BPI PACKAGING TECHNOLOGIES INC, 424B3, 1999-10-28

BPI PACKAGING TECHNOLOGIES INC
424B3, 1999-10-28
PLASTICS, FOIL & COATED PAPER BAGS

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PURSUANT TO RULE 424B3

FILE NO. 333-89137

PROSPECTUS

BPI PACKAGING TECHNOLOGIES, INC.

455 SOMERSET AVENUE
NORTH DIGHTON, MASSACHUSETTS 02764
(508) 824-8636

3,800,097 SHARES OF COMMON STOCK,
$0.01 PAR VALUE PER SHARE

We convert commercially available high molecular weight, high density
polyethylene resins into thin film. The film is either sold directly into
industrial or packaging applications or converted in-house into carryout bags of
"T-shirt sack" design. Our customers include various supermarkets, convenience
stores and other retail markets. We use advanced, high quality extrusion,
printing and bag making equipment located in our North Dighton, Massachusetts
facility.

All of the shares of common stock and warrants offered in this prospectus
are being offered by the selling securityholders in transactions on the NASDAQ
Over-the-Counter Bulletin Board or in privately negotiated transactions from
time to time at prices to be determined at the time of each sale. We will not
receive any proceeds from the sales.

Our common stock is traded on the NASDAQ Over-the-Counter Bulletin Board
under the symbol "BPIE." On October 25, 1999, the closing price of our common
stock on the NASDAQ Over-the-Counter Bulletin Board was $0.09 per share.

THIS INVESTMENT IN THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE
LOSS. SEE PAGES 6 TO 9 FOR A DESCRIPTION OF THE RISK FACTORS OF THIS INVESTMENT.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities. They have not
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.

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

The date of this prospectus is October 28, 1999.

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TABLE OF CONTENTS
PROSPECTUS

<TABLE>
<S> <C>
ABOUT THIS PROSPECTUS....................................... 1

PROSPECTUS SUMMARY.......................................... 2

RISK FACTORS................................................ 6

FORWARD-LOOKING STATEMENTS.................................. 9

USE OF PROCEEDS............................................. 10

SELECTED FINANCIAL DATA..................................... 11

BUSINESS.................................................... 12

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 17

MANAGEMENT.................................................. 25

DESCRIPTION OF OUR SECURITIES............................... 35

PRICE RANGE OF COMMON STOCK................................. 38

PERFORMANCE GRAPH........................................... 39

PRINCIPAL STOCKHOLDERS...................................... 40

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 44

SELLING SECURITYHOLDERS..................................... 44

PLAN OF DISTRIBUTION........................................ 47

EXPERTS..................................................... 48

CHANGE OF ACCOUNTANTS....................................... 48

LEGAL MATTERS............................................... 48

TRANSFER AGENT.............................................. 48

INDEMNIFICATION............................................. 48

WHERE YOU CAN FIND MORE INFORMATION......................... 49

INCORPORATION OF INFORMATION WE FILE WITH THE SEC........... 50

INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>

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ABOUT THIS PROSPECTUS

You should rely only on the information contained in the prospectus and the
documents incorporated into the prospectus. We have not authorized anyone to
provide you different information. The selling securityholders are offering to
sell, and seeking offers to buy, the shares for sale in this offering only in
jurisdictions where offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this or of any sale of common stock.

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PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this
prospectus. To understand this offering fully, you should read the entire
prospectus, especially the Risk Factors and Financial Statements.

OUR COMPANY

We convert commercially available high molecular weight, high density
polyethylene resins into thin film. This film is either sold directly into
industrial or packaging applications or converted in-house into carryout bags of
"T-shirt sack" design for supermarkets, convenience stores and other retail
markets.

All of our plastic products are manufactured using advanced, high quality
extrusion, printing and bag making equipment in our facility in North Dighton,
Massachusetts. Plastic resin is heated and blown into a thin film on blown film
extrusion lines. The film is cooled, wound on large rolls, printed with customer
information using water-based inks and shipped to customers. However, if the
film is to be used to manufacture bags, it is slit-sealed into bags, reviewed by
quality control inspectors, boxed and shipped to customers. Our manufacturing
equipment consists of blown film extrusion lines, printing presses, bag making
machines and film slitting operations.

Our proprietary, high performance plastic films are being marketed and sold
to the developing insulation overwrap market in the United States. This market
has grown due to long-term health concerns raised from the handling of asbestos
and other insulation materials. We use two films that we specifically developed
for encapsulating glass fiber insulation mats for the private housing and the
industrial buildings industries. One is flame retardant and passed the required
tests of United Laboratories.

THE OFFERING

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<S> <C>
Securities Offered........................ 3,800,097 shares of common stock. The common stock
offered hereby consists of Offered Shares issued to
Selling Securityholders and Offered Shares issued and
issuable upon exercise of warrants held by our investors
and consultants. See "Description of Securities."

Common Stock Currently Outstanding........ 27,131,221 shares.

Use of Proceeds........................... We will not receive any of the proceeds from the sale of
Offered Shares by the Selling Securityholders.
</TABLE>

RECENT DEVELOPMENTS

In July 1997, we sold 2,100,902 shares of common stock at a price of $1.00
per share in a best-efforts private placement offering with total net proceeds
of $2,100,902. Shares of common stock were sold in a single offering under
Regulation D and Regulation S of the Securities Act. Under Regulation D, we sold
850,902 shares of common stock only to accredited investors as defined in
Regulation D. Under Regulation S, we sold 1,250,000 shares of common stock
outside the United States to non-U.S investors.

In October 1997, we sold 1,796,000 shares of common stock at a price of
$1.05 per share in a best-efforts private placement offering with total net
proceeds of $1,885,800. Shares of common stock were sold in a single offering
under Regulation D and Regulation S of the Securities Act. Under Regulation D,
we sold 400,000 shares of common stock only to accredited investors as defined
in

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Regulation D. Under Regulation S, we sold 1,396,000 shares of common stock
outside the United States to non-U.S. investors.

In December 1997, we sold 1,094,223 shares each of common stock and warrants
in a private placement offering of restricted securities with total net proceeds
of $1,004,800. The price per share for 88,889 of the shares was $1.125 per share
and the remaining shares were sold at $0.90 per share. Warrants exercisable for
a minimum of 10,000 shares at $1.08 per share were sold in this offering. Under
Regulation D, we sold 222,223 shares each of common stock and warrants only to
accredited investors as defined in Regulation D. Under Regulation S, we sold
872,000 shares each of common stock and warrants outside the United States to
non-U.S. investors.

In June 1998, we completed an offering of private placement units. Each unit
consisted of 100,000 shares of common stock and a three-year warrant to purchase
100,000 shares of common stock at $1.25 per share. However, if we announce the
receipt of a contract for the purchase of goods or services resulting in
revenues of $5,000,000 or more, then the purchase price will be reduced to $1.05
per share for 15 days after the announcement. The offering price was $90,000 per
unit and the net proceeds from the offering were $1,485,000. Under
Regulation D, we sold 1,050,000 shares of common stock only to accredited
investors as defined in Regulation D. Under Regulation S, we sold 600,000 shares
of common stock outside the United States to non-U.S. investors.

In each of the above four offerings:

- the issuances of the securities were deemed to be exempt from registration
under Section 4(2) and Regulation D of the Securities Act as transactions
by an issuer not involving any public offering;

- the sale proceeds were used as part of our working capital;

- we promised to use our best efforts to file with the SEC a registration
statement on Form S-1 or S-3 relating to the shares in each offering; and

- the securities sold under Regulation D are being registered under the
Securities Act in the registration statement of which this prospectus
forms a part.

On June 27, 1998, we stopped funding the operations of our two wholly-owned
subsidiaries, RC America, Inc. and Market Media, Inc. RC America purchased
surplus inventory from manufacturers of consumer products and markets and sold
the products to mass merchandise retailers and other retail chains. Market Media
sold and marketed in-store advertising and promotion programs. At the same time,
we also ended the employment of Ronald V. Caulfield, the Chief Executive Officer
and President of RC America.

On July 2, 1998, the employment of Dennis Caulfield, our former Chief
Executive Officer, was terminated.

On August 13, 1998, the NASDAQ Listing Qualifications Panel of the NASDAQ
Stock Market delisted our securities from NASDAQ NMS, effective as of close of
business on August 13, 1998. Shortly thereafter, we formally requested that the
NASDAQ Listing and Hearing Review Council review the August 13, 1998 decision.
On December 22, 1998, NASDAQ Listing and Review Council affirmed the decision of
the NASDAQ Listing Qualifications Panel to delist our common stock from the
NASDAQ NMS. As of the date of this prospectus, we have not appealed the NASDAQ
decision to the SEC. Since August 14, 1998, our common stock has been traded on
the NASDAQ Over-the-Counter Bulletin Board under the symbol "BPIE."

On January 27, 1999, we entered into a Securities Purchase Agreement with
DGJ, L.L.C., a Delaware limited liability company, under which we issued and
sold to DGJ:

1. a Promissory Note in the principal amount of $3,200,000;

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2. a Common Stock Purchase Warrant to purchase up to 80,000,000 shares
of common stock, at an exercise price of $0.04 per share, exercisable until
January 27, 2009; and

3. 1,629,930 shares of our Series C Preferred Stock for $100. See
"Description of Our Securities--Series C Redeemable Preferred Stock" for a
description of the Series C Preferred Stock purchased by DGJ.

In connection with this financing, DGJ required certain members of our
management, C. Jill Beresford, James F. Koehlinger, Hanspeter Schulz,
Richard H. Nurse and Ivan J. Hughes, to invest $300,000, in the aggregate, in
our warrants.

In January 1999, we obtained $2,000,000 of financing secured by our accounts
receivable and $1,000,000 of financing secured by our inventory pursuant to a
factoring agreement with Franklin Capital Corporation, a company related to DGJ.

We also refinanced our equipment, capital and operating leases in
January 1999 when we entered into an equipment lease with DGJ, dated
January 27, 1999. The new lease carries no debt reduction obligation and is
treated as long-term debt. The combined monthly payments under the retired
leases were reduced from approximately $305,000 per month to $102,000 per month
under the new equipment lease with DGJ. The term of the lease is ten years and
its monthly payments of $102,000 represent interest only.

Also in January 1999, we entered into agreements with most of our unsecured
creditors that provided for a discounted payment in February 1999 or permitted
us to pay the entire balance without interest over a three-year period.

On August 19, 1999, we entered into a series of transactions with LaSalle
Business Credit, Inc. and DGJ to refinance our existing indebtedness. Our loan
agreement with LaSalle provides us with a $4,000,000 revolving line of credit.
This credit facility is secured by a first priority security interest in our
accounts receivable, inventory and certain other assets. DGJ is the lessor of
substantially all the equipment that we use, under a capital lease, and holds a
first priority security interest in our equipment. LaSalle received a second
priority security interest in our equipment. Certain of the proceeds of this
credit facility were used to retire existing indebtedness we owed to Franklin
Capital Corporation, including the factoring agreement and revolving note
described above, while the remaining proceeds were used to retire some of our
other indebtedness and for working capital purposes. This credit facility bears
interest at a fluctuating rate equal to 1.5% per annum above the prime rate of
LaSalle in effect from time to time and matures in three years.

In addition, we and DGJ amended and restated the promissory note in the
original principal amount of $3,200,000, described above, because we were unable
to fulfill the financial obligations under the terms of the loan and lease
documents with DGJ. To cure the defaults, we restated the note to include, in
addition to the original principal and interest accrued thereunder, all amounts
outstanding under: (i) an equipment loan made by DGJ to us as of March 1, 1999
in the original principal amount of $218,665; (ii) a series of advances made to
us by Franklin Capital Corporation during the second quarter of 1999 (which
totaled approximately $900,000, and were reduced to approximately $660,000 after
application of proceeds of the credit facility), rights to repayment of which
were subsequently assigned by Franklin to us; (iii) delinquent payments under
the DGJ lease of approximately $570,000; and (iv) interest on the foregoing. The
resulting balance of $4,773,585 was restated as the principal amount of a new
amended promissory note. The amended promissory note is in the original
principal amount of $4,773,585 and is payable as follows: $3,200,000 of
principal is due and payable on February 1, 2004, or earlier by acceleration, as
described in the Securities Purchase Agreement between us and DGJ, or otherwise,
and $1,573,585 is due and payable pursuant to the terms of an intercreditor
agreement between DGJ and LaSalle. The amended promissory note bears interest at
a rate of 10% per annum, and is secured by all of our assets, subordinated to
LaSalle except as to equipment.

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THE SELLING SECURITYHOLDERS

The security holders (the "Selling Securityholders") whose securities are
offered for sale (the "Offered Shares") in this prospectus, acquired the Offered
Shares through private placements of our equity securities with accompanying
warrants in 1997 and 1998.

The Offered Shares are subject to limitations on resale until they are
registered under the Securities Act. The registration statement, of which this
prospectus forms a part, has been filed in satisfaction of certain registration
rights we granted to the Selling Securityholders. See section titled "Selling
Securityholders" for more details about the Selling Securityholders and the
Offered Shares.

PLAN OF DISTRIBUTION

The Selling Securityholders may offer for sale and sell the Offered Shares
at any time on the NASDAQ OTC, or any national securities exchange or
interdealer quotation system on which the common stock may be listed, or in
privately negotiated transactions, including block transactions. In addition,
the Selling Securityholders may engage in short sales and other transactions in
the common stock or derivatives, and may pledge, sell, deliver or otherwise
transfer the Offered Shares in these transactions. This prospectus may be used
by the Selling Securityholders or by any broker-dealer who may participate in
sales of the Offered Shares. Participating broker-dealers may act as agents or
principals or both and may receive commissions, discounts or concessions in
connection with sales or other transfers of the Offered Shares.

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RISK FACTORS

You should carefully consider the following factors in evaluating an
investment in our securities.

WE HAVE SUSTAINED LOSSES IN THE PAST AND OUR PRIOR ACCOUNTANT RAISED
GOING-CONCERN ISSUES.

At December 31, 1998, we had an accumulated deficit of $43,989,302. Since
our inception in 1988, we have rarely operated profitably in any accounting
period. Net income was $821,834 for our first six months in 1999, including
extraordinary income of $1,917,707. A net loss of $3,239,213 was incurred for
the year ended December 31, 1998, including depreciation and amortization of
$2,538,880.

Our current independent accountants gave an unqualified opinion on our
financial statements for the year ended December 31, 1998. Our prior independent
accountants' report on our financial statements for the 10 month period ended
December 31, 1997 and the years ended February 28, 1997 and February 23, 1996
included an explanatory paragraph. This paragraph stated that recurring losses
from operations, our net working capital and operating cash flow deficiencies
and the defaults under capital lease obligations and notes payable raised
substantial doubt about our ability to continue as a going-concern. Note 2 in
our consolidated financial statements for the 10 month period ended
December 31, 1997, describes our ability, at the date of that report, to
continue as a going-concern. This ability was contingent upon our success in
implementing new business and financing plans.

THE MARKETS OUR PRODUCTS ARE SOLD IN ARE HIGHLY COMPETITIVE.

The plastic film and bag markets are highly competitive. Of our patented
products, HANDI-SAC-TM- has direct competition from: Sonoco Products Company's
T-sack roll bag product, flat T-sacks provided by Sonoco Products Company,
Vanguard Plastics, Inc. and others, and paper bags.
FRESH-SAC-Registered Trademark- has direct competition from: Crown Poly, Inc.
and Sealed Air, Inc., which manufacture plastic roll bags in a patented
dispensing system and Better Bag, Inc., which manufactures flat produce bags. We
have competition from a variety of traditional plastic low-cost bag-on-a-roll
manufacturers.

We potentially have direct competition for our thin, clear film used for
tissue overwrap from Exxon Chemical Americas. However, we believe that Exxon
Chemical Americas has an exclusive five year supply agreement with a consumer
packaged goods company that prohibits it from supplying other companies. Hence,
Exxon Chemical Americas is not presently considered to be our competitor. We
compete with major manufacturers of flexible packaging and other companies that
manufacture thick plastic films for tissue overwrap.

Our competitors in the traditional T-shirt bag business include large
companies including Sonoco Products Company, Inteplast Corporation and Vanguard
Plastics, Inc.

Many of our competitors have substantially greater research and development,
marketing, financial and human resources than we do. In addition, competitors
may succeed in developing new or enhanced products that are more effective than
any that may be sold or developed by us. Those companies may also prove to be
more successful than us in marketing and selling products. We can give no
assurance that we will be able to compete successfully with any of these
companies or achieve a greater market share than we currently possess.

WE CAN GIVE NO ASSURANCES THAT THERE WILL BE MARKET ACCEPTANCE FOR OUR
PROPRIETARY PLASTIC FILM AND IN-STORE ADVERTISING AND PROMOTION PRODUCTS.

Demand and market acceptance for our products are subject to a high level of
uncertainty. We can give no assurances that our products will achieve and
maintain market acceptance.

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OUR BUSINESS DEPENDS HEAVILY ON OUR PATENTS AND PROPRIETARY TECHNOLOGY.

We have developed patents related to T-shirt bags. We own a patent issued in
1989 for our T-shirt carryout bag. In 1993, we were issued a U.S. patent for the
dispensing system used in conjunction with our FRESH-SAC-Registered Trademark-
and HANDI-SAC-TM- products. We have a registered trademark in the United States
for FRESH-SAC-Registered Trademark-. In 1996, we were issued a U.S. patent for
our FRESH-SAC-Registered Trademark- advertising vehicle called the Fresh Focus
CartridgeTalker-TM-.

We can give no assurances that our patents and any patents that may be
granted to us in the future will be enforceable or provide us with meaningful
protection from competitors. Even if a competitor's products were to infringe on
our patents, it could be costly for us to enforce our rights in an infringement
action and would divert funds and resources otherwise used in our operations.
Furthermore, we can give no assurances that we would be successful in enforcing
our patent rights or that our products will not infringe patents or rights of
others.

We have developed a number of proprietary manufacturing methods and
processes used in the manufacturing of our products. We rely on and employ
various methods to protect the concepts, ideas and documentation for these
manufacturing methods, like patents and confidentiality agreements with our
employees. However, these methods may not afford sufficient protection and we
can give no assurances that others will not independently develop similar
know-how or obtain access to our know-how, concepts, ideas and documentation.

WE ARE DEPENDENT UPON OUR MANAGEMENT AND KEY PERSONNEL TO SUCCEED.

Our ability to continue to develop and to market our products depends
largely on our ability to attract and retain qualified personnel. Currently, our
principal executives have extensive experience in manufacturing and sales of
plastics products. Competition for this personnel is intense and we can give no
assurances that we will be able to retain and attract these people. See
"Management" section for a list and description of our directors and executive
officers.

WE HAVE SUBSTANTIAL SHARES OF COMMON STOCK RESERVED FOR THE EXERCISE OR GRANT OF
OPTIONS AND WARRANTS WHICH MAY CAUSE DILUTION IF EXERCISED OR GRANTED.

As of October 25, 1999, 27,131,221 shares of common stock were outstanding.
The following number of shares of common stock are reserved for the issuance:

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK ARE RESERVED FOR: NUMBER OF SHARES:
- ---------------------------------------- -----------------
<S> <C>
Exercise of options granted or available for grant to
employees, officers, directors and consultants pursuant to
our 1990, 1993 and 1996 Stock Option Plans (Options to
purchase 589,377 shares were outstanding on December 31,
1998)..................................................... 1,950,000
Conversion of the Series A and Series B Convertible
Preferred Stock........................................... 330,453
Exercise of warrants issued to the individual and principals
of the placement agent in private placements to overseas
investors................................................. 180,372
Exercise of warrants issued to our financial consultants.... 200,000
Exercise of options issued to our consultants............... 5,900,000
Exercise of options issued to DGJ in connection with January
1999 financing............................................ 80,000,000
</TABLE>

The existence of the options, warrants and preferred stock listed above may
be a hindrance to our future financings. Even though the book value of our
common stock is currently significantly lower than the exercise prices of some
of the outstanding options and warrants, the exercise of these options or
warrants in the future could dilute the book value of the common stock. However,
a majority of the

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warrants are "in-the-money," meaning that the fair market value of the
underlying common stock is greater than the exercise price of the warrant. On
October 25, 1999, the closing price of our common stock underlying the warrant
held by DGJ was $0.09 per share and the exercise price of the warrant is $0.04
per share. Further, the holders of these options and warrants may exercise them
at a time when we would otherwise be able to obtain additional equity capital on
terms more favorable to us.

