balance at October 31, 1995 3,490,000 $0.01 and $.125
Granted 75,000 $.406
----------
Balance at October 31, 1996 3,565,000 $0.01 and $.125
----------
----------

At October 31, 1996, 7,000,000 shares of common stock are reserved for
issuance under the Plans.

F-9

<PAGE>

At a special meeting of the Company's shareholders on January 20, 1992,
options were granted outside of the Company's stock option plans to the

Company's former president to purchase 1,000,000 shares of common stock. These
options were repurchased by the company during 1996 for $3,000. In addition,
options were granted to the chief executive officer to purchase 400,000 shares
of common stock. The option price of each grant is $0.125 per share and the
options expire on April 14, 1997.

At a special meeting of the Board of Directors on September 14, 1993,
options were granted outside of the Company's stock option plans to the Team to
purchase a total of 300,000 shares of common stock at an option price of $0.125
per share for a period expiring September 14, 1997.

All options outstanding at October 31, 1996 are fully exercisable.

6. Related Party Transactions

During the fiscal year ended October 31, 1996 the Company paid
approximately $133,000 ($158,000 in 1995) in commissions to the Team in
accordance with the Agreement described in Note 2 to the financial statements.
The Company paid consulting fees of approximately $207,000 ($169,000 in 1995) to
various members of the Board of Directors and/or corporate officers or to
entities controlled by them for Board of Directors fees, technical, research and
development and sales and marketing services rendered during the year.

The Company is required to assign to the Team a 1/3rd interest in any
patents or other intellectual property created by the Team which is used in the
Company's business. The Company is required to pay the Team a royalty computed
at 5% of the gross profit (difference between selling price and direct
manufacturing cost, exclusive of overhead) from use of such intellectual
property. In the event of termination of the Agreement by the Company, the
Company shall have the right to continue to retain exclusive use of the patents
and other intellectual properties by paying the Team an amount equal to 10% of
gross revenues from products sold which utilize such intellectual property;
otherwise, the Company may retain a non-exclusive license to use such
intellectual property for a fee of 5% of gross revenues from products sold
utilizing such patents. During the year ended October 31, 1996 the Company paid
royalties of approximately $3,701 to the Team ($4,320 in 1995).

7. Leases

Minimum future rental payments under commitments for noncancelable
operating leases in effect at October 31, 1996, principally for facilities is
approximately $32,000 in 1996.

Total rent expense under operating leases was $14,623 and $14,109 for the
years ended October 31, 1996 and 1995, respectively.

8. Federal Income Taxes

Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" requires the use of the liability method to recognize deferred income tax
assets and liabilities, using expected future tax rates. The tax effects of
temporary differences at October 31, 1996 is presented below:

F-10

<PAGE>

October 31,
1996
---------

Deferred tax assets:
Net operating loss $1,498,000
Other, net 5,800
----------
Total deferred tax assets 1,503,800
Less: valuation allowance 1,503,800
----------
Net deferred tax asset $ --
----------
----------

The Company has cumulative net operating loss carryforwards of
approximately $3,800,000 for federal income tax purposes which expire in the
years 2000 to 2011.

The reconciliation of income tax at the U.S. Federal statutory rate to
income tax expense is:

Year ended October 31
-----------------------
1996 1995
-------- -------
Tax at U.S. statutory rate $(159,000) $ (74,000)
Loss for which benefit not provided 159,000 74,000
--------- ---------
Actual tax provision $ -0- $ -0-
--------- ---------
--------- ---------

9. Research and Development Costs

Research and development costs charged to expense during the fiscal years
ended October 31, 1996 and 1995 were approximately $349,590 and $527,000,
respectively.

10. Significant Customers

Customers in excess of 10% of net sales for each respective year is as
follows:

Year ended October 31
-----------------------
1996 1995
------- -----
Customer A 17% 1%
Customer B 15% 2%
Customer C 17% 6%
Customer D 6% 48%

F-11

<PAGE>

Angstrom Technologies, Inc.
Balance Sheet

Apr. 30, 1997 Oct. 31, 1996
(Unaudited) (Note)
-----------------------------
Assets
Current assets:
Cash and cash equivalents $ 178,214 $ 24,175
Short-term investments 621,469 816,517
Accounts receivable 97,702 110,940
Interest receivable 6,003 6,093
Advances to suppliers 19,148 --
Inventories:
Finished goods 28,343 30,168
Work in process 13,557 12,906
Raw materials and parts 672,216 522,931

714,116 566,005
Prepaid expenses 12,759 1,181

Total current assets 1,649,411 1,524,911

Furniture and equipment, at cost 154,374 141,789
Less accumulated depreciation 56,076 46,609
Net furniture and equipment 98,298 95,180

Patents, less accumulated
amortization of $6,764 113,783 97,877
---------- ----------

Total assets $1,861,492 $1,717,968

NOTE: The balance sheet at October 31, 1996 has been derived from the audited
financial statements at that date, but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.