In August 1999, our stockholders approved an increase in the number of
authorized shares of common stock from 60,000,000 shares to 150,000,000 shares,
causing a possible dilution to the holders of common stock. Approximately
87,000,000 of the additional 90,000,000 newly authorized shares of common stock
have already been allocated for use. The following table summarizes the uses for
the increase in the number of authorized shares of common stock:

<TABLE>
<S> <C>
Reserve for exercise of DGJ Warrant......................... 49,062,500
Reserve for exercise of warrants issued to financial
consultants............................................... 900,000
Reserve for subscribed stock purchased by employees and
consultant................................................ 7,500,000(1)
Reserve for granting and exercise of options if performance
goals are met by the Company.............................. 14,750,000
Reserve for shares available to stockholders in rights
offering.................................................. 15,000,000
Unallocated shares.......................................... 2,787,500
----------
Total increase in authorized number of shares of common
stock..................................................... 90,000,000
==========
</TABLE>

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(1) Warrants to purchase 5,626,000 shares of common stock were exercised in
September 1999.

There are no remaining authorized but unissued shares of preferred stock.

SALES OF SECURITIES HELD UNDER RULE 144 MAY DEPRESS THE MARKET PRICE OF OUR
COMMON STOCK.

Ordinarily, under Rule 144, a person holding restricted securities for a
period of one year may, every three months, sell in ordinary brokerage
transactions or in transactions directly with a market maker an amount equal to
the greater of one percent of our then outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale.
Rule 144 also permits sales by a person who is not our affiliate and who has
satisfied a two-year holding period to sell without any quantity limitation.
Future sales under Rule 144 may depress the market price of the common stock.

ONE OF OUR INVESTORS COULD CONTROL OVER 50% OF OUR VOTING COMMON STOCK.

We entered into a Securities Purchase Agreement with DGJ, L.L.C. in
January 1999. Pursuant to this agreement, DGJ purchased a warrant to purchase up
to 80,000,000 shares of our common stock at $0.04 per share. If DGJ exercises
its warrants, it will control over 50% of our voting common stock. Also,
pursuant to an agreement among DGJ, Ivan J. Hughes, Chairman of the Board, and
C. Jill Beresford, Vice President of Marketing, Mr. Hughes and Ms. Beresford
agreed to vote their shares of stock as directed by DGJ on any matters presented
to our stockholders with respect to the Securities Purchase Agreement.
Therefore, DGJ has greater voting power on some issues than it has with its
securities holdings alone. See "Principal Stockholders" for a more detailed
description of investor holdings.

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE TO MEET OUR CAPITAL REQUIREMENTS.

We are intending to raise additional capital for the Company through a
rights offering in the fourth quarter of 1999. We are planning on selling
15,000,000 shares of common stock at $0.04 per share, for an aggregate offering
price of $600,000 to holders of common stock on a certain record date, that has
not yet been determined. Even after the completion of the rights offering, we
may need

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additional capital requirements than through the rights offering, our existing
credit facilities and cash flow from operations. However, we believe that we
will have access to sufficient funds to carry on our existing level of business.
We cannot assure you that our existing credit facilities will be renewed once
their terms have expired or that we will be able to consummate any future
financing transactions on satisfactory terms.

Factors which could affect our access to capital markets, or the cost of
such capital include:

- changes in interest rates;

- general and economic conditions; and

- investors' perceptions of our business, results of operations, leverage,
financial conditions and business prospects.

Economic, financial, competitive and other matters strongly influence each
of these factors, and we may not be able to control these influences. Our
existing credit facilities require us to maintain certain financial ratios and
also prohibit new borrowings.

OUR CHARTER PROVISIONS AND DELAWARE LAW MAY INHIBIT A TAKEOVER.

We, as a Delaware corporation, are subject to the General Corporation Law of
the State of Delaware, including Section 203, an anti-takeover law enacted in
1988. In general, this law restricts the ability of a public Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder. As a result, any potential
acquirers of our Company may be discouraged from attempting to effect an
acquisition transaction with us. This could possibly deprive holders of our
securities of certain opportunities to sell or otherwise dispose of their
securities at above-market prices in these transactions. As a result of the
application of Section 203 and certain provisions in our Certificate of
Incorporation and By-laws, including the adoption of a classified Board of
Directors and the requirement for increased stockholder vote to take certain
actions involving the directors and the Certificate of Incorporation and
By-laws, potential acquirers may find it more difficult or be discouraged from
attempting to effect an acquisition transaction with our Company, thereby
possibly depriving holders of our securities of certain opportunities to sell or
otherwise dispose of these securities at above-market prices pursuant to these
transactions.

FORWARD-LOOKING STATEMENTS

We make statements in this prospectus and the documents incorporated by
reference that are considered forward-looking statements within the meaning of
the Securities Act of 1933 and the Securities Exchange Act of 1934. The Private
Securities Litigation Reform Act of 1995 contains safe harbor provisions that
cover these forward-looking statements. We are including this statement for
purposes of complying with these safe harbor provisions. We base these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties and assumptions, including,
among other things:

- uncertain market acceptance of our products;

- competition;

- the continued availability of financing in the amounts, at the times and
on the terms required to support our future business;

- continued losses and cash flow deficits;

- reliance on key personnel;

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- safety, efficacy and patent concerns regarding our products and
technology;

- changes in general economic conditions; and

- unforeseen operational difficulties and financial losses due to year 2000
computer problems.

Words like "expect," "anticipate," "intend," "plan," "believe," "estimate"
and variations of these types of words and similar expressions are intended to
identify forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Because of these risks, uncertainties
and assumptions, the forward-looking events discussed or incorporated by
reference in this document may not occur.

USE OF PROCEEDS

We will not receive any part of the proceeds of any sale or transactions for
the Offered Shares sold by the Selling Securityholders. We have agreed to pay
all of the costs and fees relating to the registration of the Offered Shares.
However, we will not pay any discounts, concessions or commissions payable to
underwriters, dealers or agents incident to the offering of the Offered Shares.
Certain of the Selling Securityholders purchased warrants to purchase common
stock at $1.25 per share and have not yet exercised these warrants. We could
receive $3,588,905 in gross proceeds if all of these warrants are exercised.
However, as it is unlikely that these warrants will be exercised in the near
term as their exercise price is greater than the value of the underlying stock.
There can be no assurance that any of the warrants will be exercised before they
expire. We will use the proceeds from the exercise of any of the warrants for
general working capital and general corporate purposes. The purpose of this
offering is to register securities acquired by the Selling Securityholders
through private placements of our equity securities with accompanying warrants
in 1997 and 1998.

10
<PAGE>
SELECTED FINANCIAL DATA

The following tables set forth summary financial information for the periods
indicated. This information should be read in conjunction with our consolidated
financial statements (including the notes thereto) appearing later in this
prospectus.

STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS TEN MONTH FISCAL YEARS ENDED
ENDED ENDED YEAR ENDED PERIOD ENDED ------------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, FEBRUARY 28, FEBRUARY 23, FEBRUARY 24,
1999 1998 1998 1997 1997 1996 1995
----------- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................. $7,471,964 $4,639,864 $10,382,819 $13,951,725 $30,810,037 $28,839,954 $25,254,645
Cost of goods sold......... 6,354,020 4,794,768 8,826,905 17,311,037 27,784,329 26,161,723 19,879,041
----------- ----------- ----------- ------------ ------------ ----------- -----------
Gross profit (loss)........ 1,117,944 (154,904) 1,555,914 (3,359,312) 3,025,708 2,678,231 5,375,604
Selling, general and
administrative expense... 1,424,695 2,375,830 4,301,842 6,137,985 8,695,612 6,370,956 5,029,832
Bad debt expense........... -- -- -- 319,736 93,165 -- --
Write-down of impaired
assets and related
expenses................. -- -- -- -- 5,385,000 -- --
Patent infringement
settlement............... -- -- -- -- 512,648 -- --
----------- ----------- ----------- ------------ ------------ ----------- -----------
Income (loss) from
operations............... (306,751) (2,530,734) (2,745,928) (9,817,033) (11,660,717) (3,692,725) 345,772
Allowance for officer
loan..................... -- -- (68,039) (586,978) -- -- --
Interest and other
expense.................. (832,105) (276,152) (471,166) (984,064) (1,112,647) (865,206) (280,445)
Interest income............ 42,983 35,953 45,920 49,206 9,133 47,786 77,104
----------- ----------- ----------- ------------ ------------ ----------- -----------
Net income (loss) before
extraordinary income and
non-recurring charges.... (1,095,873) (2,770,933) (3,239,213) (11,338,869) (12,764,231) (4,510,145) 142,431
Extraordinary income....... 1,917,707 -- -- -- -- -- --
Non-recurring charges...... -- -- -- -- -- -- (989,917)
----------- ----------- ----------- ------------ ------------ ----------- -----------
Net income (loss) after
extraordinary income and
non-recurring charges.... $ 821,834 $(2,770,933) $(3,239,213) $(11,338,869) $(12,764,231) $(4,510,145) $ (847,486)

Earnings (loss) per share
before extraordinary
income:
Basic and diluted net
earnings (loss) per
share.................... $ (.05) $ (.14) $ (.16) $ (.73) $ (.96) $ (.38) $ (.08)
Shares used in computing
basic and diluted net
loss per share........... 21,496,623 20,012,639 20,849,356 15,579,747 13,261,815 11,756,532 10,670,040

Earnings (loss) per share
after extraordinary
income and non-recurring
charges:
Basic and diluted net
earnings (loss) per
share.................... $ 0.04 $ (.14) $ (.16) $ (.73) $ (.96) $ (.38) $ (.08)
Shares used in computing
basic and diluted net
earnings (loss) per
share.................... 21,496,623 20,012,639 20,849,356 15,579,747 13,261,815 11,756,532 10,670,040
</TABLE>

BALANCE SHEET DATA

<TABLE>
<CAPTION>
AT AT AT AT AT AT AT
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, FEBRUARY 28, FEBRUARY 23, FEBRUARY 24,
1999 1998 1998 1997 1997 1996 1995
----------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets.............. $21,194,727 $ 19,388,057 $17,751,965 $20,970,740 $29,247,231 $35,277,975 $35,341,925
Long term obligations..... $10,856,267 -- -- -- $ 3,809,241 $ 5,441,057 $ 4,495,692
Redeemable preferred
stock................... $ 100 -- -- -- -- $ 183,369 $ 183,369
Working capital
(deficit)............... $(2,171,934) $(13,919,703) $(12,748,154) $(13,897,932) $(5,819,144) $(2,767,867) $ 3,909,634
Stockholders' equity...... $ 4,881,307 $ 3,747,753 $ 3,279,473 $ 5,115,535 $11,544,675 $19,768,971 $24,048,204
</TABLE>

11
<PAGE>
BUSINESS

OUR COMPANY

We convert commercially available high molecular weight, high density
polyethylene resins into thin film. This film is either sold directly into
industrial or packaging applications or converted in-house into carryout bags of
"T-shirt sack" design. Our customers include supermarkets, convenience stores
and other retail markets.

Our proprietary, high performance plastic films are being marketed and sold
to the developing insulation overwrap market in the United States. This market
has grown due to long-term health concerns raised from the handling of asbestos
and other insulation materials. We use two films specifically developed for
encapsulating glass fiber insulation mats for the private housing and the
industrial buildings industries. One is flame retardant and passed the required
tests of United Laboratories.

HISTORY

Our predecessor, Beresford Packaging, Inc. ("Beresford-U.S."), was organized
as a wholly owned subsidiary of Beresford Packaging, Inc., a Canadian
corporation. In February 1988, Beresford-U.S. was merged into Beresford Box
Company Limited ("Beresford-Canada"), to acquire certain assets and assume
certain liabilities of Surrey Industries, Inc., which was an unaffiliated entity
manufacturing traditional resin plastic bags. We were organized as a Delaware
corporation in May 1990. In August 1990, Beresford-U.S. merged into us. In
February 1993, our stockholders and directors changed our name from BPI
Environmental, Inc. to BPI Packaging Technologies, Inc.

During the fourth quarter of the fiscal year ending February 28, 1997 we
exited the standard grocery T-shirt bag business. However, because our other
products did not fill our current conversion capacity of 40 million pounds of
resin per year, we re-entered this business in the third quarter of 1998 and it
has contributed to our fixed costs since then.

12
<PAGE>
PRODUCTS AND MARKETS

"Direct competition" refers to competition for substantially similar
products and "indirect competition" refers to products which are not identical,
but which could be substituted for our product.

<TABLE>
<CAPTION>
1999 ANNUAL
MARKET PATENT
(MILLIONS) STATUS COMPETITION
<S> <C> <C> <C> <C> <C>
HANDI-SAC-TM- $37 U.S. PATENT DIRECT: SONOCO PRODUCTS
CONVENIENCE, HARDWARE/AUTOMOTIVE ISSUED 1993
COMPANY T-SACK ROLL BAG
AND DRUG
INDIRECT: PAPER AND FLAT
T-SACKS

FRESH-SAC-REGISTERED TRADEMARK- $63 U.S. PATENT DIRECT: CROWN POLY, INC.,
T-SHIRT PRODUCE BAG ISSUED 1993 SEALED AIR AND BETTER BAG,
INC.

INDIRECT: PRODUCE BAG ON A
ROLL

INSULATION OVERWRAP $15 PROCESS DIRECT: VANGUARD PLASTICS,
TECHNOLOGY INC.
NO INDIRECT

HIGH PERFORMANCE PRINTED TISSUE UNDER EVALUATION PROCESS DIRECT: EXXON CHEMICAL
OVERWRAP FILM TECHNOLOGY AMERICAS

NO INDIRECT

T-SHIRT CARRYOUT BAG $850 U.S. PATENT DIRECT: VANGUARD, SONOCO AND
ISSUED 1989 INTEGRATED BAGGING SYSTEMS
CORP.

INDIRECT: KRAFT PAPER BAGS
</TABLE>

HANDI-SAC-TM- is a T-shirt bag sold in a patented dispensing mechanism. The
patented system allows the retailer to effectively store and dispense T-shirt
bags in a limited space under the check-out counter, which is important to
convenience, drug, retail and hardware stores. HANDI-SAC-TM- is installed in
approximately 11,000 convenience, drug, retail and hardware stores. Management
estimates the annual market potential for HANDI-SAC-TM- at approximately
$37 million in 1999. The market is split approximately 70% plastic and 30%
paper.

FRESH-SAC-Registered Trademark- is a thin T-shirt produce bag sold in a
patented dispensing mechanism. This program is presently being sold to
approximately 600 supermarkets directly, and through distributors. Management
estimates the total annual market potential for the FRESH-SAC-Registered
Trademark- Produce Profit Builder Program to be $63 million in 1999.

We are testing a thin, clear mono-layer high molecular weight, high density
polyethylene film specifically designed for printed tissue overwrap (for
example, paper towels and bathroom tissue) as a replacement for traditional film
more than twice its thickness. The market size for this product is under
evaluation. Our five year purchase agreement for tissue overwrap with
Printpack, Inc. was terminated on October 7, 1998.

We have specifically developed two films to encapsulate glass fiber
insulation mats for the private housing and the industrial buildings industries.
One is flame retardant and has passed the required tests

13
<PAGE>
of United Laboratories. The market size of this new film application is
currently estimated to be $15 million annually and is expected to grow in North
America.

COMPETITION

The plastic film and bag markets are highly competitive. High barriers of
entry into the plastic bag and film markets are created by significant capital
requirements.

Of our patented products, HANDI-SAC-TM- has direct competition from: Sonoco
Products Company's T-sack roll bag product, flat T-sacks provided by Sonoco
Products Company, Vanguard Plastics, Inc. and others, and paper bags.
FRESH-SAC-Registered Trademark- has direct competition from: Crown Poly, Inc.
and Sealed Air, Inc., which manufacture plastic roll bags in a patented
dispensing system and Better Bag, Inc., which manufactures flat produce bags. It
has indirect competition from a variety of traditional, plastic, low-cost,
bag-on-a-roll manufacturers.

We potentially have direct competition for our thin, clear film used for
tissue overwrap from Exxon Chemical Americas. However, we believe that Exxon
Chemical Americas has an exclusive five year supply agreement with a consumer
packaged goods company that prohibits it from supplying other companies and,
therefore, Exxon Chemical Americas is not presently considered to be our
competitor. We compete with major manufacturers of flexible packaging and other
companies that manufacture thick plastic films for tissue overwrap.

Our competitors in the traditional T-shirt bag business include large
companies including Sonoco Products Company, Inteplast Corporation and Vanguard
Plastics, Inc.

PROPRIETARY PROCESSES, PATENTS AND OTHER RIGHTS

We can give no assurances that our current patents and any patents that may
be granted in the future will be enforceable or provide us with meaningful
protection from competitors. Even if a competitor's products were to infringe
our patents, it could be costly for us to enforce our rights in an infringement
action and would divert funds and resources otherwise used in our operations.
Furthermore, we can give no assurances that we would be successful in enforcing
our patent rights. We can give no assurances that our products will not infringe
patents or rights of others.

We have developed a number of proprietary manufacturing methods and
processes utilized in the manufacture of our products. We rely on and employ
various methods to protect the concepts, ideas and documentation for these
manufacturing methods, like patents and confidentiality agreements with our
employees. However, these methods may not afford sufficient protection and we
can give no assurances that others will not independently develop similar
know-how or obtain access to our know-how, concepts, ideas and documentation.

MANUFACTURING

All of our plastic products are manufactured in our facility in North
Dighton, Massachusetts. Plastic resin is heated and blown into a thin film on
blown film extrusion lines. The film is cooled, wound on large rolls, printed
with customer information using water-based inks and shipped to customers.
However, if the film is to be used to manufacture bags, it is slit-sealed into
bags, reviewed by quality control inspectors, boxed, and shipped to customers.
Our manufacturing equipment consists

14
<PAGE>
of blown film extrusion lines, printing presses, bag making machines and film
slitting operations. Additional slitting capacity was acquired in the first
quarter of 1999.

RAW MATERIALS

High molecular weight, high density polyethylene resin is the principal raw
material in our products. The principal component of this resin is ethylene, a
derivative of natural gas, which is currently available from several sources.
During the year ended December 31, 1998, as in some prior fiscal years, resin
prices fluctuated significantly, a trend we expect to continue.

BACKLOG

Our backlog of firm orders on October 25, 1999 was $468,159, as compared to
$889,164 on March 22, 1999. We generally sell products on an individual purchase
order basis to regular customers rather than under annual contracts on a
scheduled delivery basis. Accordingly, backlog may fluctuate significantly and
may not be an accurate indicator of general business trends.

SEASONALITY

The first quarter of any year is traditionally the slowest quarter for bag
products marketed to the retail trade. There is no apparent seasonality in the
industrial film business.

MAJOR CUSTOMERS

For the year ended December 31, 1998, two of our customers each accounted
for more than 10% of sales: Owens Corning at 10% and Bunzl, a distributor of our
patented bag products to grocery and convenience store retailers, at 20%. Our
primary relationships are with the decision makers at the retail level who chose
Owens Corning, Bunzl or other distributors to redistribute our products.
Therefore, we do not believe that the loss of Owens Corning's or Bunzl's
business would have a material adverse effect on our business as our products
would be shipped either direct to the retailer or through a different
distributor.