F-12

<PAGE>

Angstrom Technologies, Inc.
Balance Sheet (continued)

<TABLE>
<CAPTION>
April 30, 1997 Oct. 31, 1996
-------------- -------------
(Unaudited) (Note)

<S> <C> <C>
Liabilities and capital
Current liabilities:
Accounts payable $ 138,828 $ 190,938
Accrued liabilities 82,472 55,520
Long-term debt due within one year 27,672 26,068

Total current liabilities 248,972 272,526
Long-term debt 54,137 68,386

Capital:
Preferred stock, $.01 par value;
5,000,000 shares authorized,
1,370,475 issued and outstanding
(liquidation preference of $2.00
per share) 2,254,942 2,439,483

Common stock, $.01 par value;
45,000,000 shares authorized,
22,917,178 shares issued and 230,172 224,690
outstanding

Additional paid in capital 4,917,645 4,726,086
Accumulated deficit (5,844,375) (6,013,203)

Net capital 1,558,384 1,377,056

Total liabilities and capital $ 1,861,492 $ 1,717,968
</TABLE>

F-13

<PAGE>

Angstrom Technologies, Inc.
Statements of Operations
(Unaudited)

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30, April 30, April 30,
1997 1996 1997 1996
---- ---- ---- ----

<S> <C> <C> <C> <C>
Net sales $ 433,183 $ 244,083 $ 855,979 $ 442,582

Cost of Sales 129,293 120,150 248,743 260,307
------------ ------------ ------------ ------------

Gross profit 303,890 123,933 607,236 82,275

Selling, general and
administrative expenses 225,463 215,338 452,828 395,197
------------ ------------ ------------ ------------

Other income (expense) 78,427 (91,405) 154,408 (212,922)
Interest expense (2,583) (3,305) (5,355) (6,778)
Interest income 12,595 17,415 19,776 34,926
Gain on security sale -- -- -- 4,028
------------ ------------

(10,012) (14,110) (14,421) (32,176)
------------ ------------ ------------ ------------

Net income (loss) 88,439 (77,295) 168,829 (180,746)
------------ ------------ ------------ ------------

Less dividend requirement
on preferred stock (54,819) (62,855) (109,600) (106,900)
------------ ------------ ------------ ------------

Net income (loss) applicable
to common stock $ 33,620 $ (140,150) $ 59,229 $ (287,646)
------------ ------------ ------------ ------------

Net income (loss) per common
share $ -- $ (0.01) $ -- (0.01)
============ ============ ============ ============

Weighted Average Number
of Shares Outstanding 22,863,145 21,760,958 22,496,568 21,985,118
============ ============ ============ ============
</TABLE>

F-14

<PAGE>

Angstrom Technologies, Inc.
Statements of Cash Flows
(Unaudited)

Six Months ended Apr. 30
1997 1996
---- ----

Operating Activities
Net income (loss) $ 168,828 $(103,451)

Adjustments to reconcile net loss to net
cash used by operating activities:

Depreciation and amortization 10,204 3,672

Changes in operating assets and liabilities:
Accounts receivable 13,238 60,008
Interest receivable 90 --
Advances to suppliers (19,148) --
Inventories (148,111) (49,295)
Prepaid expenses (11,578) 51,287
Accounts payable (52,110) (12,980)
Accrued liabilities 28,556 (26,426)
Net cash provided (used in) operating activities (10,031) (77,185)

Investing activities
Purchases of furniture and equipment (12,585) (24,214)
Proceeds from sale of investments 195,048 66,267
Capitalization of patents (16,643) (15,730)
Net cash provided by investing activities 165,820 26,323

Financing activities
Proceeds from stock options exercises 12,500 --
Principal repayments of long-term debt (14,250) (5,537)
Net cash used by financing activities (1,750) (5,537)

Net increase (decrease) in cash 154,039 (56,399)
Cash and cash equivalents at beginning of year 24,175 129,308
Cash and cash equivalents at end of year 178,214 72,909

Supplemental cash flow disclosures
Cash paid for interest $ 5,355 $ 6,778

F-15

<PAGE>

ANGSTROM TECHNOLOGIES. INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

Note 1 The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the six month period ended April 30, 1997 is
not necessarily indicative of the results that may be expected for
the year ended October 31, 1997. For further information, refer to
the financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended October 31,
1996.