EMPLOYEES

As of October 25, 1999, we had 177 full-time employees. None of our
employees are represented by a union. We have not experienced a significant work
stoppage and consider our relationships with our employees to be good.

FACILITIES

We maintain our principal executive offices and manufacturing operations in
a 124,000 square foot facility in North Dighton, Massachusetts. The premises are
leased from an unaffiliated landlord. The term of the lease expires on
December 31, 2007. The premise's monthly rent was $31,738 effective August 1,
1997, and thereafter is adjusted based on certain indices. However, the monthly
rental payment was reduced to $26,255 effective March 1, 1999 due to a reduction
in space. We are responsible for payment of real estate taxes, which are
approximately $52,000 per year, and maintenance costs, which are approximately
$30,000 per year. We have an option to extend the lease at its expiration for a
seven year period.

LEGAL PROCEEDINGS

At December 31, 1998, we were involved in various pending commercial legal
proceedings with equipment lessors and trade suppliers because of lease defaults
and overdue trade accounts. The debt of the equipment lessors was paid in
conjunction with the January 27, 1999 financing on terms we

15
<PAGE>
negotiated with the lessors. Currently, we have no significant pending
commercial legal proceedings with equipment lessors or trade suppliers.

A notice of potential claim has been sent by a group of investors to us and
our insurance carrier. This notice alleges that our former management made
misrepresentations concerning registration rights attendant to the securities
purchased by them pursuant to Regulation D, Rule 144A and Regulation S of the
Securities Act. The securities held by this group of investors is being
registered with the SEC in this prospectus and registration statement. We
believe that any settlement in connection with this potential claim will not
have a material effect on our operations. Except as noted below, no further
action has been taken by this group of investors as of October 25, 1999.

On October 4, 1999, Professional Edge Fund, L.P. ("Pro Edge"), one of the
group of investors described above, filed suit against us in the Court of Common
Pleas of Philadelphia County Trial Division, Action No. 000147. Pro Edge also
named as defendants C. Jill Beresford, our Vice President of Marketing, Dennis
N. Caulfield, our former Chief Executive Officer and our former Chairman of the
Board of Directors, and Newport Capital Partners in this matter. Pro Edge has
alleged that we have breached a contract in regards to the registration of
shares it purchased in a private placement of our shares in November 1997 and
that we have been unjustly enriched based on the sale of these unregistered
shares. Pro Edge is seeking damages in an amount of approximately $1,013,000
plus interest and costs and expenses of the lawsuit. We intend to vigorously
defend ourselves against these allegations.

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

GENERAL

On December 2, 1997, our Board of Directors adopted a change of our fiscal
year end from a 52-53 week fiscal year ending on the Friday closest to
February 28 to a calendar year ending on December 31. The change in fiscal year
end resulted in the 10 month period ended December 31, 1997, the results of
which are included in our consolidated financial statements contained elsewhere
in this prospectus.

In June 1998, our Board of Directors stopped funding the operations of our
two subsidiaries, RC America, Inc. and Market Media, Inc. in connection with
cost cutting measures instituted at that time. Accordingly, the results of
operations discussed below may not necessarily be indicative of the results of
our operations for future periods.

RESULTS OF OPERATIONS

FIRST SIX MONTHS OF 1999 COMPARED TO THE FIRST SIX MONTHS OF 1998

For the first six months ended June 30, 1999, we had sales of $7,471,964
compared to sales of $4,639,864 for the first six months ended June 30, 1998.

Sales of our proprietary bag products (FRESH-SAC-Registered Trademark-
T-shirt sack produce bag and HANDI-SAC-TM-) and film products were $4,830,916 in
the first six months of 1999, compared to sales of $4,396,137 in the first six
months of 1998, an increase of 9%. Sales of traditional plastic carry-out bags
were $2,641,048 in the first six months of 1999, compared to sales of $243,727
in the first six months of 1998. We re-entered the traditional plastic carry-out
bag market and expect continued sales increases in this segment in future
quarters.

In the first six months of 1999, cost of goods sold was $6,354,020 or 85% of
sales, compared to $4,794,768, or 104% of sales, in the first six months of
1998. The decrease in cost of goods sold as a percentage of sales is due to a
decrease in fixed costs, increased sales volume and a reduction in variable
costs as a percentage of sales. Cost of goods sold would have been approximately
$150,000 greater in the first six months of both 1999 and 1998 had we not
recorded a write-down of plant and equipment during the fiscal year ended
February 28, 1997.

Selling, general and administrative expense for the first six months of 1999
was $1,424,695, or 19% of sales, compared to $2,375,830, or 51% of sales, in the
first six months of 1998. The decrease in selling, general and administrative
expense, as a percentage of sales, is due to the reduction of fixed expenses,
offset by an increase in variable expenses, which resulted from an increase in
sales volume. Overhead reductions, including the closing of operations of its
two subsidiaries, were mainly responsible for the decrease.

For the first six months of 1999, interest expense was $832,105, compared to
$276,152 for the first six months of 1998. The increase in interest expense is
due to the conversion of operating leases to capital leases as a result of the
financial restructuring in January 1999.

The net loss before extraordinary income was $1,095,873 in the first six
months of 1999 compared to a net loss of $2,770,933 in the first six months of
1998. The decrease in the loss before extraordinary income was due to a decrease
in fixed expenses and an increase in sales volume. Overhead reductions,
including the closing of operations of its two subsidiaries, were mainly
responsible for the decrease.

Extraordinary income of $1,917,707 in the first six months of 1999 was the
result of the financial restructuring in January 1999 and the resulting
discounts from settlements with unsecured creditors. No extraordinary income was
reported for the first six months of 1998.

17
<PAGE>
Net income after extraordinary income was $821,834 for the first six months
of 1999, compared with a loss of $2,770,933 in the first six months of 1998. The
change from net loss to net income was caused by a decrease in fixed expenses,
an increase in sales volume and the financial restructuring during the first
quarter of 1999. Net income after extraordinary income during the first six
months of 1999 would have been approximately $150,000 lower and the loss for
1998, $150,000 higher had we not recorded a write-down of plant and equipment
during the fiscal year ended February 28, 1997.

We experienced losses in prior years resulting in operating loss
carryforwards for federal and state income tax purposes. Due to our past
history, no benefit was recognized for net operating loss carryforwards because
of the uncertainty of realization. We estimate that sufficient net loss
carryforwards are available to offset income for the six months ended June 30,
1999.

We had basic and diluted net loss before extraordinary income of $0.05 per
share in the first six months of 1999 compared to a loss before extraordinary
income of $0.14 per share in first six months of 1998

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE 10 MONTH PERIOD ENDED DECEMBER 31,
1997

We are unable to accurately recast operating results to provide for a
12 month period ending December 31, 1997 because we did not undertake monthly
accounting closings during the months in question. The months of January and
February are the lowest sales periods of the year under normal seasonality
trends. We believe that the results for a 12 month period ending December 31,
1997 would not have produced a lesser loss for the reporting period than the
loss as represented for the 10 month period ending December 31, 1997.

During the 10 month period ended December 31, 1997, we exited the
traditional plastic carryout bag market. Sales for the year ended December 31,
1998 were $10,382,819 compared to $13,951,725 in the 10 month period ended
December 31, 1997.

Sales of our proprietary bag products, FRESH-SAC-Registered Trademark-
T-shirt sack produce bag and HANDI-SAC-TM-, were $7,799,714 in the year ended
December 31, 1998, compared to sales of $6,185,039 in the 10 month period ended
December 31, 1997. Sales of traditional products decreased to $1,595,010 in the
year ended December 31, 1998 from $6,739,028 in the 10 month period ended
December 31, 1997. We exited the traditional bag market during the 10 month
period ending December 31, 1997 and had sales of $536,543 in the first nine
months of this period compared to sales of $1,058,467 in the last quarter of
1998, when we elected to return to the traditional bag market. The sales of
insulation overwrap films were $988,095 in 1998, compared to $58,731 in the
10 month period ended December 31, 1997. RC America, Inc. had no sales in 1998,
compared to $968,927 in the 10 month period ended December 31, 1997.

In 1998, cost of goods sold was $8,826,905, or 85.0% of sales, as compared
to cost of goods sold in the 10 month period ended December 31, 1997 of
$17,311,037, or 124.1% of sales. Plans to reduce overhead in 1998 resulted in
significant savings beginning in the second quarter of 1998. Cost of goods sold
would have been approximately $303,000 greater in 1998 and approximately
$253,000 greater during the 10 month period ended December 31, 1997 had we not
recorded a write-down of plant and equipment during the fiscal year ended
February 28, 1997.

Selling, general and administrative expense for 1998 was $4,301,842, or
41.4% of sales, as compared to selling, general and administrative expense of
$6,137,985 in the 10 month period ended December 31, 1997, or 44.0% of sales.
Overhead reductions, including the closing of operations of its two
subsidiaries, were mainly responsible for the decrease.

In 1998, interest expense decreased to $471,166, or 4.5% of net sales, as
compared to $984,064 in the 10 month period ended December 31, 1997, or 7.1% of
net sales. Interest decreased due to lower debt balances outstanding under our
credit lines.

18
<PAGE>
A net loss of $3,239,213 in 1998 compares to a net loss of $11,338,869 in
the 10 month period ended December 31, 1997. The non-cash expenses of
depreciation and amortization were $2,538,880 for 1998, compared to $2,186,621
for the 10 month period ended December 31, 1997. The net loss can be attributed
to reductions in plant and sales, general and administrative costs, and
discontinued operations of the two subsidiaries in the second quarter of 1998.
The losses for 1998 and the 10 month period ended December 31,1997 would have
been greater by approximately $303,000 and $253,000, respectively, if we had not
recorded a write-down of plant and equipment in fiscal year 1997.

We incurred a loss of $0.16 per share in 1998, as compared to a loss of
$0.73 per share in the 10 month period ended December 31, 1997.

Operating profits (loss) for the various business units are as follows:

<TABLE>
<CAPTION>
YEAR ENDED 10 MONTH PERIOD ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------ ----------------------
<S> <C> <C>
Proprietary, traditional and film
products............................... $(1,004,120) $ (7,878,610)
RC America, Inc.......................... (130,345) (34,584)
BPI Packaging Technologies, Inc.......... (7,353) (119)
Market Media, Inc........................ (122,136) (391,853)
Unallocated corporate overhead........... (1,481,974) (1,511,867)
----------- ------------
Operating profit (loss).................. $(2,745,928) $ (9,817,033)
Allowance for officer loan............... (68,039) (586,978)
Interest expense, net.................... (425,246) (934,858)
----------- ------------
Net loss................................. $(3,239,213) $(11,338,869)
=========== ============
</TABLE>

10 MONTH PERIOD ENDED DECEMBER 31, 1997 COMPARED TO FISCAL YEAR 1997

We are unable to accurately recast operating results to provide for a
12 month period ending December 31, 1997 because we did not undertake monthly
closing of the records during the months in question. The months of January and
February are the lowest sales periods of the year under normal seasonality
trends. We believe the results for a 12 month period ending December 31, 1997
would not have produced a lesser loss for the reporting period than the loss
represented for the 10 month period ending December 31, 1997.

Sales for the 10 month period ended December 31, 1997 were $13,951,725,
compared to sales of $30,810,037 for fiscal year 1997. Sales of our proprietary
bag products, FRESH-SAC-Registered Trademark- T-shirt sack produce bag,
HANDI-SAC-TM- and MAXI-SAC-TM-, and film products were $6,185,039 in the
10 month period ended December 31, 1997, compared to sales of $12,035,704 in
fiscal year 1997. Sales of traditional products decreased to $6,739,028 in the
10 month period ended December 31, 1997 from $16,571,656 in fiscal year 1997.
Insulation overwrap sales were $58,731 during the 10 month period ended
December 31, 1997. RC America, Inc.'s net sales were $968,927 in the 10 month
period ended December 31, 1997 compared to $2,067,746 in fiscal year 1997.
Market Media, Inc. recorded no sales in the 10 month period ended December 31,
1997, compared to sales of $134,932 during fiscal year 1997.

In the 10 month period ended December 31, 1997, cost of goods sold was
$17,311,037 or 124.1% of sales, as compared to cost of goods sold in fiscal year
1997 of $27,784,329, or 90.2% of sales. Selling, general and administrative
expense for the 10 month period ended December 31, 1997 was $6,137,985, or 44.0%
of sales, as compared to selling, general and administrative expense of
$8,695,612 in fiscal year 1997, or 28.2% of sales. Additional depreciation of
approximately $253,000 would have been recorded in the 10 month period ended
December 31, 1997, if we had not recorded the write-down of plant and equipment
during fiscal year 1997.

19
<PAGE>
For the 10 month period ended December 31, 1997 interest expense decreased
to $984,064, or 7.1% of net sales, as compared to $1,112,647 in fiscal year
1997, or 3.6% of net sales.

A net loss of $11,338,869 in the 10 month period ended December 31, 1997
compares to a net loss of $12,764,231 in fiscal year 1997. The non-cash expenses
of depreciation and amortization were $2,186,621 for the 10 month period ended
December 31, 1997, compared to $3,417,849 for fiscal year 1997. The loss
reported for the 10 month period ending December 31, 1997 would have been
$253,000 greater if we had not recorded the write-down of plant and equipment
during fiscal year 1997.

We incurred a loss of $0.73 per share in the 10 month period ended
December 31, 1997 as compared to a loss of $0.96 per share in fiscal year 1997.

Operating profits (loss) for the various business units are as follows:

<TABLE>
<CAPTION>
10 MONTH PERIOD ENDED
DECEMBER 31, 1997 FISCAL YEAR 1997
---------------------- ----------------
<S> <C> <C>
Proprietary, traditional and film
products................................. $ (7,878,610) $ (9,079,854)
RC America, Inc............................ (34,584) 53,591
BPI Packaging, Inc......................... (119) (2,205)
Market Media, Inc.......................... (391,853) (809,199)
Unallocated corporate overhead............. (1,511,867) (1,823,050)
------------ ------------
Operating profit (loss).................... $ (9,817,033) $(11,660,717)
Allowance for Officer Loan................. (586,978) --
Interest expense, net...................... (934,858) (1,103,514)
------------ ------------
Net loss................................... $(11,338,869) $(12,764,231)
============ ============
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Since our initial public offering in October 1990, we have generated funds
to finance our activities through both public sales and private placements of
our securities, as well as bank loans, equipment lease financings and cash from
operations.

On January 27, 1999, we issued a promissory note in the aggregate principal
amount of $3,200,000 to DGJ. This note matures at the latest on February 1,
2004, has an interest rate of 6% per annum payable monthly in arrears and is
secured by all of our assets. On June 30, 1999, we were in default on the note
as we failed to make four monthly interest payments of $16,000 per month for the
months of March to June 1999, or a total of $64,000. In addition, we did not
make our July and August 1999 interest payments. As this caused an event of
default, as defined in the note, DGJ, the holder of the note, is entitled to
various rights and remedies under the note and the Securities Purchase
Agreement, including, but not limited to, the right to declare all or any part
of the unpaid principal amount of the note outstanding to be due and payable. As
of August 13, 1999, DGJ had indicated a willingness to defer exercising its
rights and remedies upon default pending discussion with us regarding how the
note default was to be cured. This note was amended on August 19, 1999, as
described in "Notes Payable" below.

On January 27, 1999, we entered into a factoring agreement with a company
related to DGJ. The factoring agreement provided us with $2,000,000 of financing
secured by our accounts receivable and $1,000,000 secured by our inventory. The
term for both the accounts receivable and inventory financing was six months,
subject to automatic termination unless we gave at least 90 days written notice
of termination. We gave written notice of termination regarding this factoring
agreement on March 30, 1999. The financing bore interest at the prime rate plus
5% on the outstanding balance on the inventory loan and prime rate plus 2% on
all accounts receivable submitted for financing. The parties to the factoring
agreement had indicated a willingness to extend the terms of the agreement on a

20
<PAGE>
month-to-month basis until the agreement could be replaced with a revolving line
of credit. This factoring agreement was replaced, on August 19, 1999 with a loan
agreement with LaSalle Business Credit, Inc., as described in "Notes Payable"
below.

During the second quarter of 1999, the lender under the factoring agreement,
described above, advanced us additional funds in various increments. These
additional funds were used as working capital. The terms of these additional
loans are on the same terms as the original factoring agreement. On August 19,
1999, the total amounts owed to this lender were assumed by DGJ and were added
into the $3,200,000 promissory note made in favor of DGJ, as described in "Notes
Payable" below.

Our equipment, capital and operating leases are funded by the equipment
lease with DGJ, dated January 27, 1999. On June 30, 1999, we were in default on
the equipment lease as we failed to make five monthly lease payments of $102,000
per month for the months of February to June 1999, or $510,000 in total. In
addition, we did not make our July and August 1999 lease payments. As this
caused an event of default, as defined in the equipment lease, DGJ is entitled
to various rights and remedies under the equipment lease and the Securities
Purchase Agreement, including, but not limited to, the right to have any and all
remaining sums under the lease become immediately due and payable and the right
to repossess the leased equipment. As of August 13, 1999, DGJ had indicated a
willingness to defer exercising its rights and remedies upon default pending
discussion with us regarding how the equipment lease default was to be cured. On
August 19, 1999 the past due amounts we owed under this equipment lease were
added to the $3,200,000 promissory note made in favor of DGJ, as described in
"Notes Payable" below.

In February 1999, we borrowed approximately $219,000 from DGJ to purchase
additional pieces of equipment. This loan bore interest at a rate of 18% per
annum and matured in September 1999. Beginning on April 1, 1999, we were
required to make six successive monthly installment payments of interest only.
As of June 30, 1999, we did not make any monthly interest payments under this
note. As of August 13, 1999, DGJ had indicated a willingness to defer exercising
its rights and remedies upon default pending discussion with us regarding how
the loan default was to be cured. On August 19, 1999, the amount of this loan
and any interest accrued thereunder were added to the $3,200,000 promissory note
made in favor of DGJ. See "Notes Payable" below for a description.

NOTE PAYABLE

At August 10, 1998, we entered into a new revolving line of credit
arrangement with a lender providing for the borrowing of up to $2,000,000
against eligible accounts receivable. Part of the proceeds were used to repay a
line of credit with Foothill Capital Corporation and the balance was used as
general working capital. On October 16, 1998, we negotiated an increase in the
advance on our receivable from 70% to 75% of eligible receivables. We paid a fee
of 2% of our monthly invoices with interest at prime plus 6%. The agreement was
secured by receivables, general intangibles, contract rights and all inventory.
As of December 31, 1998, we were in default under the terms of the agreement by
being late on rent payments to our landlord.

On January 27, 1999, we entered into a factoring agreement with Franklin
Capital Corporation, an entity affiliated with Gary R. Edidin, one of our
directors. Under this factoring agreement, we, with full recourse, assigned and
sold to Franklin our entire interest in all of our present and future accounts,
instruments, contractual rights, chattel paper, documents and general
intangibles arising from sales of goods and/or rendition of services, and
proceeds from these items and all security and guarantees on them, then existing
or subsequently created. We paid Franklin a factoring fee in an amount equal to
2% of the gross amount of these receivables; provided, however, that the minimum
commission for any receivables was $5.00.

Under the factoring agreement, Franklin may have advanced us up to 85% of
the purchase price of the receivables as they were created, subject to a maximum
advance at any time outstanding of

21
<PAGE>
$2,000,000. Interest was charged for the number of days that advances of the
purchase price of the receivables are made to us prior to the date they were
paid and for the number of days that the advances from Franklin's account
remained outstanding at the prime rate plus 2% per annum, except that the
interest was to be in no event less than 8% per annum. The factoring agreement
matured in July 1999 and was extended to August 1999.

On January 27, 1999, we issued a demand revolving note to Franklin in the
principal sum of $1,000,000 at an interest rate of 5% above the prime rate.
However, the interest rate charged could not be less than a minimum annual fixed
rate of 12 3/4%. We agreed to pay Franklin a late charge on all payments made
pursuant to the revolving note equal to 5% of the late payment.

The revolving note was secured by a security agreement we entered into with
Franklin on January 27, 1999. This security agreement granted Franklin a
continuing security interest in our right, title and interest in our then
present and future accounts, inventory, equipment and other property. Under the
terms of the Security Agreement, the amount eligible to be advanced under the
revolving note was limited to the lesser of:

- $1,000,000; and

- the sum of:

(a) 50% of eligible inventory consisting of finished goods covered by
firm purchase orders or contracts; and

(b) 50% of eligible inventory consisting of raw materials comprised of
resins.

On August 19, 1999, we entered into a series of transactions with LaSalle
Business Credit, Inc. and DGJ to refinance our existing indebtedness. Our loan
agreement with LaSalle provides us with a $4,000,000 revolving line of credit.
This credit facility is secured by a first priority security interest in our
accounts receivable, inventory and certain other assets. DGJ is the lessor of
substantially all the equipment that we use, under a capital lease, and holds a
first priority security interest in our equipment. LaSalle received a second
priority security interest in our equipment. Certain of the proceeds of this
credit facility were used to retire existing indebtedness we owed to Franklin
Capital Corporation, including the above described factoring agreement and
revolving note, while the remaining proceeds were used to retire some of our
other indebtedness and for working capital purposes. This credit facility bears
interest at a fluctuating rate equal to 1.5% per annum above the prime rate of
LaSalle in effect from time to time and matures in three years.

In addition, we and DGJ amended and restated the promissory note in the
original principal amount of $3,200,000, because we were unable to fulfill its
financial obligations under the terms of the loan and lease documents by and
between us and DGJ. To cure the defaults, we restated the note to include, in
addition to the original principal and interest accrued thereunder, all amounts
outstanding under: (i) an equipment loan made by DGJ to us as of March 1, 1999
in the original principal amount of $218,665; (ii) a series of advances made to
us by Franklin during the second quarter of 1999 (which totaled approximately
$900,000, and were reduced to approximately $660,000 after application of
proceeds of the credit facility), rights to repayment of which were subsequently
assigned by Franklin to us; (iii) delinquent payments under the DGJ lease of
approximately $570,000; and (iv) interest on the foregoing. The resulting
balance of $4,773,585 was restated as the principal amount of a new amended
promissory note. The amended promissory note is in the original principal amount
of $4,773,585 and is payable as follows: $3,200,000 of principal is due and
payable on February 1, 2004, or earlier by acceleration, as described in the
Securities Purchase Agreement between us and DGJ, or otherwise, and $1,573,585
is due and payable pursuant to the terms of an intercreditor agreement between
DGJ and LaSalle. The amended promissory note bears interest at a rate of 10% per
annum, and is secured by all of our assets, subordinated to LaSalle except as to
equipment.

22
<PAGE>
SALES OF SECURITIES

We received net proceeds from the privately placed sale of common stock from
January 1, 1998 to June 30, 1998, of $1,282,951. The proceeds were used for
general corporate purposes.

We issued no common stock between April 1, 1999 and June 30, 1999. In
connection with our financial restructuring in January 1999, 1,629,930 shares of
Series C Preferred Stock were issued to DGJ for $100. Also, in connection with
the January financial restructuring, we reserved 30,937,500 shares of authorized
but unissued shares of common stock to meet its requirements under the financing
terms of such restructuring.

EQUIPMENT PURCHASES AND LEASE FINANCINGS

From March 1994 through August 1997, we acquired, through purchase or lease,
approximately $19,700,000 of additional equipment to increase manufacturing
capacity and efficiency and to expand our product lines. The equipment was
financed from the sale of equity securities, equipment lease financing and bank
loans.

Some of our capital leases contained provisions that gave the lessors the
right to accelerate lease payments in the event of default. Each of these
capital lessors previously filed suit because of defaults. All of our capital
leases, operating leases and real-estate leases were in default on December 31,
1998.

Pursuant to the Securities Purchase Agreement, we entered into a ten year
equipment lease with DGJ in which we agreed to lease certain equipment for
$1,224,000, interest only at 18%, per year, payable in equal monthly
installments. This equipment lease replaced the existing equipment leases that
were in default or which were subject to judgments due to past due payments we
owed. See "Liquidity and Capital Resources" above for additional information.

In February 1999, we borrowed approximately $219,000 from DGJ to purchase
additional pieces of equipment. See "Liquidity and Capital Resources" above for
additional information.

LIQUIDITY

The non-cash charges of depreciation and amortization of $2,538,880 in 1998
were added to the net loss on our Statement of Cash Flows. Inventory was reduced
by $630,453 during 1998. The current asset ratio was 0.12:1 at December 31, 1998
and 0.66:1 after the financial restructuring that occurred on January 27, 1999.
The debt-to-equity ratio was 4.4:1 at December 31, 1998 and 2.8:1 after the
January 27, 1999 financial restructuring.

The non-cash charges of depreciation and amortization of $1,369,953 in the
first six months of 1999 were added to the net profit on our Statement of Cash
Flows for that period. Inventory and accounts receivable increased by a total of
$1,424,564 during the first six months of 1999. The current asset ratio was
0.60:1 at June 30, 1999 and 0.12:1 at December 31, 1998. The debt to equity
ratio was 3.34:1 at June 30, 1999 and 4.4:1 at December 31, 1998.

IMPAIRMENT OF LONG-LIVED ASSETS AND PATENT INFRINGEMENT SETTLEMENT

During the fourth quarter of fiscal year 1997, we made the decision to exit
the traditional T-shirt bag business. The application of Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of," to the decision to exit the
traditional T-shirt bag business caused us to recognize a non-cash charge of
$5,385,000 to write down to fair value some long-lived assets consisting
principally of machinery and equipment, patents and goodwill, together with
other related expenses. The assets consist of those related to the manufacture
of the traditional T-shirt bag business.

23
<PAGE>
Description of impaired assets, patents, goodwill and plant assets relating
to bag making facilities:

<TABLE>
<S> <C>
Patents..................................................... $1,044,577
Goodwill.................................................... 620,353
Plant equipment............................................. 3,335,070
Reserve for agreement with bag-making equipment vendor...... 285,000
Write-off of rubber plates used in bag-making equipment..... 100,000
----------
Total....................................................... $5,385,000
==========
</TABLE>

The method used to determine fair value was a discounted cash flow approach.
Fair value of all assets, except plant equipment, was determined to be zero
based upon our decision to exit the traditional T-shirt bag business. Fair value
of the plant equipment was determined based upon projected future cash flows for
the remaining useful life, present book value and residual value of assets at
the end of its useful life, with cash flows both discounted at 14% per year, the
current average cost of secured debt financing.

A patent infringement suit settlement of $512,648, including legal defense
costs, was recorded during fiscal year 1997.

IMPACT OF INFLATION

Inflation during the year ended December 31, 1998 did not have any impact on
operating results nor did it have any impact on the last three fiscal periods.

YEAR 2000

In June 1998, we implemented a Year 2000 compliance project. This project
addresses the internal risk, requirements and budgets for becoming Year 2000
compliant. We have completed an inventory of all of our internal operations and
currently are addressing Year 2000 compliance with our suppliers and other
constituents. In the second quarter of 1999, we expended $25,000 on Year 2000
compliance.

As a result of the Year 2000 compliance project, we are upgrading our
financial and accounting system at a cost of approximately $25,000, and are
funding the upgrade out of working capital. The finance and accounting system
upgrade was installed and tested as of October 22, 1999. We have tested all of
our manufacturing equipment, including our manufacturing information systems,
and all were determined to be Year 2000 compliant. We have not utilized any
independent verification or validation processes since the tests performed on
our manufacturing systems determined the systems to be Year 2000 compliant. We
do not contract out our systems maintenance and design and, therefore, have no
third party risk in this regard.

As of October 25, 1999, we have contacted five significant customers, which
accounted for 50.3% of total sales for the first quarter of 1999 regarding their
Year 2000 compliance status. All of these customers have indicated that they are
either already Year 2000 complaint or are on schedule to be Year 2000 complaint
by December 31, 1999. None of these customers currently order from us through
electronic systems.

We sent questionnaires to all 409 vendors as of May 14, 1999 regarding their
Year 2000 compliance status. As of October 25, 1999, we received 183 responses.
All major vendors responded that they are currently Year 2000 compliant and the
other vendors are either Year 2000 compliant or are on schedule to be Year 2000
compliant by December 31, 1999.

In the worse-case scenario we envision, Year 2000 compliance issues may
cause the railroad systems in the United States to become dysfunctional, which
would require us to obtain our resin and other supplies by other means of
transportation. We would be unable to manufacture products and revenues would be
impacted 60 days after the rail system stops functioning. Our contingency plan
is to implement a manual system for our accounting and finance functions and
accumulate a 30-day inventory excess of raw materials by December 31, 1999.

We have not deferred any of our information technologies projects due to
Year 2000 efforts. Furthermore, there has been no impact from any deferred
projects on our financial condition or results of operations.

24
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers, their positions held and their ages
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ----------------------------------
<S> <C> <C>
Hanspeter Schulz.................. 60 President and Director
Richard H. Nurse.................. 54 Vice President of Manufacturing
Peter W. Blackett................. 50 Senior Vice President of Sales
Chief Financial Officer and
James F. Koehlinger............... 63 Treasurer
C. Jill Beresford................. 45 Vice President of Marketing
Ivan J. Hughes.................... 70 Chairman of the Board
David N. Laux..................... 71 Director
Gary R. Edidin.................... 54 Director
Allen S. Gerrard.................. 63 Director
Bruce M. Fleisher................. 68 Director
Theodore L. Koenig................ 40 Director
</TABLE>

No director or executive officer is related by blood, marriage or adoption
to any other director or executive officer.

HANSPETER SCHULZ, PH.D. Dr. Schulz has been our President and Director
since January 1999. From August 1998 to January 1999, Dr. Schulz served as our
consultant. From 1996 to 1998, Dr. Schulz was a Director of Business Integration
for Celanese Ltd., a member of the Hoechst Group, and was one of three managers
responsible for the global installation of Systems Anwendugen Prozesse
Technologies. From June 1995 to 1996, Dr. Schulz was Business Director for
Methanol/Formaldehyde/ Polyols, a global commodity business of Celanese, a
member of the Hoechst Group, with production sites in the United States, Canada
and Germany. From 1982 to June 1995, Dr. Schulz was Vice President and General
Manager of the High Density and Ultra High Molecular Weight Polyethylene
business at American Hoechst, a member of the Hoechst Group. From 1959 to 1969,
Dr. Schulz studied chemistry and related subjects at the Universities of
Stuttgart, Germany, Kansas, USA, on a scholarship basis, and Hamburg, Germany
resulting in a Ph.D. of Natural Sciences in 1969.

RICHARD H. NURSE, PH.D. Dr. Nurse has been our Vice President of
Manufacturing since January 1999. Prior thereto, he was our Vice President of
Technical Development since January 1995. Starting in 1989, Dr. Nurse was an
independent consultant to the plastics industry. From 1987 to 1988, Dr. Nurse
was the Director of Research and Development for Cookson Performance Plastics, a
plastics additive manufacturer. From 1985 to 1987, he was a Technical Manager
for Nortech Company, another plastics additive manufacturer. From 1973 to 1985,
Dr. Nurse was with the Hoechst AG, a plastics resin manufacturer, serving in
technical application and development management in South Africa and Germany and
since 1979, in the United States. Dr. Nurse received a Ph.D. degree in Polymer
Technology from the University of Manchester Institute of Science and Technology
in England and a Bachelor of Science degree in Chemical and Plastics Technology
from the Polytechnic of South Bank, London, England.

PETER W. BLACKETT. Mr. Blackett has been our Senior Vice President of Sales
since March 1999. From 1997 to 1999, he was employed with Fina Oil and Chemical
Company as Regional Sales Manager and from 1992 to 1997, as a Technical Service
Manager for Fina's High Density Polyethylene business group. Mr. Blackett holds
a Higher National Certificate in Mechanical Engineering from Peterborough
Technical College and a Graduateship of the Plastics Institute from Borough
Polytechnic in South London.

25
<PAGE>
JAMES F. KOEHLINGER. Mr. Koehlinger has been our Chief Financial Officer
and Treasurer since January 1999. He previously served as our consultant, on a
part-time basis, from August 1998 to January 1999. From October 1996 to
January 1999, Mr. Koehlinger was a senior consultant with Benchmark, a financial
consulting firm. He previously served as our Chief Financial Officer from
February 1988 to October 1996. Mr. Koehlinger received a Bachelor of Science
degree from Indiana University and a Master of Business Administration degree
from Clark University. He is also a certified public accountant.

C. JILL BERESFORD. Ms. Beresford has been our Vice President of Marketing
since January 1999. From June 1998 until January 1999, she was our Chairman,
Chief Executive Officer and Chief Financial Officer. She also served as our
Chief Operating Officer from 1995 to 1998. She served as our President from
July 1996 to June 1998. She was our Treasurer from May 1990 to January 1999 and
our Director from March 1989 until January 1999. From May 1990 to July 1995,
Ms. Beresford was our Vice President of Marketing. Ms. Beresford attended the
University of Guelph, Ontario, Canada and received a Masters degree in Business
Administration from Boston University.

IVAN J. HUGHES. Mr. Hughes was re-elected as our Director on July 13, 1998
and became Chairman of the Board on January 27, 1999. Mr. Hughes previously
served as our Director from March 1996 to February 1998. Since 1991, Mr. Hughes
has been the President of the Plastic Division of Duro Bag Manufacturing
Company, a privately held company which manufactures grocery bags, shopping and
specialty bags for the food and retail industry. Mr. Hughes has been employed by
Duro Bag in various positions for the past 35 years and presently serves on the
Executive and Compensation Committees. Mr. Hughes received a Bachelor of Science
degree in Mechanical Engineering at Lafayette College and completed his graduate
studies at Columbia University.

DAVID N. LAUX. Mr. Laux has served as our Director since January 1993.
Since 1991, Mr. Laux has served as a Director of ROC Taiwan Fund, a closed end
fund listed on the New York Stock Exchange. Since 1990, Mr. Laux has been
President of the USA-ROC Economic Council, a private non-profit association
which promotes business relations between the United States and Taiwan.
Mr. Laux received his Bachelor of Arts degree from Amherst College and his
Master of Business Administration degree from the American University in
Washington, D.C. He has done graduate work at the University of California at
Berkeley and Georgetown University. Mr. Laux is also a graduate of the Advanced
Management Program at Harvard Business School.

GARY R. EDIDIN. Mr. Edidin has served as our Director since January 1999.
In January 1999, Mr. Edidin became a Member of the Board of Managers, Chairman,
President and Chief Executive Officer of DGJ. In 1975, Mr. Edidin co-founded
Edidin Associates, an investment banking firm. He has been Managing Partner of
Edidin Associates since 1980. In 1992, Mr. Edidin co-founded Franklin Capital
Corp., a regional asset based lender, and is presently the Co-Chairman and
member of its Board of Directors. In 1980, Mr. Edidin served as the Chief
Executive Officer and Chairman of Optique Du Monde, Ltd. ("ODM"), an eyewear
company. In 1988, ODM was sold to the Safilo Group, an Italian publicly traded
eyewear company. Since 1988, he has been a management consultant to the Safilo
Group and Safilo USA, its U.S. subsidiary. In 1997, Mr. Edidin represented
Safilo Group in its acquisition of Smith Sports Optics, Inc. and began serving
that company as a member of the Board of Directors and Executive Committee. He
has also served as the Chairman and Chief Executive Officer of Clarin Corp., a
manufacturer of institutional seating, since 1993. Since 1998, Mr. Edidin has
served as a member of the Board of Directors of Colors For Plastic, a plastic
coloration company. In 1977, a group of investors, including Edidin Associates,
purchased the Lawndale Trust and Savings Bank, a community bank in Chicago. The
same investors subsequently purchased the Garfield Ridge Trust and Savings Bank
and the Bank of Chicago, two Chicago community banks. In 1995, these three banks
were merged into one under the name Bank of Chicago. In 1997, Bank of Chicago
was sold to TCF, a publicly traded savings bank headquartered in Minnesota.
Mr. Edidin has served these banks in

26
<PAGE>
various capacities over the years, including Chairman and Chief Executive
Officer. Mr. Edidin received his Bachelor of Science degree from the University
of Pennsylvania, Wharton School, and his Juris Doctor degree from the University
of Chicago Law School. Mr. Edidin also attended the University of Chicago
Business School.

ALLEN S. GERRARD. Mr. Gerrard has served as our Director since
January 1999. Since 1996, Mr. Gerrard has served as a Director of Deere Park
Capital Management, an investment and merchant banking firm. Since May 1998, he
has also served as Vice-Chairman of that company. Beginning in January 1999,
Mr. Gerrard has been a Member of the Board of Managers and Treasurer of DGJ.
From November 1998 to March 1999, Mr. Gerrard served as Director of McConnell
Dowell Corporation, Limited, a publicly traded company involved in construction.
Since 1997, Mr. Gerrard has served as a Director of Dominion Bridge Company, a
publicly-traded construction and shipbuilding company. Mr. Gerrard was a
Principal in the law firm of Allen S. Gerrard & Associates from 1978 to 1999.
Mr. Gerrard received his Bachelor of Arts degree in Political Science from the
University of Illinois in Champaign-Urbana and his Juris Doctor degree from the
University of Michigan Law School.

BRUCE M. FLEISHER. Mr. Fleisher has served as our Director since
April 1999. Since 1998, Mr. Fleisher has been involved in private investing.
From 1996 to 1998, he served as the Vice President and Division Manager, Chicago
for the Supply Systems Division of Unisource Worldwide, Inc., a wholesale
distributor of paper and packaging supplies. From 1983 to 1996, he was the
President and owner of Darter, Inc. In 1996, Darter, Inc. was purchased by
Unisource Worldwide, Inc. From 1996 to 1997, he was also a member of the Board
of Directors and Chairman of the Industrial Committee for the National Paper
Trade Association. Mr. Fleisher received his Bachelor of Science degree in
Economics from the University of Pennsylvania, Wharton School, and his Masters
degree in Business Administration from George Washington University.

THEODORE L. KOENIG. Mr. Koenig has served as our Director since
April 1999. In 1996, Mr. Koenig founded and since serves as the President and
Chief Executive Officer of Monroe Investments, Inc., a Chicago-based investment
and merchant banking firm specializing in strategic growth investment
opportunities. From 1989 to July 1999, Mr. Koenig was a partner at Holleb &
Coff, a Chicago-based law firm. Since July 1999, Mr. Koenig has acted as counsel
to Holleb & Coff. Mr. Koenig received his Bachelor of Arts degree in Accounting
from Indiana University Kelley School of Business and his Juris Doctor degree
from the Illinois Institute of Technology, Chicago Kent School of Law.
Mr. Koenig is also a Certified Public Accountant.

SIGNIFICANT EMPLOYEE

The following employee is not an executive officer but is expected to make
significant contributions to our business:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ----------------------------------
<S> <C> <C>
Tracy L. McGrath.................. 34 Vice President of Sales
</TABLE>

TRACY L. MCGRATH. Ms. McGrath has served as our Vice President of Sales
since January 1999. Prior to that position, she was our Vice President of
Marketing since December 1997 and, before that, was our Marketing Manager since
November 1993. Ms. McGrath has a Bachelor of Science degree in Communications
from Eastern Connecticut State University.

EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to the
annual and long term compensation for services in all capacities to our business
during the 12 months ended December 31,

27
<PAGE>
1998, the 10 months ended December 31, 1997, fiscal year 1997 and the fiscal
year ended February 23, 1996, of those persons who were, at December 31, 1998:

- our Chief Executive Officer (including persons who held this position at
any time during 1998); and

- other executive officers receiving total cash and bonus compensation in
excess of $100,000 (the "Named Officers").

We did not grant any restricted stock awards or stock appreciation rights or
make any long term incentive plan payouts to the individuals named in the table
below during the periods indicated.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION SECURITIES
-------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY(1) BONUS(2) OPTIONS(#) COMPENSATION
- --------------------------- ----------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Dennis N. Caulfield(3)................. 1998 $169,846 $0 0 $ 9,923(3)
Former Chief Executive Officer 1997(A) $266,666 $0 0 $ 43,323(3)
1997 $320,000 $0 0 $130,220(3)
1996 $320,000 $0 0 $ 36,174(3)

C. Jill Beresford(4)................... 1998 $182,506 $0 0 $ 12,848(4)
Chief Executive Officer, 1997(A) $150,000 $0 0 $ 6,424(4)
Chairman of the Board of 1997 $180,000 $0 0 $ 26,716(4)
Directors 1996 $180,000 $0 0 $ 14,612(4)

Alex F. Vaicunas(5).................... 1998 $124,856 $0 0 $ 1,746(5)
Former Vice President of 1997(A) $104,167 $0 0 $ 3,150(5)
Film Sales 1997 $125,000 $0 0 $ 3,232(5)
1996 $125,000 $0 0 $ 1,213(5)

Richard Nurse, Ph.D.(6)................ 1998 $119,115 $0 0 $ 8,935(6)
Vice President of Technical 1997(A) $ 64,399 $0 0 $ 3,410(6)
Development 1997 $ 77,279 $0 0 $ 4,401(6)
1996 $ 71,936 $0 0 $ 3,656(6)

Paul J. DeCristofaro(7)................ 1998 $ 32,332 $0 0 $ 668(7)
Former Chief Financial 1997(A) $ 83,410 $0 0 $ 0
Officer 1997 $100,092 $0 0 $ 0
</TABLE>

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

(A) Reflects information for the 10 months ended December 31, 1997.

(1) Amounts shown indicate cash compensation earned and received by executive
officers. No amounts were earned but deferred at the election of those
officers. Executive officers participate in our group life and health
insurance.

(2) From July 1, 1993 through December 31, 1998, Mr. Caulfield, Ms. Beresford
and Mr. Vaicunas were eligible to participate in an executive compensation
program. This program provided them with an aggregate bonus equal to 6% of
our pre-tax profit for the first $1,000,000 in pre-tax profits in any fiscal
year, and 12% of pre-tax profits in excess of $1,000,000 in any fiscal year.
However, at the discretion of the Board of Directors the bonus would not
exceed $750,000 in the aggregate in any fiscal year beginning with fiscal
year 1995. No bonuses were paid to Mr. Caulfield, Ms. Beresford or
Mr. Vaicunas during 1998, the 10 month period ended December 31, 1997, in
fiscal year 1997 or fiscal year 1996 under this program. This program is no
longer in effect.

28
<PAGE>
(3) In the periods presented, we paid approximately $335 and $990 per month for
two personal term life insurance policies for Mr. Caulfield and $700 per
month for a disability policy. We also made automobile and insurance
payments of approximately $980 per month during 1998, the 10 months ended
December 31, 1997, in fiscal year 1997 and in fiscal year 1996, for an
automobile for Mr. Caulfield. The fiscal year 1997 amount includes $73,846
paid for unused vacation from prior fiscal years and $12,308 for unused
vacation from fiscal year 1997. This amount includes $0, $6,400, $8,000 and
$0 we contributed to Mr. Caulfield's 401(k) account during 1998, the
10 months ended December 31, 1997, in fiscal year 1997 and in fiscal year
1996, respectively. Mr. Caulfield's employment with us was terminated on
July 2, 1998.

(4) In the periods presented, we paid approximately $80 per month for a personal
term life insurance policy for Ms. Beresford and approximately $190 per
month for a disability policy. In the periods presented, we also made
automobile and insurance payments of approximately $435 and $790,
respectively, per month for an automobile for Ms. Beresford for 1998 and all
other periods presented, respectively. The amount also includes $10,385 and
$7,616 of unused vacation pay that was paid in fiscal year 1997 and fiscal
year 1996, respectively. This amount includes $3,655, $3,655, $3,738 and
$623 we contributed to Ms. Beresford's 401(k) account during 1998, the
10 months ended December 31, 1997, in fiscal year 1997 and in fiscal year
1996, respectively. Ms. Beresford began serving as the chairman of the Board
of Directors and Chief Executive Officer on July 2, 1998, when
Mr. Caulfield's employment ceased.

(5) In the periods presented, we paid approximately $65 per month for a
disability policy for Mr. Vaicunas. This amount excludes automobile and
insurance payments made by us on behalf of Mr. Vaicunas of approximately
$760 per month for an automobile. Mr. Vaicunas reimbursed us for any
personal use of the automobile. This amount includes $0, $2,500, $2,452 and
$433 we contributed to Mr. Vaicunas' 401(k) account during 1998, the
10 months ended December 31, 1997, in fiscal year 1997 and in fiscal year
1996, respectively. Mr. Vaicunas served as the Vice President of Film Sales
until December 26, 1998.

(6) In the periods presented, we reimbursed Dr. Nurse for mileage on his car and
travel expenses associated with company business. Dr. Nurse served as the
Vice President of Technical Development throughout 1998.

(7) This includes $668 we contributed to Mr. DeCristofaro's 401(k) account
during 1998. Mr. DeCristofaro served as our Chief Financial Officer until
March 1998.

STOCK OPTION PLANS

In May 1990, we adopted the 1990 stock option plan. On October 25, 1993, we
approved the 1993 stock option plan. The 1990 and 1993 stock option plans
provide certain individuals the right to purchase up to 200,000 shares and
750,000 shares, respectively, of common stock. In September 1996, we adopted a
stock option plan that entitles certain individuals the right to purchase up to
1,000,000 shares of common stock. Our Board determines: those individuals who
receive options; the time period during which the options may be exercised; the
number of shares of common stock that may be purchased and the exercise price,
which cannot be less than the fair market value of the common stock at the date
of grant. Options generally vest ratably over two to five years. We may not
grant employee incentive stock options with a fair value in excess of $100,000
that is exercisable during any one calendar year. Options granted under the
stock option plans generally expire 10 years from the date they are granted.

29
<PAGE>
AGGREGATED OPTION EXERCISED IN THE LAST FISCAL YEAR
AND FY-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
AT FY-END EXERCISABLE/
SHARES ACQUIRED EXERCISABLE/ UNEXERCISABLE
NAME ON EXERCISE VALUE REALIZED($) UNEXERCISABLE ($)(1)
- ---- --------------- ----------------- --------------------- -------------
<S> <C> <C> <C> <C>
C. Jill Beresford................. 0 0 163,224/0 0 / 0
</TABLE>

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

(1) In-the-money options are those options for which the fair market value of
the underlying common stock is greater than the exercise price of the
option. On December 31, 1998, the fair market value of our common stock
underlying the options as determined by the last sale price quoted on NASDAQ
OTC was $0.19. Since the exercise price of all of the options reflected in
this table is greater than $0.19, the options held by this individual are
not in-the-money and are, therefore, not included in this calculation.

401(k) RETIREMENT SAVINGS PLAN

We provide an employee retirement savings plan under Section 401(k) of the
Internal Revenue Code which covers substantially all employees. Under the terms
of the plan, employees may contribute a percentage of their salary, up to a
maximum of 15%, which is then invested in one or more of several mutual funds
selected by the employee. We match 100% of the employee contribution, up to a
maximum of 2% of their salary.

EMPLOYMENT AND CONSULTING AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS

We entered into employment, non-competition, and confidentiality agreements
with each of Mr. Caulfield, Ms. Beresford and Mr. Vaicunas. Base salaries for
Mr. Caulfield, Ms. Beresford and Mr. Vaicunas were $320,000, $180,000 and
$125,000 per annum, respectively, subject to periodic review by our Board. Each
of these agreements expired on June 30, 1998. However, Ms. Beresford's
employment agreement was renewed for an additional one year term. Her agreement
provided for severance payments of 60 months base salary in the event her
employment was terminated without cause and prohibited her from competing with
us for a period of 24 months following termination of her employment with us. In
the event of a change of control in our company, she had the option to terminate
her employment and to receive additional severance compensation subject to the
provisions of her employment agreement. We have has also entered into
non-competition and confidentiality agreements with certain other employees.

In conjunction with the January 1999 Financing, on January 27,1999, we
entered into an employment agreement with each of Ms. Beresford,
Mr. Koehlinger, Dr. Nurse and Dr. Schulz and a consulting agreement with
Mr. Hughes with terms as listed below. In addition, on March 22, 1999, we
entered into an employment agreement with Peter W. Blackett with terms as listed
below.

30
<PAGE>
EMPLOYMENT AND CONSULTING AGREEMENT TERMS

<TABLE>
<CAPTION>
EMPLOYEE/CONSULTANT BASE SALARY/FEE TERM WARRANT SHARES
- ------------------- --------------- ----------------- --------------
<S> <C> <C> <C>
C. Jill Beresford............... $125,000 7/1/99 - 6/30/00 937,000
James F. Koehlinger............. $125,000 1/27/99 - 1/27/02 1,719,000
Richard H. Nurse................ $125,000 1/27/99 - 1/27/02 1,719,000
Hanspeter Schulz................ $150,000 1/27/99 - 1/27/02 2,188,000
Ivan J. Hughes.................. $ 52,000 1/27/99 - 1/27/02 937,000
Peter W. Blackett............... $125,000 3/22/99 - 3/21/02 0
</TABLE>

At the end of the terms of employment of Mr. Koehlinger, Dr. Nurse,
Dr. Schulz and Mr. Blackett, each individual's employment will revert to the
status of employment at will and will thereafter be subject to termination by
either party at any time and regardless of cause. Upon expiration of
Ms. Beresford's term, at our option, we may extend her employment term for an
additional 18 months provided we give Ms. Beresford proper notice.

Under the terms of each agreement described above, each of these individuals
will receive options to purchase common stock during the term of each's
respective agreement if we equal or exceed certain financial performance goals.
See "Compensation Committee--Board Compensation Committee Report on Executive
Compensation--Bonus Plan" below for a description of the performance goals.
Also, in consideration of Ms. Beresford, Mr. Koehlinger, Dr. Nurse, Dr. Schulz
and Mr. Hughes entering into his or her agreement, we granted each of these
individuals a warrant to purchase a certain number of shares of common stock at
$0.04 per share. These warrants expire on January 27, 2009. Please refer to the
chart above for the number of shares each received. Each of these individuals
has paid to us their respective amount due under these warrants and they can be
exercised by completing the proper documentation without requiring them to make
any additional payments to us. Dr. Schulz, Mr. Koehlinger and Dr. Nurse have
exercised these warrants received in connection with their individual
agreements. Dr. Schulz is also given as consideration for his employment costs
related to an apartment and an automobile for the duration of his employment
under his employment agreement. Mr. Blackett will be given, as consideration for
his employment, reimbursement for reasonable and necessary expenses incurred in
connection with the relocation of his personal residence close to our office.

Each of the employment and consulting agreements described above contains a
covenant not to compete and requires the employee or consultant to maintain the
confidentiality of our confidential information.

COMPENSATION OF DIRECTORS

All of our outside Directors are paid $1,875 each per calendar quarter. No
other Directors receive any compensation. In June 1992, David N. Laux, an
outside Director, received options to purchase a total of 7,500 shares of common
stock at a purchase price of $2.50 per share through June 9, 2002. In
March 1996, Ivan J. Hughes, then considered an outside Director, received
options to purchase a total of 7,500 shares of common stock at a purchase price
of $2.38 per share through June 9, 2003. In January 1998, Mr. Laux received
options to purchase a total of 25,000 shares of common stock at a purchase price
of $1.25 per share through December 31, 2003.

BOARD OF DIRECTORS, BOARD COMMITTEE AND MEETINGS

Our Board has established an Audit Committee, a Compensation Committee and
an Executive Committee. Our Board held three meetings during 1998. Each director
attended at least 75% of all meetings of the Board and applicable Committees
held last year.

31
<PAGE>
EXECUTIVE COMMITTEE

The Executive Committee is empowered to act with all authority granted to it
by the Board between Board meetings, except with respect to those matters
required by Delaware law or by our By-laws to be subject to the power and
authority of the Board as a whole. Messrs. Ivan J. Hughes, Hanspeter Schulz,
Theodore L. Koenig and Gary R. Edidin are the current members of the Executive
Committee. The former Executive Committee did not meet during 1998. The current
Executive Committee has met two times in 1999.

AUDIT COMMITTEE

The Board has established an Audit Committee whose current members are
David N. Laux, Bruce M. Fleisher, Gary R. Edidin and Allen S. Gerrard. The
purposes of the Audit Committee are to:

- review our financial results and recommend the selection of our
independent auditors;

- review the effectiveness of our accounting policies and practices,
financial reporting and internal controls; and

- review the scope of independent audit coverage, the fees charged by the
independent auditors, any transactions which may involve a potential
conflict of interest and internal control systems.

The functions of the Audit Committee are to:

- recommend annually to the Board the appointment of our independent public
accountants;

- discuss and review the scope and the fees of the prospective annual audit
and to review the results of the annual audit with our independent public
accountants;

- review and approve non-audit services of the independent public
accountants;

- review compliance with our existing major accounting and financial
policies;

- review the adequacy of our financial organization; and

- review management's procedures and policies relative to the adequacy of
our internal accounting controls.

During 1998, the former Audit Committee met one time and the new Audit
Committee has met two times in 1999 for the purposes of:

- reviewing the arrangements and scope of our annual audit;

- discussing the matters of concern to the Committee with regard to our
financial statements or other results of the audit; and

- our internal accounting procedures and controls and the activities and
recommendations of our independent public accountants.

COMPENSATION COMMITTEE

David N. Laux, Bruce M. Fleisher, Gary R. Edidin and Allen S. Gerrard serve
on the Compensation Committee. The former Compensation Committee did not meet
during 1998. The current Compensation Committee has met one time in 1999.

32
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee believes that the primary objectives of our
compensation policies are to attract and retain a management team that can
effectively implement and execute our strategic business plan. These
compensation policies include:

- an overall management compensation program that is competitive with
management compensation programs at companies of similar size to attract,
retain and motivate superior talent in our industry;

- short-term bonus incentives for management to meet our overall business
strategy and profitability goals, including net income performance goals;

- promoting our pay-for-performance philosophy; and

- long-term incentive compensation in the form of stock options and other
long-term equity compensation which will encourage management to continue
to focus on stockholder return.

It is the intention of the Compensation Committee to utilize a
pay-for-performance compensation strategy that is constructive towards the
attainment of our sales growth and profitability goals. Also, the Compensation
Committee's goal is to use compensation policies to closely align our interests
with the interests of stockholders so that our management has incentives to
achieve short-term performance goals while building long-term value for our
stockholders. The Compensation Committee will review its compensation policies
from time to time to determine the reasonableness of our compensation programs
and to take into account factors which are unique to us.

BONUS PLAN. To incentivize our senior management, Ms. Beresford,
Mr. Koehlinger, Dr. Nurse, Dr. Schulz, Mr. Blackett and Mr. Hughes will receive
options to purchase common stock during the term of their respective employment
or consulting agreements if we equal or exceed certain financial performance
goals in 1999, 2000 and 2001. If our net earnings for the particular fiscal
years plus amounts deducted in the computation thereof for: (a) interest
expense; (b) Federal, state and local income taxes; (c) depreciation;
(d) amortization of intangibles, as computed by our accountants in accordance
with generally accepted accounting principals, consistently applied; and
(e) any expenses or other charges associated with the investment, loans, and
equipment leases made by DGJ to us and all other charges ("EBITDA"), equals or
exceeds one of the EBITDA performance goals stated in the employment or
consulting agreements, we will grant to these individuals options to purchase a
certain number of shares of common stock. The maximum number of shares of common
stock these individuals and one other employee, Ms. McGrath, can purchase under
these options is 14,750,000 shares.

COMPENSATION FOR PRIOR CHIEF EXECUTIVE OFFICER. Mr. Caulfield's and
Ms. Beresford's compensation as Chief Executive Officer was based upon analysis
of other comparable public companies' chief executive officers' compensation and
each's efforts and success in the following areas: establishing strategic goals
and objectives for our long-term growth; raising equity and debt capital needed
to allow us to erase our working capital deficit and adequately capitalizing our
business to move forward; improving our operating results; and establishing
critical strategic partnerships with vendors and distribution channels.

BASE SALARIES. Ms. Beresford's base salary was $180,000 for the 12 month
period ended June 30, 1999 and for her employment term from July 1, 1999 to
June 30, 2000 her salary will be $125,000. The current Compensation Committee
believes that executive officer salaries reflect base salaries paid to senior
officers of other companies of similar size.

Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows tax deductions to public companies for compensation over $1 million
paid to a corporation's chief

33
<PAGE>
executive officer and the four other most highly compensated executive officers.
Qualifying "performance-based" compensation will not be subject to the deduction
limit if certain requirements are met. The Compensation Committee has discussed
and considered and will continue to evaluate the potential impact
Section 162(m) has on us in making compensation determinations, but has not
established a set policy with respect to future compensation determinations.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee consists of David N. Laux, Bruce M. Fleisher,
Gary R. Edidin and Allen S. Gerrard. None of our executive officers have served
on the Board of Directors of any other entity that has had any of their officers
serve either on our Board or Compensation Committee. However, Ivan J. Hughes,
our Chairman of the Board of Directors, serves on the Compensation Committee of
Duro Bag, one of our customers. See "Certain Relationships and Related
Transactions" below.

CONCLUSION

The current Compensation Committee believes that the newly-instituted
executive compensation plan implemented as part of the Securities Purchase
Agreement with DGJ discussed in this registration statement is consistent with
our overall corporate strategy for continued growth in sales, manufacturing and
earnings and stockholder value.

COMPENSATION COMMITTEE

Gary R. Edidin
Bruce M. Fleisher
Allen S. Gerrard
David N. Laux

34
<PAGE>
DESCRIPTION OF OUR SECURITIES

Our authorized capital stock consists of the following:

<TABLE>
<CAPTION>
CLASS OF SECURITIES PAR VALUE NUMBER OF AUTHORIZED SHARES
- ------------------- --------- ---------------------------
<S> <C> <C>
Common Stock............................... $0.01 150,000,000
Series A Convertible Preferred............. $0.01 183,758
Series B Convertible Preferred............. $0.01 146,695
Series C Redeemable Preferred.............. $0.01 1,629,930
</TABLE>

As of October 25, 1999, 27,131,221 shares of our common stock were held of
record by 321 stockholders.

The following is a summary of certain provisions of the common stock, the
Certificate of Incorporation, and the By-laws. This summary is not intended to
be complete and is qualified by reference to the provisions of applicable law
and to the Certificate of Incorporation and By-laws.

COMMON STOCK

The following summary description of the common stock is qualified in its
entirety by reference to our Certificate of Incorporation. We are authorized to
issue up to 150,000,000 shares of common stock, $0.01 par value.

The holders of common stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of preferred stock which may be outstanding from time to time, holders of
common stock are entitled to receive ratably dividends as may be declared by the
Board out of funds legally available for dividend distribution. In the event of
our liquidation, dissolution or winding, holders of common stock, are entitled
to share ratably in assets remaining after payment of liabilities, accrued
dividends and liquidation preferences on the preferred stock, if any. Holders of
common stock have no preemptive rights and have no rights to convert their
common stock into any other securities. The outstanding common stock is validly
issued, fully paid and not subject to further assessment or call.