Note 2 Earnings per common share are calculated based upon a weighted
average of shares outstanding after giving effect to the preferred
dividend requirements.

Note 3 The preferred stock issued December 22, 1993 provided for an annual
cumulative dividend to be paid on November 1, 1995. Management has
determined that available funds would be more prudently utilized in
its ongoing research and development efforts and as a result no
accrual or payment of dividend will be made until such time as
sufficient cash flows are generated from operations. Management
intends to hold the dividend payable as of November 1, 1996, in
arrears. No dividend was accrued for the year ended October 31, 1996.
The amount that would have been accrued at October 31, 1996, if a
dividend had been recorded, would have been $237,206 ($.16 per
preferred stock share outstanding at November 1, 1996). No dividend
has been accrued for the three month period ended April 30, 1997. The
amount that would have been accrued at April 30, 1997, if a dividend
had been recorded for the six months then ended would have been
approximately $128,279.

Note 4 On December 3, 1993, the shareholders of the Company approved an
amendment to the Company's certificate of incorporation increasing
the authorized number of shares of common stock to 45,000,000 from
25,000,000, increasing the authorized number of preferred stock to
5,000,000 from 2,000,000 and reducing the par value of the preferred
stock to $.01 per share from $10.00 per share. On December 22, 1993,
the Company completed the issuance of 1,725,000 units of its
securities through a public offering, resulting in net proceeds of
$2,838,454 after offering expenses. Each unit consists of one share
of the redeemable convertible preferred stock and one Class A
redeemable common stock purchase warrant. Each share of preferred
stock is convertible into four shares of the Company's common stock
and each Class A warrant entitles the holder to purchase one share of
the Company's common stock for $1.00 and to receive one Class B

redeemable common stock purchase warrant which entitles the holder to
purchase one share of the Company's common stock for $1.50.

F-16

<PAGE>

For the three months ended April 30, 1997, preferred stock conversions were
as follows:

Conversion Preferred Stock Common Stock
Date Converted Received
--------------------------------------
02/04/97 20,000 80,000
02/05/97 2,300 9,200
02/11/97 9,100 36,400
02/12/97 29,900 119,600
02/26/97 6,370 25,480
02/28/97 5,450 21,800
03/12/97 5,000 20,000
04/09/97 1,000 4,000
------- -------
79,120 316,480
======================

The preferred stock has a liquidation preference of $2.00 per share,
an aggregate of $2,740,950.

Note 5 Effective November 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes."
The standard requires the use of the liability method to recognize
deferred income tax assets and liabilities, using expected future tax
rates. The cumulative effect of adopting the standard and the effect
of applying the standard on the operating statement for the period
ended April 30, 1994 was zero. The tax effects of the net operating
loss carryforwards and temporary differences that give rise to
deferred income tax assets and a corresponding valuation allowance at
April 30, 1997 and October 31, 1996 are presented below:

April 30, October 31,
1997 1996
Deferred tax assets:
Net operating loss $ 1,466,000 $ 1,498,000
Other, net 7,000 5,000
----------- -----------
Total deferred tax assets 1,474,000 1,503,800
Less: valuation allowance (1,474,000) (1,503,800)
----------- -----------
Net Deferred Tax Asset $ -0- $ -0-
=========== ===========

The company entered fiscal 1997 with cumulative net operating loss
carryforwards of approximately $3,800,000 for federal income tax
purposes which expire in the years 2000 to 2010.

Note 6 On March 3, 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128 "Earnings
Per Share" (SFAS No. 128). This pronouncement provides a different
method of calculating earnings per share than is currently used in
accordance with Accounting Board Opinion (APS) No. 15, "Earnings Per
Share." SFAS 128 provides for the calculation of "Basic" and
"Diluted" earnings per share. Basic earnings per share includes no
dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in the earnings of
an entity, similar to fully diluted earnings per share. The Company
will adopt SFAS No. 128 in 1997 and its implementation is not
expected to have a material effect on the financial statements.

Note 7 Patents Included in the other assets section of the balance sheet are
certain costs associated with patents, which are capitalized and
amortized over the shorter of their statutory lives or their
estimated useful lives using the straight-line method. The Company
periodically evaluates the recoverability of these assets in
accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of ("SFAS 121")."