COMMON STOCK WARRANTS

In the June 1998 private placement of securities, we sold units of
securities. Each unit consisted of 100,000 shares of common stock and a three
year warrant to purchase 100,000 shares of common stock at $1.25 per share.
However, if we announce the receipt of a contract for the purchase of goods or
services resulting in revenues of $5,000,000 or more, then the purchase price
will be reduced to $1.05 per share for 15 days after the announcement. The
offering price per unit was $90,000. Currently, warrants to purchase 1,650,000
shares of common stock are outstanding, of which 1,050,000 are being registered
in this registration statement. The warrants expire at various times throughout
the end of the year 2001 and are not subject to redemption or call before their
expiration.

In connection with the Securities Purchase Agreement we entered into in
January 1999, we issued and sold to DGJ a Common Stock Purchase Warrant to
purchase up to 80,000,000 shares of common stock, at an exercise price of $0.04
per share, exercisable until January 27, 2009. Also, in connection with the
January 1999 financing, we issued warrants exercisable into 5,900,000 shares of
common stock for various consulting services provided to us. Of the 5,900,000
warrant shares, 5,000,000 are exercisable at $0.04 per share until January 27,
2009 and 900,000 are exercisable at $0.10 per share until January 27, 2003.
Under the terms of the employment agreements with Ms. Beresford,
Mr. Koehlinger, Dr. Nurse and Dr. Schulz and the consulting agreements with
Mr. Hughes, we granted each of these individuals a warrant to purchase a certain
number of shares of common stock at $0.04 per share.

35
<PAGE>
These warrants expire on January 27, 2009. Mr. Koehlinger, Dr. Nurse and
Dr. Schulz exercised their warrants in September 1999. See "Employment and
Consulting Agreements, Termination of Employment and Change in Control
Arrangements" for a description of how many shares each individual's warrant is
exercisable into.

PREFERRED STOCK

The following summary description of our preferred stock is qualified in its
entirety by reference to our Certificate of Incorporation and the Certificates
of Designation for each series of outstanding preferred stock. We are authorized
to issue up to 2,000,000 shares of preferred stock, $0.01 par value. The
preferred stock may be issued in one or more series, the terms of which may be
determined at the time of issuance by the Board, without further action by
stockholders, and may include voting rights, including the right to vote as a
series on particular matters, preferences as to dividends and liquidation,
conversion, redemption rights and sinking fund provisions.

SERIES A CONVERTIBLE PREFERRED STOCK

In connection with our second public offering in June 1991, we authorized
1,400,000 shares of Series A Convertible Preferred Stock of which 1,061,800
shares were issued in the offering. A total of 873,142 shares of Series A
Convertible Preferred Stock have been converted to common stock as of
December 31, 1998, leaving a balance of 183,758 shares of Series A Convertible
Preferred Stock outstanding. The Series A Convertible Preferred Stock is
redeemable, at our option, if the last sale price of the common stock has
averaged at least $9.00 per share, subject to equitable adjustments for stock
splits, reverse stock splits and similar recapitalizations, for at least
30 consecutive trading days ending within five days prior to the date notice of
redemption is given. After payment of any sums due to holders of Series B
Convertible Preferred Stock, the Series A Convertible Preferred Stock retains a
liquidation preference over the common stock and any other class or series of
stock ranking junior to the Series A Convertible Preferred Stock at a rate of
$4.00 per share plus any declared but unpaid dividends. Holders of Series A
Convertible Preferred Stock are entitled to receive non-cumulative dividends out
of any funds legally available at an annual rate of $0.34 per share, payable
annually on the last day of June. The Series A Convertible Preferred Stock is
convertible, at the holder's option, into an equal number of fully paid and
non-assessable shares of common stock at any time prior to its redemption,
subject to adjustment for stock splits, stock dividends, recapitalization and
similar events. The Series A Convertible Preferred stock votes with the common
stock as a single class on all matters. Holders of the Series A Convertible
Preferred Stock are entitled to vote as a class upon any proposed amendment to
our Certificate of Incorporation that would change the rights and preferences of
the Series A Convertible Preferred Stock so as to affect the series adversely.

SERIES B CONVERTIBLE PREFERRED STOCK

Upon completion of our initial public offering in October 1990,
Beresford-Canada and its subsidiary, Beresford Box Company Ltd., converted long
term subordinated debt in the principal amount of $1,833,692 into 146,695 shares
of Series B Convertible Preferred Stock. The Series B Convertible Preferred
Stock is redeemable for $10.00 per share at our option. The Series B Convertible
Preferred Stock retains a liquidation preference over the Series A Convertible
Preferred Stock and the common stock at a rate of $10.00 per share plus any
declared but unpaid dividends. The holders of the Series B Convertible Preferred
Stock are entitled to receive non-cumulative dividends out of any funds legally
available for dividends at the rate of 6% per annum or $.60 per share, payable
in cash annually on March 1st of each year. Dividends on the Series B
Convertible Preferred Stock are payable before any dividends shall be paid,
declared or set apart for the Series A Convertible Preferred Stock and the
common stock. The Series B Convertible Preferred Stock have limited voting
rights. The Series B Convertible Preferred Stock is convertible at the holder's
option into an equal number of shares of

36
<PAGE>
common stock at any time, subject to adjustment for stock splits, stock
dividends, recapitalization and similar events.

SERIES C REDEEMABLE PREFERRED STOCK

In the January 1999 financing, we sold to DGJ, for an aggregate purchase
price of $100, a total of 1,629,930 shares of Series C Preferred Stock. The
Series C Preferred Stock is redeemable at our discretion if the promissory note
to DGJ, issued pursuant to the January 1999 financing, has been retired in its
entirety, at an aggregate redemption price of $100 plus accrued interest at a
rate of 6% per annum beginning on January 27, 1999. The shares of Series C
Preferred Stock are not convertible into shares of common stock and have no
preferences upon liquidation dissolution, winding up, or insolvency. The holders
of the Series C Preferred Stock have no voting rights; provided however, upon an
event of default, as defined in the Securities Purchase Agreement, holders of
the Series C Preferred Stock will be entitled to vote with the holders of common
stock as a single class on each matter submitted to a vote of our stockholders,
with each share of the Series C Preferred Stock having 30 votes.

No other shares of preferred stock are outstanding as of the date of this
prospectus, and we have no present plans for the issuance thereof.

37
<PAGE>
PRICE RANGE OF COMMON STOCK

Our common stock was traded on the National Association of Securities
Dealers Automated Quotation National Market System ("NASDAQ NMS") from
October 12, 1992 through August 13, 1998. Since August 14, 1998, our common
stock has been traded on the National Association of Securities Dealers
Automated Quotation Over-the-Counter Bulletin Board ("NASDAQ OTC"), under the
symbol "BPIE."

As of October 25, 1999, 321 holders of record held 27,131,221 shares of our
common stock and 53 holders of record held 183,758 shares of our Series A
Convertible Preferred Stock. We believe that there are approximately 4,500 to
5,000 beneficial owners of our common stock and Series A Convertible Preferred
Stock.

For the fiscal quarters reported below, the following table sets forth the
range of high and low sale quotations for our common stock for the relevant
periods as reported by the NASDAQ NMS or the range of the high and low bid
prices on the NASDAQ OTC. These quotations represent inter-dealer quotations
without adjustment for retail markups, markdowns or commissions and may not
represent actual transactions.

<TABLE>
<CAPTION>
HIGH SALE/BID LOW SALE/BID
------------- ------------
<S> <C> <C>
COMMON STOCK
Fiscal Year 1997
First Quarter..................................... $ 4.25 $ 1.375
Second Quarter.................................... $ 3.625 $ 1.625
Third Quarter..................................... $ 3.6875 $1.8125
Fourth Quarter.................................... $ 2.3125 $ 1.625
Ten Month Period Ending December 31, 1997
First Quarter..................................... $1.96875 $1.5625
Second Quarter.................................... $ 1.875 $ 1.031
Third Quarter..................................... $ 2.313 $ 1.031
Fourth Quarter (through December 31, 1997)(1)..... $ 1.938 $ 1.063
1998
First Quarter..................................... $ 1.375 $ 0.688
Second Quarter.................................... $ 1.400 $ 0.844
Third Quarter..................................... $ 0.94 $ 0.125
Fourth Quarter.................................... $ 0.40 $ 0.12
1999
First Quarter..................................... $ 0.30 $ 0.14
Second Quarter.................................... $ 0.30 $ 0.14
Third Quarter..................................... $ 0.30 $ 0.11
Fourth Quarter (through October 25, 1999)......... $ 0.14 $ 0.06
</TABLE>

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

(1) In December 1997, we changed our fiscal year end from February 28 to
December 31.

On October 25, 1999, the high ask price of the common stock was $0.09, the
low bid price was $0.09 and the close price was $0.09.

DIVIDENDS

We have not paid any cash dividends on our common stock since inception. We
do not anticipate the payment of cash dividends on our common stock in the
foreseeable future. Any earnings generated from operations, after payment of
dividends on our Series A and B classes of preferred stock, will be used to
finance the growth of our business. Dividends on the preferred stock are
non-cumulative.

Section 7.12 of the Securities Purchase Agreement and our current revolving
line of credit loan arrangement prohibit the payment of dividends, in cash or
other property, on or in respect of any shares of any class of capital stock of
our securities.

38
<PAGE>
PERFORMANCE GRAPH

The following graph compares the performance of our common stock with the
performance of the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") Market Index of Companies and the Media General
Industry Group representing packaging and container companies, which consists of
other companies in the packaging and container industry, for the period from
December 31, 1993 to December 31, 1998. The graph assumes that the value of the
investment in the common stock and each index was $100 at December 31, 1993 and
that all dividends, if any, were reinvested.

MANUFACTURING INDUSTRY. COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG BPI PACKAGING TECHNOLOGIES, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
BPI PACKAGING TECHNOLOGIES, INC. NASDAQ MARKET INDEX PEER COMPANIES GROUP
<S> <C> <C> <C>
1993 $100.00 $100.00 $100.00
1994 $62.26 $104.99 $101.48
1995 $32.08 $136.18 $100.15
1996 $28.77 $169.23 $108.45
1997 $16.98 $207.00 $100.92
1998 $10.85 $291.96 $87.00
</TABLE>

39
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of common stock and
Series A Preferred Stock as of October 25, 1999 by:

(1) our directors;

(2) our executive officers;

(3) our directors and executive officers as a group; and

(4) persons who beneficially owned more than 5% of the common stock and
Series A Preferred Stock or by persons who did not beneficially own more
than 5% of the common stock and Series A Preferred Stock, in the
aggregate, but who were considered members of a "group" within the
meaning of Section 13(d)(3) of the Exchange Act, beneficially owning more
than 5% of the common stock and Series A Preferred Stock.

Each of the persons listed below disclaims beneficial ownership in any
shares beneficially owned by the others. The number of shares of common stock
and Series A Preferred Stock beneficially owned by each person listed below is
based on information contained in the Schedule 13D filed with the SEC on behalf
of the listed persons and on information provided to us by the named entity or
individual. The percentage of shares of the common stock and Series A Preferred
Stock each listed person is indicated as beneficially owning is based on
27,131,221 and 183,758 shares of common stock and Series A Preferred Stock,
respectively, outstanding on October 25, 1999.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS(2)(3)
- ------------------------------------ --------------------- --------------
<S> <C> <C>
Hanspeter Schulz, Ph.D.(4) ................................. 2,188,000 8.01%

Richard H. Nurse, Ph.D.(4) ................................. 1,725,000 6.32%

C. Jill Beresford(4)(5)(6)(7) .............................. 2,561,249 8.50%

James F. Koehlinger(4) ..................................... 1,719,000 6.29%

Peter W. Blackett(4) ....................................... 0 0%

Ivan J. Hughes(5)(7)(8) .................................... 1,027,000 3.63%
Davis and Oak Streets
Ludlow, Kentucky 41016-0250

David N. Laux(9) ........................................... 52,500 *
1700 N. Moore St, Suite 1703
Arlington, Virginia 22209

Gary R. Edidin(10) ......................................... 80,000,000 74.55%
Edidin & Associates
600 Central Avenue
Suite 262
Highland Park, IL 60035

Allen S. Gerrard(11) ....................................... 80,000,000 74.55%
Deere Park Capital Management
40 Skokie Boulevard
Suite 110
Northbrook, IL 60062
</TABLE>

40
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS(2)(3)
- ------------------------------------ --------------------- --------------
<S> <C> <C>
Theodore L. Koenig(12) ..................................... 0 0%
Monroe Investments, Inc.
5 Revere Drive
Suite 206
Northbrook, Illinois 60062

Bruce M. Fleisher .......................................... 0 0%
2350 N. Lincoln Park West
Chicago, Illinois 60614

DGJ, L.L.C.(7)(13) ......................................... 80,000,000 74.55%
600 Central Avenue, Suite 262
Highland Park, Illinois 60035

All Officers and Directors As a Group
(11 persons)(6)(7)(8)(9) ................................. 89,272,749 81.47%
</TABLE>

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

* Less than one percent.

(1) None of these persons owns any shares of Series A Preferred Stock. No other
stockholder owns at least 5% of the common stock and Series A Preferred
Stock, combined.

(2) Pursuant to SEC rules, shares of common stock which an individual or group
has a right to acquire within 60 days pursuant to the exercise of options
or warrants are deemed to be outstanding for the purpose of computing the
percentage ownership of the individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table. This table reflects the ownership of all
shares of common stock and the Series A Convertible Preferred Stock voting
as a single class, since each is entitled to one vote per share.

(3) Except as otherwise noted, does not give effect to the issuance of:

- up to 330,453 shares of common stock issuable upon conversion of
Series A and Series B Convertible Preferred Stock;

- up to 180,372 shares issuable upon exercise of warrants issued to an
individual and principals of the placement agent in our private
placements to overseas investors;

- up to 1,950,000 shares issuable upon exercise of options granted or
available for grant under our 1990, 1993 and 1996 stock option plans;

- up to 200,000 shares of common stock issuable upon the exercise of
warrants issued to financial consultants, subject to adjustment; and

- up to 5,000,000 and 900,000 shares of common stock issuable upon the
exercise of options expiring January 27, 2009 and January 27, 2003,
respectively, issued to our consultants, subject to adjustments.

(4) These individuals may be reached at our office located at 455 Somerset
Avenue, North Dighton, Massachusetts 02764.

(5) These individuals acquired warrants to purchase a certain number of shares
common stock at $0.04 per share. These warrants expire on January 27, 2009
and are described above in "Board of Directors and Executive
Officers--Employment Contracts, Termination of Employment and Change in
Control Arrangements." The following table lists the name of the individual
and the

41
<PAGE>
corresponding number of shares of common stock their warrant is convertible
into (the "Warrant Shares"):

<TABLE>
<CAPTION>
NAME WARRANT SHARES
- ---- --------------
<S> <C>
C. Jill Beresford..................................... 937,000
Ivan J. Hughes........................................ 937,000
---------
1,874,000
</TABLE>

(6) Includes:

- 1,314,130 shares of common stock;

- 146,695 shares of Series B Convertible Preferred Stock;

- 163,224 shares of common stock issuable upon the exercise of an option
at a price of $2.50 per share through June 30, 2003; and

- 937,000 shares of common stock issuable upon the exercise of a warrant
(see footnote 5).

(7) Under the terms of a Lockup Agreement, dated January 27, 1999, between DGJ,
C. Jill Beresford and Ivan J. Hughes, Ms. Beresford and Mr. Hughes agreed
to vote their stock as directed by DGJ with respect to any matters
presented to our stockholders with respect to the Securities Purchase
Agreement and agreed not to sell shares of common stock without the prior
written consent of DGJ.

(8) Includes:

- 82,500 shares of common stock;

- 7,500 shares of common stock issuable upon exercise of an option at a
purchase price of $2.38 per share through March 24, 2006; and

- 937,00 shares of common stock issuable upon the exercise of a warrant
(see footnote 5).

(9) Includes:

- 20,000 shares of common stock;

- 7,500 shares of common stock issuable upon exercise of an option at a
purchase price of $2.50 per share through June 9, 2002; and

- 25,000 shares of common stock issuable upon exercise of an option at a
purchase price of $1.25 per share through December 31, 2003.

(10) A member of DGJ and also a member of the Board of Managers, Chairman,
President and Chief Executive officer of DGJ. Mr. Edidin holds no shares
of our stock directly, but may be deemed to beneficially own 80,000,000
shares of common stock beneficially owned by DGJ by virtue of his
positions with DGJ. This amount does not include 1,629,930 shares of our
Series C Preferred Stock held by DGJ. Mr. Edidin disclaims beneficial
ownership of all of these shares.

(11) A Director of Deere Park Capital Management, which is a member of DGJ. He
has no direct or indirect beneficial ownership in the equity securities
owned by DGJ. He is also a Member of the Board of Managers and Treasurer
of DGJ. Mr. Gerrard holds no shares of our stock directly, but may be
deemed to beneficially own 80,000,000 shares of common stock beneficially
owned DGJ by virtue of his positions with DGJ. This amount does not
include 1,629,930 shares of our Series C Preferred Stock held by DGJ.
Mr. Gerrard disclaims beneficial ownership of all of these shares.

42
<PAGE>
(12) A member of Monroe Investments, Inc., which is a member of
Hilco BPI, L.L.C., which is a member of DGJ. He disclaims beneficial
ownership of our securities except to the extent of his membership
interest in DGJ through these entities.

(13) Includes 80,000,000 shares of common stock currently issuable upon the
exercise of a warrant at a price of $0.04 per share through January 27,
2009. However, DGJ has indicated that it has no current intention of
exercising this warrant to purchase common stock. This amount does not
include 1,629,930 shares of our Series C Preferred Stock owned by DGJ.

43
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Ivan J. Hughes, our Director, is the President of the Plastic's Division and
a Director and a member of the Executive and Compensation Committees of Duro
Bag. In January, February, March, April, May, June, July, August and
September 1999, Duro Bag issued purchase orders to us for $192,000, $190,335,
$209,513, $255,729, $0, $350,019, $364,435, $249,355 and $51,696, respectively,
to purchase bags for Duro Bag customers. We expect similar monthly orders from
Duro Bag during the remainder of the year. We manufacture these products on
behalf of Duro Bag for its customers. We sell these products on terms as
contracted between Duro Bag and its customers, which terms are equal, if not
better, than we could obtain from our other customers for these products.

In November 1990, we established an officer's loan receivable to Dennis N.
Caulfield, our then Chairman for $132,197. The note was amended in April 1998
and the interest rate changed to 6%, effective from November 1990, and is now
payable on or before January 1, 2001. Interest on the loan, along with advances
for travel not offset by expense reports, caused the loan balance to equal
$586,978 at December 31, 1997. Mr. Caulfield did not make any payments against
the loan from the period beginning 1990 through December 31, 1997. Accordingly,
we reserved the full amount of this loan on that date. Also, no payments were
made in 1998. In addition, we paid, on behalf of Mr. Caulfield, approximately
$36,000 of a $200,000 personal income tax levy imposed by the Massachusetts
Department of Revenue on Mr. Caulfield in exchange for an interest bearing note
due on or before June 30, 1998, which has not yet been repaid. This note was
reserved for as of June 30, 1999.

Effective February 26, 1994, Ronald Caulfield exchanged his 49,500 shares of
common stock of RC America for 200,000 shares of our common stock, pursuant to
the terms of a Stock Exchange Agreement by and between us and Ronald Caulfield.
The Stock Exchange Agreement also provides for the issuance to Ronald Caulfield
of up to an additional 100,000 shares of our common stock over a five year
period based on RC America attaining certain levels of pre-tax earnings. No
shares of common stock were issued in 1998 or for the 10 month period ended
December 31, 1997. As a result of RC America's earnings for fiscal year 1997 and
Fiscal Year 1996, 2,649 and 2,550 shares, respectively, of the 100,000 shares of
common stock were issued to Mr. Ronald Caulfield. The Stock Exchange Agreement
contains demand and piggy-back registration rights for the shares.