F-17

<PAGE>

================================================================================

No dealer, salesman or 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 of this Prospectus. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
securities offered hereby in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.

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

The Company has undertaken to amend this Prospectus under certain
circumstances to reflect herein fundamental changes in the information set forth
herein or in the Registration Statement of which this Prospectus is a part.

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

TABLE OF CONTENTS

Page

Available Information..................................... 2
Prospectus Summary........................................ 3
Risk Factors.............................................. 6
Price Range of Common Stock.............................. 11
Capitalization........................................... 13
Management's Discussion and Analysis or
Plan of Operation....................................... 14
Business ................................................ 17
Dividends................................................ 23
Management............................................... 24
Share Ownership of Certain Beneficial
Owners and Management................................. 31
Interests of Management and Others
in Certain Transactions................................ 32
Selling Stockholders and Plan of Distribution............ 33
Description of Securities............................... 35
Transfer Agent and Warrant Agent........................ 40
Shares Eligible for Future Sale......................... 40
Litigation.............................................. 41
Legal Matters........................................... 41
Experts................................................. 41
Index to Financial Statements........................... 42

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

Until July 21, 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 is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

================================================================================

ANGSTROM TECHNOLOGIES, INC.

1,400,000 Shares
of Common Stock, $.01 par value

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

June 25, 1997

================================================================================

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Reference is made to Section 145 of the Delaware General Corporation Law
(the "GCL"), Article 8 of the Registrant's Restated Certificate of
Incorporation, as amended, and Article VII of the Company's By-Laws.

Section 145 of the GCL generally provides that a corporation is empowered
to indemnify any person who is made a party to any threatened, pending or
completed action, suite or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving, at
the request of the corporation, in any of such capacities of another corporation
or other enterprise, if such director, officer, employee or agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. This
statute describes in detail the right of the Registrant to indemnify any such
person.

Article 8 of the Restated Certificate of Incorporation of the Registrant,
as amended, provides generally for indemnification of all such persons to the
full extent permitted under the above-referenced Delaware statute.

Pursuant to Article VII of the Company's By-Laws, the Company may
indemnify, to the fullest extent permitted by the GCL, any person, including
officers and directors, with regard to any action or proceeding.

On November 7, 1994, the Board of Directors the Board of Directors of the
Company adopted a form of Indemnity Agreement to be entered into with all
executive officers and directors of the Company, providing for Indemnification
to be made to them to the fullest extent permitted under Delaware law. The form
of such Indemnity Agreement is filed as Exhibit 10.9 hereto.

Item 25. Other Expenses of Issuance and Distribution.

The following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered.

Legal Fees and Expenses....................................... 8,000.00
Printing and EDGAR transmission costs......................... 4,000.00
Accounting Fees............................................... 3,000.00
Blue Sky Expenses and Counsel Fees............................ 2,000.00
Miscellaneous................................................. 1,000.00
----------

Total.................................................... $18,000.00

Item 26. Recent Sales of Unregistered Securities.

The Company has not sold any securities without registration during the
last three years.

II-1

<PAGE>

Item 27. Exhibits.

Exhibit
No. DESCRIPTION
--- -----------

3.1 Restated Certificate of Incorporation of the Registrant.(1)
3.2 Form of Amendment to Certificate of Incorporation.(1)
3.3 By-Laws of the Registrant.(1)
4.1 Form of Warrant Agreement between the Registrant and American Stock
Transfer & Trust Company, including forms of Class A and Class B
Warrants.(1)
4.2 Certificate of Designation of 8% Redeemable Convertible Preferred
Stock(1).
4.3 Specimen Common Stock Certificate(2).
4.4 Specimen Preferred Stock Certificate(1).
5 Opinion of Hartman & Craven LLP on legality of securities being
registered.*
10.1 Amended 1983 Stock Option Plan(2).
10.2 1985 Stock Option Plan(3).
10.3 Employment Agreement, dated October 28, 1992, between the Registrant
and Mr. Daniel A. Marinello(4).
10.4 Form of Option Agreement under 1983 Stock Option Plan(2).
10.5 Option Agreement, dated October 14, 1992, between the Registrant and
Daniel A. Marinello.(1)
10.6 Form of Agency Agreement for independent sales and marketing agents of
the Registrant.(1)*
10.7 1994 Stock Option Plan.*
10.8 Form of Employment Agreement between Registrant and executive team of
Messrs Marinello, Liang and Ryan.*
10.9 Form of Indemnity Agreement between Registrant and its executive,
officers and directors.*
10.10 Consultation Agreement between Registrant and Arnold J. Wasserman.*
10.11 Stock Option Grants dated November 7, 1994 between the Company each of
Messrs. Marinello, Liang and Ryan.*
23.1 Consents of Hartman & Craven (contained in, and incorporated herein by
reference to, Exhibits 5 and 7 of this Registration Statement).*
23.2 Consent of Ernst & Young LLP (dated November 22, 1994).*
23.3 Consent of Ernst & Young LLP (dated March 22, 1995).*
23.4 Consent of Ernst & Young LLP (dated September 20, 1995).*
23.5 Consent of Ernst & Young LLP (dated January 24, 1996).*
23.6 Consent of Ernst & Young LLP (dated May 2, 1997).*
23.7 Consent of Ernst & Young LLP (dated June 25, 1997).
24 Power of Attorney (contained in, and incorporated herein by reference
to, included page II-5 of Registration Statement).*