Four of our directors, Gary R. Edidin, Allen S. Gerrard, Theodore L. Koenig
and Bruce M. Fleisher, are either affiliated with DGJ or have been appointed by
DGJ. The financial restructuring in January 1999, the loans described in the
"Liquidity and Capital Resources" and "Notes Payable" Sections, and all other
transactions between the us and DGJ will be deemed to be related party
transactions due to the relationship of these directors to DGJ. Also,
Mr. Koenig is counsel to the Chicago-based law firm of Holleb & Coff, which
provides legal services to us.

SELLING SECURITYHOLDERS

The Offered Shares were acquired by the Selling Securityholders in the
private offerings of securities that occurred in July 1997, October 1997,
December 1997 and June 1998. Absent registration under the Securities Act, the
Offered Shares are subject to limitations on resale. The Registration Statement
of which this prospectus forms a part has been filed in satisfaction of
registration rights we granted to the Selling Securityholders.

Certain of the Selling Securityholders are, or are affiliated with, members
of the National Association of Securities Dealers, Inc. Each of these Selling
Securityholders or its respective affiliate may have or may in the future engage
in market making activities with respect to our common stock or engage in
purchase and sale transactions involving our common stock, including
transactions with other NASD member firms. The Selling Securityholders and any
participating broker or dealer may be deemed to be "underwriters" within the
meaning of the Securities Act. Any commissions, discounts or concessions and any
gain realized by a person deemed to be an underwriter may be deemed to be

44
<PAGE>

underwriting compensation to such person. We have been informed that one of the
Selling Securityholders has made a subordinated loan to a member firm of the
NASD. Certain of the Selling Securityholders or their affiliates have in the
past provided services to us, none of which we deem to be material.

Certain of the Selling Securityholders have sent to us a notice of potential
claim that alleges that our former management made misrepresentation concerning
registration rights attendant to the securities being registered in this
prospectus. One of the members of this group of investors has filed a lawsuit
against us regarding this matter. Please see the section "Business--Legal
Proceedings" for a description of this notice and the filed lawsuit.

The following table shows the name of each Selling Securityholders, the
number of outstanding Shares of common stock beneficially owned by each Selling
Securityholder on October 25, 1999, the number of shares issuable upon exercise
of options and warrants held by the Selling Securityholder and the total number
of shares available for resale after the registration statement becomes
effective. The following table assumes that each of the Selling Securityholders
will sell all of the Offered Shares set forth opposite his or her name. However,
one or more of the Selling Securityholders may sell only a portion or may sell
none of the Offered Shares set forth opposite his or her name. Hence, no
estimate can be given as to the amount of Offered Shares that will be held by
the Selling Securityholders upon termination of this offering.

<TABLE>
<CAPTION>
NUMBER OF
SHARES ISSUABLE ON SHARES AVAILABLE
NUMBER OF SHARES EXERCISE OF OPTIONS FOR SALE
SELLING SECURITYHOLDERS BENEFICIALLY OWNED AND WARRANTS HEREUNDER
- ----------------------- ------------------ ------------------- ----------------
<S> <C> <C> <C>
Charles R. Schaller (IRA)..................... 25,188 0 25,188
William Wolff................................. 130,250(1) 0 130,250
Norman Buchbinder............................. 55,250 0 55,250
Noah Wolff, as Trustee of Noah Wolff Revocable
Trust....................................... 55,250 0 55,250
William Pasternak............................. 15,000 0 15,000
Ranan C. Wolff................................ 10,000 0 10,000
Frederick S. Bogart........................... 16,575 0 16,575
Cheryl Magence................................ 16,575 0 16,575
Bernard Groveman & Barbara Ancona JTWROS...... 62,500(1) 0 62,500
Jack Varon.................................... 10,000 0 10,000
Juda Kallus................................... 11,050 0 11,050
Ari D. Wolff & Chana Wolff JTWROS............. 15,000 0 15,000
Barry Zeffren and Tziona Zeffren.............. 7,514 0 7,514
Sylvia Wolff.................................. 34,750(1) 0 34,750
Jack Saltz.................................... 50,000 0 50,000
Helen S. Levine............................... 50,000 0 50,000
Baruch Z. Halberstam.......................... 76,667 66,667(2) 143,334
S. Marcus Finkle.............................. 100,000 0 100,000
David A. Messer............................... 100,000 0 100,000
Harold Kwitman................................ 25,000 0 25,000
Spiegel 1982 Grandchildren's Trust FBO Anthony
David Spiegel............................... 23,250 0 23,250
Spiegel 1982 Grandchildren's Trust, FBO Evan
Scott Spiegel............................... 23,250 0 23,250
Abraham Spiegel............................... 53,600 0 53,600
Hindy Taub.................................... 50,000 50,000(2) 100,000
Professional Edge Fund, LLC................... 422,223 200,000(2) 622,223
</TABLE>

45
<PAGE>

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

(1) This Selling Securityholder has identified itself as a member of the NASD or
as an affiliate or associate, directly or indirectly, with any member firm
of the NASD.

(2) Represents shares issuable upon exercise of warrants. The warrants are
exercisable for a period of three years from the issuance date a price of
$1.25 per share. However, if we announce receipt of a contract for at least
$5,000,000 of goods or services, the warrants shall be exercisable at a
price of $1.05 per share for a period of 15 days following the announcement
of the contract.

(3) Represents shares issuable upon exercise of options at a price of $1.08 per
share until December 17, 2002.

We have agreed to pay the expenses of registering the Offered Shares on
behalf of the Selling Securityholders, not including broker-dealer commissions,
discounts, concessions or any legal fees incurred by the Selling Securityholders
in connection with sales of the Offered Shares. We and the Selling
Securityholders have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.

46
<PAGE>
PLAN OF DISTRIBUTION

The shares of common stock may be offered and sold from time to time by the
Selling Securityholders, or by pledgees, donees, transferees or other successors
in interest. The shares of common stock covered by this prospectus may be sold
by the Selling Securityholders in one or more transactions on NASDAQ OTC, or
otherwise at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Selling
Securityholders will act independently of us in making decisions with respect to
these offers and sales. The shares of common stock may be sold by one or more of
the following:

- a block trade in which the broker or dealer will attempt to sell the
shares of common stock as an agent but may position and resell a portion
of the block as principal to facilitate the transaction;

- purchases by a broker or dealer as principal and resale by the broker or
dealer for its account pursuant to this prospectus; and

- ordinary brokerage transactions and transactions in which the broker
solicits purchasers.

Thus, the period of distribution of these shares of common stock may occur
over an extended period of time. We are paying all of the other expenses of
registering the Offered Shares under the Securities Act. These expenses are
estimated to be $125,000 for filing, legal, accounting and miscellaneous fees
and expenses. We have agreed to indemnify the Selling Securityholders against
certain liabilities, including liabilities under the Securities Act. In
effecting sales, broker-dealers engaged by the Selling Securityholders may
arrange for other broker-dealers to participate. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with these sales.

We will receive $3,588,905 in gross proceeds if all of the warrants
described above are exercised. Any proceeds from the exercise of the warrants
will be used for general corporate purposes. We will not receive any part of the
proceeds of any sale or transactions of the Offered Shares made by the Selling
Securityholders.

The Selling Securityholders, any broker-dealers and any other participating
broker-dealers who execute sales for the Selling Securityholders may be deemed
to be underwriters within the meaning of the Securities Act. In connection with
these sales, and any profits realized by the Selling Securityholders and the
compensation of any broker-dealer may be deemed to be underwriting discounts and
commissions. Any shares covered by this prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus.

The Selling Securityholders will pay or assume brokerage commissions or
underwriting discounts incurred in connection with the sale of their Offered
Shares. We will not pay or assume these commissions or discounts.

We have advised the Selling Securityholders that during the time they may be
engaged in a distribution of common stock and warrants included in this
prospectus, they are required to comply with Rules 10b-6 and 10b-7 under the
Exchange Act, as described below. In connection with these rules, they may not
engage in any stabilization activity, except as permitted under the Exchange
Act, are required to furnish each broker-dealer through which common stock
included in this prospectus may be offered copies of this prospectus, and may
not bid for or purchase any of our securities or attempt to induce any person to
purchase any securities except as permitted under the Exchange Act.

Rule 10b-6 under the Exchange Act prohibits, with certain exceptions,
participants in a distribution from bidding for or purchasing, for an account in
which the participant has a beneficial interest, any of the securities that are
the subject of the distribution. Rule 10b-7 governs bids and purchases made to
stabilize the price of a security in connection with a distribution of the
security.

47
<PAGE>
EXPERTS

Livingston & Haynes, P.C., an independent accounting firm, audited our
consolidated financial statements for the year ended December 31, 1998. Their
report was relied on and given authority as this firm is an expert in accounting
and auditing.

The financial statements at December 31, 1997 and for the ten months ended
December 31, 1997 and the year ended February 28, 1997 included in this
prospectus have so been included in reliance on the report (which contains an
explanatory paragraph relating to our ability to continue as a going concern as
described in Note 2 to the financial statements) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

On July 31, 1998, we reported on Form 8-K that we engaged Livingston &
Haynes, P.C. as our independent accountants on July 29, 1998. The decision to
engage Livingston & Haynes, P.C. was approved by our Audit Committee.

CHANGE OF ACCOUNTANTS

By letter dated July 6, 1998, PricewaterhouseCoopers LLP resigned as our
independent accountants.

The reports of PricewaterhouseCoopers LLP on our financial statements for
the 10 month period ended December 31, 1997 and the years ended February 28,
1997 and February 23, 1996 included an explanatory paragraph regarding our
ability to continue as a going concern. The foregoing notwithstanding, the
reports of PricewaterhouseCoopers LLP did not contain any other adverse opinion,
a disclaimer of opinion or qualification or modification as to uncertainty,
audit scope or accounting principles.

In connection with the audits of our financial statements for the 10 month
period ended December 31, 1997 and the years ended February 28, 1997 and
February 23, 1996, and during the subsequent interim period through July 6,
1998, there were no disagreements between us and PricewaterhouseCoopers LLP
relative to accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which, if not resolved to the satisfaction of
PricewaterhouseCoopers LLP, would have caused PricewaterhouseCoopers LLP to make
reference to the matter in its reports on the financial statements for such
periods. None of the reportable events listed in Item 304(a)(1)(iv)(B) of
Regulation S-K occurred with respect to us during the 10 month period ended
December 31, 1997 and the years ended February 28, 1997 and February 23, 1996
and the subsequent interim period preceding the resignation of
PricewaterhouseCoopers LLP.

LEGAL MATTERS

Certain legal matters with respect to the validity of the Offered Shares
will be passed upon by Holleb & Coff, Chicago, Illinois. Theodore L. Koenig, our
Director, is counsel with the law firm of Holleb & Coff.

TRANSFER AGENT

Our transfer agent for the common stock is American Stock Transfer and Trust
Company of 40 Wall Street, 46(th) Floor, New York, New York 10005.

INDEMNIFICATION

Delaware General Corporation Law, Section 102(b)(7), allows a corporation,
in its original Certificate of Incorporation or in a later amendment, validly
approved by stockholders, to eliminate or limit personal liability of members of
its Board of Directors for violations of a director's fiduciary duty

48
<PAGE>
of care. However, the elimination of liability will not apply where there has
been a breach of the duty of loyalty, failure to act in good faith, intentional
misconduct or knowing violations of law, payment of a dividend or a stock
repurchase which is deemed illegal or a director has derived improper personal
benefit. Our Certificate of Incorporation includes the following language:

To the maximum extent permitted by Section 102(b)(7) of the General
Corporation Law of Delaware, a director of this Corporation shall not be
personally liable to the Corporation 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 Corporation or
its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.

Delaware General Corporation Law, Section 145, permits a corporation
organized under Delaware law to indemnify directors and officers with respect to
any matter in which the director or officer acted in good faith and in a manner
he reasonably believed to be not opposed to our best interests, and, with
respect to any criminal action, he had reasonable cause to believe his conduct
was not unlawful. Our By-laws include the following provision:

A reference is made to Section 145 and any other relevant provisions of the
General Corporation Law of the State of Delaware. Particular reference is
made to the class of persons, hereinafter called Indemnitees, who may be
indemnified by a Delaware corporation pursuant to the provisions of such
Section 145, namely, any person, or the heirs, executors, or administrators
of such person, who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of such
corporation or is or was serving at the request of such corporation as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise. The Corporation shall, and is
hereby obligated to, indemnify the Indemnitees, and each of them, in each
and every situation where the Corporation is obligated to make such
indemnification pursuant to the aforesaid statutory provisions, the
Corporation in not obligated, but is nevertheless permitted or empowered, to
make such indemnification, it being understood that, before making such
indemnification, with respect to any situation covered under this sentence,
(i) the Corporation shall promptly make or cause to be made, by any of the
methods referred to in Subsection (d) of such Section 145, a determination
as to whether each Indemnitee 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, it the case of any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful, and (ii) that no
such indemnification shall be made unless it is determined that such
Indemnitee 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, in the
case of any criminal action or proceeding, had no reasonable cause to
believe that his conduct was unlawful.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, we have been informed that, in the opinion
of the SEC, this indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference rooms at 450 Fifth Street, N.W., Washington, D.C.; 7 World
Trade Center, Suite 1300, New York, NY 10048; and 500 West Madison Street,
Suite 1400,

49
<PAGE>

Chicago, IL 60661-2511. Please call the SEC at 1-800-SEC-0330 for information on
their public reference rooms.

INCORPORATION OF INFORMATION WE FILE WITH THE SEC

The SEC allows us to "incorporate by reference" the information we file with
them, which means:

- incorporated documents are considered part of the prospectus;

- we can disclose important information to you by referring you to those
documents; and

- information that we file with the SEC will automatically update and
supersede the prospectus.

We incorporate by reference each of the following documents that we will
file with the SEC after the date of the prospectus but before the end of the
offering:

- Reports filed under Sections 13(a) and (c) of the Exchange Act;

- Definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders' meeting; and

- Any reports filed under Section 15(d) of the Exchange Act.

You may request a copy of these filings, at no cost, by contacting us at the
following address, phone number or e-mail:

BPI Packaging Technologies, Inc.
Attn: James F. Koehlinger
Chief Financial Officer
455 Somerset Avenue
North Dighton, Massachusetts 02764
Tel: (508) 824-8636
http://[email protected]

This prospectus is part of a registration statement we filed with the SEC
(Registration No. 333-89137).

50
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
INTERIM CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheets at June 30, 1999 (unaudited) and
December 31, 1998......................................... F-2

Consolidated Statements of Operations (unaudited)--Three
Month Periods ended June 30, 1999 and June 30, 1998....... F-3

Consolidated Statements of Operations (unaudited)--Six Month
Periods ended June 30, 1999 and June 30, 1998............. F-4

Consolidated Statements of Cash Flows (unaudited)--Six Month
Periods ended June 30, 1999 and June 30, 1998............. F-5

Notes to Consolidated Financial Statements (unaudited)...... F-6

AUDITED CONSOLIDATED FINANCIAL STATEMENTS:

Report of Independent Accountants--Livingston &
Haynes, P.C. ............................................. F-14

Report of Independent Accountants........................... F-15

Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-16

Consolidated Statements of Operations for the year ended
December 31, 1998, the 10-Month period ended December 31,
1997 and the fiscal year ended February 28, 1997.......... F-17

Consolidated Statements of Stockholders' Equity for the year
ended December 31, 1998, the 10-month period ended
December 31, 1997 and the fiscal year ended February 28,
1997...................................................... F-18

Consolidated Statements of Cash Flows for the year ended
December 31, 1998, the 10-month period ended December 31,
1997 and the fiscal year ended February 28, 1997.......... F-19

Notes to Consolidated Financial Statements.................. F-20
</TABLE>

F-1
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current assets
Cash...................................................... $ 176,726 $ 73,116
Accounts receivable, net.................................. 1,351,505 882,389
Inventories............................................... 1,672,861 717,413
Prepaid expenses and other current assets, net............ 84,127 51,420
------------ ------------
Total current assets.................................... 3,285,219 1,724,338
------------ ------------
Property and equipment, net................................. 16,173,069 15,290,305
------------ ------------
Deposits--leases and equipment purchases.................... 73,911 149,851
Loans to officers, net...................................... 6,430 6,072
Other assets................................................ 1,656,098 581,399
------------ ------------
1,736,439 737,322
------------ ------------
$ 21,194,727 $ 17,751,965
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Note payable.............................................. $ 1,690,163 $ 814,311
Trade notes payable....................................... -- 584,433
Capital lease obligations due within one year............. -- 3,800,286
Accounts payable.......................................... 2,886,573 6,597,223
Accrued expenses.......................................... 880,417 2,676,239
------------ ------------
Total current liabilities............................... 5,457,153 14,472,492
------------ ------------
Long-term liabilities
Capitalized lease obligations............................. 7,018,665 --
Subordinated debt......................................... 2,720,000 --
Accounts payable long term................................ 1,117,602 --
------------ ------------
Total long-term liabilities............................. 10,856,267 --
Stockholders' Equity
Series B convertible preferred stock, $0.01 par value..... 1,466,954 1,466,954
Series A convertible preferred stock, $0.01 par value..... 673,983 674,032
Series C redeemable preferred stock, $0.01 par value...... 100 --
Common stock, $0.01 par value; shares
authorized--60,000,000; shares issued and
outstanding--21,500,521 and 21,495,621 at June 30, 1999
and December 31, 1998, respectively 215,005 214,956
Subscribed stock............................................ 300,000 --
Capital in excess of par value.............................. 45,392,733 44,912,833
Accumulated deficit......................................... (43,167,468) (43,989,302)
------------ ------------
4,881,307 3,279,473
------------ ------------
$ 21,194,727 $ 17,751,965
============ ============
</TABLE>

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

F-2
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
JUNE 30, JUNE 30,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $ 4,130,980 $ 2,406,967
Cost of goods sold.......................................... 3,697,856 2,561,729
----------- -----------
Gross profit (loss)....................................... 433,124 (154,762)

Operating expenses:
Selling, general and administrative....................... 539,669 1,280,759
----------- -----------
(Loss) income from operations............................. (106,545) (1,435,521)

Other (expense) income:
Interest/other expense.................................... (560,333) (131,217)
Interest/other income..................................... 26,971 18,598
----------- -----------
Net income/(loss) before extraordinary income............... (639,907) (1,548,140)
Extraordinary income--gain on debt restructuring............ 185,945 --
----------- -----------
Net income/(loss) after extraordinary income................ $ (453,962) $(1,548,140)
=========== ===========
Earnings (loss) per share before extraordinary income:
Basic and diluted net earnings (loss) per share............. $ (0.03) $ (0.07)
Shares used in computing basic and diluted net earnings
(loss) per share.......................................... 21,497,613 20,987,122

Earnings (loss) per share after extraordinary income:
Basic and diluted net earnings (loss) per share............. $ (0.02) $ (0.07)
Shares used in computing basic and diluted net earnings
(loss) per share.......................................... 21,497,613 20,987,122
</TABLE>

The accompanying notes are an integral part Of these consolidated financial
statements.