- --------------------
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form
SB-2 (File No. 33-69190) and hereby incorporated by reference herein.
(2) Filed as an Exhibit to the Registrant's Registration Statement on Form
S-1 (File No. 2-85945) and hereby incorporated by reference herein.
(3) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1991 (File No. 0-12646) and hereby
incorporated by reference herein.
(4) Filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended October 31, 1992 (File No. 0-12646) and
hereby incorporated by reference herein.

* Previously filed.

II-2

<PAGE>

Item 28. Undertakings.

(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business owner in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue; and

(2) The small business issuer will file, during any period in which it
offers or sells securities, a post-effective amendment to this registration
statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and

(iii) Include any additional or changed material information on the
plan of distribution.

(3) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities

offered, and the offering of the securities at that time to be the initial bona
fide offering.

(4) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

II-3

<PAGE>

Signatures

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Post-Effective
Amendment No. 6 to its registration statement to be signed on its behalf by the
undersigned in the City of Erlanger, State of Kentucky, on June 19, 1997.

ANGSTROM TECHNOLOGIES, INC.

By: s/Daniel A. Marinello
---------------------------
Daniel A. Marinello,
Chief Executive Officer and
Chief Financial Officer

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
s/Daniel A. Marinello Chief Executive Officer, June 19, 1997
- ---------------------------------- Chief Financial Officer and a
Daniel A. Marinello Director (Principal Executive
Officer, Principal Financial Officer
and Principal Accounting Officer)

s/Louis Liang Executive Vice President - June 19, 1997
- ---------------------------------- Strategic Business and a Director
Louis Liang

s/William J. Ryan Executive Vice President - June 19, 1997
- ---------------------------------- Operations and a Director
William J. Ryan

s/Douglas B. Kruger Secretary and a Director June 19, 1997
- ----------------------------------
Douglas B. Kruger
</TABLE>

<PAGE>

EXHIBIT INDEX

Exhibit
No.
- -------

5 Opinion of Hartman & Craven LLP on legality of securities being
registered.*
10.7 1994 Stock Option Plan.*
10.8 Form of Employment Agreement between Registrant and executive team of
Messrs Marinello, Liang and Ryan.*
10.9 Form of Indemnity Agreement between Registrant and its executive,
officers and directors.*
10.10 Consultation Agreement between Registrant and Arnold J. Wasserman.*
10.11 Stock Option Grants dated November 7, 1994 between the Company each of
Messrs. Marinello, Liang and Ryan.*
23.1 Consents of Hartman & Craven (contained in, and incorporated herein by
reference to, Exhibits 5 and 7 of this Registration Statement).*
23.2 Consent of Ernst & Young LLP (dated November 22, 1994).*
23.3 Consent of Ernst & Young LLP (dated March 22, 1995).*
23.4 Consent of Ernst & Young LLP (dated September 20, 1995).*
23.5 Consent of Ernst & Young LLP (dated January 24, 1996).*
23.6 Consent of Ernst & Young LLP (dated May 2, 1997).*
23.7 Consent of Ernst & Young LLP (dated June 25, 1997).
24 Power of Attorney (contained in, and incorporated herein by reference
to, included page II-5 of Registration Statement).*

- ---------------------------------------------
* Previously filed.

<PAGE>

Exhibit 23.7

Consent to Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 6, 1997, in the Post-Effective Amendment No. 6
to the Registration Statement (Form SB-2, No. 33-86754) and related Prospectus
of Angstrom Technologies, Inc. for the registration of 1,400,000 shares of its
common stock.

S/Ernst & Young LLP

Cincinnati, Ohio
June 25, 1997