F-3
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
JUNE 30, JUNE 30,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $ 7,471,964 $ 4,639,864
Cost of goods sold.......................................... 6,354,020 4,794,768
----------- -----------
Gross profit (loss)....................................... 1,117,944 (154,904)

Operating expenses:
Selling, general and administrative....................... 1,424,695 2,375,830
----------- -----------
(Loss) income from operations............................. (306,751) (2,530,734)

Other (expense) income:
Interest/other expense.................................... (832,105) (276,152)
Interest/other income..................................... 42,983 35,953
----------- -----------
Net income/(loss) before extraordinary income............... (1,095,873) (2,770,933)
Extraordinary income--gain on debt restructuring............ 1,917,707 --
----------- -----------
Net income/(loss) after extraordinary income................ $ 821,834 $(2,770,933)
=========== ===========
Earnings (loss) per share before extraordinary income:
Basic and diluted net earnings (loss) per share............. $ (0.05) $ (0.14)
Shares used in computing basic and diluted net earnings
(loss) per share.......................................... 21,496,623 20,012,639

Earnings (loss) per share after extraordinary income:
Basic and diluted net earnings (loss) per share............. $ 0.04 $ (0.14)
Shares used in computing basic and diluted net earnings
(loss) per share.......................................... 21,496,623 20,012,639
</TABLE>

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

F-4
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
JUNE 30, JUNE 30,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss)......................................... $ 821,834 $(2,770,933)
----------- -----------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................... 1,369,953 1,269,439
Gain on restructuring of accounts payable............... (1,917,607) --
(Increase) in accounts receivable--trade................ (469,116) (185,695)
(Increase) decrease in inventories...................... (955,448) 344,067
(Increase) decrease in prepaid expenses and other
current assets........................................ (32,707) 5,552
Increase (decrease) in accounts payable................. (1,259,874) 558,114
Increase (decrease) in other accrued expenses........... (152,445) 82,930
----------- -----------
Total adjustments..................................... (3,417,244) 2,074,407
----------- -----------
Net cash used in operating activities............... (2,595,410) (696,526)
----------- -----------
Cash flows from investing activities:
Additions to property and equipment....................... (542,535) (1,530)
Deposits related to equipment refinancing................. 75,940 (318)
Additions to property and equipment debt refinancing...... (1,678,973) --
Increase in advance to officers........................... (358) --
Decrease in other assets, net............................. -- 78,420
----------- -----------
Net cash (used in) provided by investing
activities........................................ (2,145,926) 76,572
----------- -----------
Cash flows from financing activities:
Net increase (payments) under note payable--bank.......... 875,852 (780,945)
Capitalized financing costs............................... (1,105,908) --
Principal payments on capital lease obligations........... -- (75,000)
Refinance of capital and operating leases................. (5,443,763) --
Refinanced capital lease obligation....................... 7,018,665 --
Subordinated debt addition................................ 3,200,000 --
Subscribed stock.......................................... 300,000 --
Net proceeds from sales of stock and exercise of
warrants................................................ 100 1,403,151
----------- -----------
Net cash provided by financing activities........... 4,844,946 547,206
----------- -----------
Net increase (decrease) in cash............................. 103,610 (72,748)
Cash at beginning of period................................. 73,116 125,220
----------- -----------
Cash at end of period....................................... $ 176,726 $ 52,472
=========== ===========
</TABLE>

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

F-5
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
consolidated financial statements.

Revenue is recognized upon the shipment of products and the passage of title
to customers.

In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) considered necessary for a fair statement of the interim
financial data have been included. Results from operations for the six month
period ended June 30, 1999 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1999.

For further information, refer to the consolidated financial statements and
the footnotes included in the Amendment No. 4 to the Annual Report on
Form 10-K/A for BPI Packaging Technologies, Inc. (the "Company") for the year
ended December 31, 1998 and the Current Report on Form 8-K filed on
February 11, 1999 related to the financial restructuring of the Company.

NOTE 2: FINANCIAL RESTRUCTURING

On January 27, 1999, the Company entered into a Securities Purchase
Agreement (the "Securities Purchase Agreement") with DGJ, L.L.C. ("DGJ") (the
"January 1999 Financing"), whereby the Company agreed to issue and sell to DGJ,
and DGJ agreed to purchase from the Company the following:

1. a Promissory Note in the aggregate principal amount of $3,200,000 (the
"Note");

2. a Common Stock Purchase Warrant for the purchase of up to 80,000,000
shares of the Company's common stock, $0.01 par value per share (the
"Common Stock"), at an exercise price of $0.04 per share, exercisable
until January 27, 2009; and

3. 1,629,930 shares of Series C Preferred Stock of the Company for $100.

The Note matures on February 1, 2004 or earlier if the Company enters into a
merger agreement, completes a public offering in excess of $10,000,000, defaults
on the payment of interest or sells 50% or more of its shares in the Company to
a stockholder not previously an investor in the Company. The Note has an
interest rate of 6% per annum payable monthly in arrears and is secured by all
assets of the Company. The Note is subordinated to the equipment lease and, in
certain respects, the factoring agreement, described below. On June 30, 1999,
the Company was in default on the Note as it failed to make four monthly
interest payments of $16,000 per month for the months of March to June 1999, or
a total of $64,000. In addition, the Company has not made its July and
August 1999 interest payments. As this has caused an Event of Default as defined
in the Note, DGJ, the holder of the Note, is entitled to various rights and
remedies under the Note and the Securities Purchase Agreement, including, but
not limited to, the right to declare all or any part of the unpaid principal
amount of the Note outstanding to become due and payable. As of August 13, 1999,
DGJ has indicated a willingness to defer exercising its rights and remedies upon
default pending discussion with the Company regarding how the Note default is to
be cured.

In conjunction with the January 1999 Financing, DGJ required certain members
of the Company's management, C. Jill Beresford, James F. Koehlinger, Richard H.
Nurse, Hanspeter Schulz and Ivan J.

F-6
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: FINANCIAL RESTRUCTURING (CONTINUED)
Hughes, to invest, in the aggregate, $300,000 in the Company's warrants. The
Common Stock represented by the warrants cannot be issued until approval for an
increase in the Company's authorized shares of Common Stock is obtained at the
next annual meeting of stockholders.

The shares of the Series C Preferred Stock were purchased by DGJ for an
aggregate purchase price of $100. Some of the rights and restrictions of
Series C Preferred Stock include the following: (i) the holders of Series C
Preferred Stock have no voting rights; provided, however, upon an Event of
Default, as defined in the Securities Purchase Agreement, holders of the
Series C Preferred Stock will be entitled to vote with the holders of the Common
Stock as a single class on each matter submitted to a vote to the Company's
stockholders, with each share of the Series C Preferred Stock having 30 votes;
(ii) if the Note has been retired in its entirety, the Company, at its option,
may elect to redeem all or a portion of the outstanding Series C Preferred
Stock, at an aggregated redemption price of $100 plus accrued interest at a rate
of 6% per annum commencing on January 27, 1999; and (iii) the shares of the
Series C Preferred Stock are not convertible into shares of Common Stock.

In conjunction with the January 1999 Financing, the Company entered into
agreements with most of its unsecured creditors that provided a discounted
payment in February 1999 or a non-interest bearing agreement to pay the entire
balance over a three-year period. The unsecured creditor agreements, together
with the financing referred to above, allowed the Company to restructure trade
notes payable of $584,000 and accounts payable of $6,597,000, or a total of
$7,181,000, compared to $1,874,000 of current accounts payable and $1,426,000 of
long-term debt, or a total of $3,300,000 after refinancing. Unsecured creditors
of the Company owed approximately $3,009,000 as of January 27, 1999 selected the
discounted payment plan resulting in extraordinary income of $1,917,707 during
the first six months of 1999. This gain of $1,917,707 was recorded as
extraordinary income amounting to $0.08 per share. The tax effect of this gain
reduced the net operating tax loss carryforward from prior years which has been
fully reserved and, therefore, has no impact on current operations. The balance
of the unsecured creditors selected the three year payment plan or are currently
negotiating with the Company or did not reach discounted or deferred agreements
with the Company. The Company did not recognize any gain under the three year
payment arrangement.

The gain on the restructuring of trade notes payable and accounts payable
was accounted for as an extraordinary item in the Company's Consolidated
Statement of Operations for the six month period ended June 30, 1999. The
creditors who selected the long-term debt agreement are being paid their
balances due over a 36-month period in 36 equal installments with no interest.
The Company was involved in a patent infringement suit and reached a settlement
on January 27, 1999 to pay the balance due of $200,000 as part of the
restructuring of the Company's debt described above.

A factoring agreement with a company related to DGJ now provides the Company
with $2,000,000 of financing secured by the Company's accounts receivable and
$1,000,000 secured by its inventory. The term for both the accounts receivable
and inventory financing is six months, subject to automatic renewal unless the
Company gives at least 90 days written notice of termination. Written notice of
termination regarding this factoring agreement was given by the Company on
March 30, 1999. The financing bears interest at the prime rate plus 5% on the
outstanding balance on the inventory loan and the prime rate plus 2% on all
accounts receivable submitted for financing. The Company may borrow up to 85% of
its qualified accounts receivable and 33% of its qualified inventory. The
parties to the factoring agreement have indicated a willingness to extend the
terms of the agreement on a

F-7
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: FINANCIAL RESTRUCTURING (CONTINUED)
month-to-month basis until the agreement can be replaced with a revolving line
of credit, which the Company is currently negotiating with another entity
(Note 7).

The Company's equipment, capital and operating leases have been replaced
with a new equipment lease with DGJ. Current obligations of $3,800,000 and
accrued lease obligations of $1,643,000 were retired and $1,679,000 of equipment
previously treated as operating leases was added to the property and equipment
accounts. The new lease carries no debt reduction obligation and is treated as
long-term debt. The Company's combined monthly payments under the retired leases
were reduced from approximately $305,000 per month to $102,000 per month under
the new lease agreement with DGJ. The lease obligation is a ten-year lease with
monthly payments of $102,000 representing interest only. The total principal
amount of the lease is $6,800,000 and is due at the end of the lease term. The
lease was recorded as a capital lease during the quarter ended March 31, 1999
and will be treated as such in future periods. The lease requires the Company to
meet certain financial covenants, including, but not limited to, earnings
targets and debt-to-equity ratios.

On June 30, 1999, the Company was in default on the equipment lease with DGJ
as it failed to make five monthly lease payments of $102,000 per month for the
months of February to June 1999, or $510,000 in total. As this has caused an
Event of Default, as described in the equipment lease, DGJ is entitled to
various rights and remedies under the equipment lease and the Securities
Purchase Agreement, including, but not limited to, the right to have any and all
remaining sums under the lease become immediately due and payable and the right
to repossess the leased equipment. As of August 13, 1999, DGJ has indicated a
willingness to defer exercising its rights and remedies upon default pending
discussion with the Company regarding how the equipment lease default is to be
cured.

The note payable, warrants and Series C Preferred Stock purchased by DGJ for
$3,200,200 were valued using a discounted cash flow analysis, at an assumed rate
of 14%. Net cash proceeds after fees were assigned to the various components of
this transaction based upon the discounted value of the note payable at 14%. Of
the $3,200,200, $480,000 has been recorded as additional capital in excess of
par value related to the warrants. The Series C Preferred Stock is determined to
have no value separate from the warrants because it is not convertible to Common
Stock and its redemption price is the same as its purchase price, $100 plus
accrued interest at 6% per annum beginning on January 27, 1999. Also, the
Series C Preferred Stock has no preference in liquidation, although, it has a
voting preference. The fair market value of the Common Stock on January 27, 1999
was $0.28 per share. The warrants have an exercise price of $0.04 per share.

Accounts payable long term consists of amounts due to vendors who selected a
36 month payment plan as part of the Company's financial restructuring. The
payment plan current portion is included in current liabilities.

NOTE 3: BASIC AND DILUTED NET LOSS PER SHARE

The Company is required to present "basic" and "diluted" earnings per share.
Basic earnings per share is computed by dividing the income available to common
stockholders by the weighted average number of common shares outstanding for the
period. For the purposes of calculating diluted earnings per share, the
denominator includes both the weighted average number of common shares
outstanding and potential dilutive common shares outstanding for the period.

F-8
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: BASIC AND DILUTED NET LOSS PER SHARE (CONTINUED)
For the periods ended June 30, 1999 and 1998, the Company had recorded a net
loss before extraordinary income. Therefore, basic and diluted earnings per
share are the same due to the anti-dilutive effect of potential common shares
outstanding. Anti-dilutive potential common shares excluded from the computation
include common shares issuable upon the exercise of stock options, common shares
issuable upon the conversion of redeemable convertible preferred stock or upon
the exercise of warrants.

NOTE 4: ACCOUNTS RECEIVABLE-TRADE

Accounts receivable-net consists of the following:

<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Accounts receivable-trade....................... $1,481,058 $1,066,841
Allowance for doubtful accounts................. (54,553) (109,452)
Allowance for credits........................... (75,000) (75,000)
---------- ----------
$1,351,505 $ 882,389
========== ==========
</TABLE>

NOTE 5: INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Raw materials................................... $ 613,262 $296,427
Finished goods.................................. 1,059,599 420,986
---------- --------
$1,672,861 $717,413
========== ========
</TABLE>

NOTE 6: PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost, which includes costs of assets
constructed or purchased, related delivery and installation costs and interest
incurred on significant capital projects during their construction and
installation periods. Property under capital leases is recorded at the lower of
the present value of future minimum rental payments or the fair value of the
property at the beginning of the lease term. Maintenance and repairs that do not
extend the useful life of the asset or improve capacity are charged to expense
when incurred. Machinery and equipment are depreciated using the straight-line
method over a period of eleven years. Leasehold improvements consist of costs
relating to buildings and equipment under lease and are amortized using the
straight-line method over the shorter of the life of the asset or the remaining
life of the lease.

The carrying value of property and equipment is periodically reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying values may not be recoverable.

NOTE 7: NOTE PAYABLE

At December 31, 1998, the Company had a $2,000,000 revolving line of credit
secured by accounts receivable. Borrowings under the line of credit were subject
to 70% of qualifying accounts receivable,

F-9
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: NOTE PAYABLE (CONTINUED)
less the aggregate amount utilized under all commercial and standby letters of
credit and bank acceptances. The line of credit bore interest at prime plus 6%
(14.5% at December 31, 1998). In addition, the Company paid 2% interest on all
new invoices submitted for financing. The credit line was for one year and
subject to renewal annually. At December 31, 1998, the balance under the line of
credit was $814,311, which was the maximum available based on the qualifying
accounts receivable. Subsequent to December 31, 1998, the Company repaid this
note payable in full in connection with its financial restructuring (Note 2).

On January 27, 1999, the Company entered into a factoring agreement, which
provides the Company with up to $2,000,000 of financing secured by the Company's
accounts receivables and $1,000,000 secured by its inventory. At June 30, 1999,
the balance under this agreement was $1,690,163 (Note 2).

During the second quarter of 1999, the lender under the factoring agreement,
described above, has advanced additional funds to the Company in various
increments. These additional funds were used as working capital. These
additional loans made to the Company are on the same terms as the original
factoring agreement. As of August 12, 1999, the Company had borrowed a total of
$600,000 from this lender.

On July 16, 1999, the Company received a non-binding letter from a bank
stating that it is intending to provide the Company with a $4,000,000 revolving
line of credit that would be secured, to some extent, by accounts receivable,
inventory and all other assets of the Company. The proceeds of this loan are to
be used to retire the factoring agreement, described above, and for working
capital purposes.

In February 1999, the Company borrowed approximately $219,000 from DGJ to
purchase additional pieces of equipment. This loan bears interest at a rate of
18% per annum and matures in September 1999. Beginning on April 1, 1999, the
Company was required to make six successive monthly installment payments of
interest only. As of June 30, 1999, the Company has not made any monthly
interest payments under this note. As of August 13, 1999, DGJ has indicated a
willingness to defer exercising its rights and remedies upon default pending
discussion with the Company regarding how the loan default is to be cured.

F-10
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8: CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX
MONTH PERIOD ENDED JUNE 30, 1999

BPI PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
SERIES A SERIES C
SERIES B CONVERTIBLE CONVERTIBLE REDEEMABLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
---------------------- ------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998....................... 146,695 $1,466,954 212,258 $674,032 0 $ 0
Subscribed stock.................................
Net income for six months ending June 30, 1999...
Ascribed value of Series C Redeemable Preferred
Stock under refinancing of 1/27/99.............
Issuance of stock during financial
Restructuring.................................. 1,629,930 $100
Conversion of Series A Convertible Preferred
Stock to Common Stock.......................... (4,900) $ (49)
Balance at June 30, 1999........................... 146,695 $1,466,954 207,358 $673,983 1,629,930 $100
</TABLE>

<TABLE>
<CAPTION>
COMMON STOCK SUBSCRIBED STOCK CAPITAL IN
--------------------- -------------------- EXCESS OF ACCUMULATED
SHARES AMOUNT SHARES AMOUNT PAR VALUE DEFICIT TOTAL
---------- -------- --------- -------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998............. 21,495,621 $214,956 0 $ 0 $44,912,833 $(43,989,302) $3,279,473
Subscribed stock....................... 7,500,000 $300,000 $ 300,000
Net income for three months ending
March 31, 1999....................... $ 821,834 $ 821,834
Ascribed value of Series C Redeemable
Preferred Stock under refinancing of
1/27/99.............................. $ 480,000 $ 480,000
Issuance of stock during financial
Restructuring........................ $ (100) $ 0
Conversion of Series A Convertible
Preferred Stock to Common Stock...... 4,900 $ 49 0
Balance at June 30, 1999................. 21,500,521 $215,005 7,500,000 $300,000 $45,392,733 $(43,167,468) $4,881,307
</TABLE>

NOTE 9: RELATED PARTY TRANSACTIONS

Ivan J. Hughes, a director of the Company, is the President of the Plastic's
Division, and a director and a member of the Executive and Compensation
Committees of Duro Bag Manufacturing Company ("Duro Bag"). In January, February,
March, April, May, June and July, Duro Bag issued purchase orders for $192,000,
$190,335, $209,513, $255,729, $0, $350,019 and $364,435, respectively, to the
Company to purchase bags for Duro Bag customers. Orders from Duro Bag
represented 18% of sales during the first quarter period ended March 31, 1999,
15% of sales during the second quarter period ended June 30, 1999 and 16% of
sales for the six months ended June 30, 1999. The Company expects similar orders
from Duro Bag during the remainder of the year. The Company manufacturers these
products on behalf of Duro Bag for its customers. The Company sells these
products on terms as contracted between Duro Bag and its customers, which terms
are equal, if not better, than the Company could obtain from its other customers
for these products.

F-11
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9: RELATED PARTY TRANSACTIONS (CONTINUED)
In November 1990, the Company established an officer's loan receivable to
Dennis N. Caulfield, its Chairman for $132,197. The note was amended in
April 1998 and the interest rate changed to 6% effective from November 1990 and
is now payable on or before January 1, 2001. Interest on the loan, along with
advances for travel not offset by expense records, caused the loan balance to
equal $586,978 as of December 31,1997. Mr. Caulfield did not make any payments
against the loan from the period beginning 1990 through December 31, 1997.
According, the Company reserved the full amount of this loan on that date. Also,
no payments were made in 1998. In addition, the Company paid, on behalf of the
former Chairman, approximately $36,000 of a $200,000 personal income tax levy
imposed by the Massachusetts Department of Revenue on Mr. Caulfield in exchange
for an interest bearing note due on or before June 30, 1998, which has not yet
been repaid. This note was reserved for as of June 30, 1999.

Effective February 26, 1994, Ronald Caulfield exchanged his 49,500 shares of
common stock of RC America for 200,000 shares of the Company's Common Stock,
pursuant to the terms of a Stock Exchange Agreement by and between the Company
and Ronald Caulfield (the "Exchange Agreement"). The Exchange Agreement also
provides for the issuance to Ronald Caulfield of up to an additional 100,000
shares of the Company's Common Stock over a five year period based on RC America
attaining certain levels of pre-tax earnings. No shares of Common Stock were
issued in 1998 or for the 10 month period ended December 31, 1997. As a result
of RC America's earnings for the fiscal year ended February 28, 1997 and
February 23, 1996, 2,649 and 2,550 shares, respectively, of the 100,000 shares
of Common Stock were issued to Mr. Ronald Caulfield. The Exchange Agreement
contains demand and piggy-back registration rights for the shares.

Four of the Company's directors, Gary R. Edidin, Allen S. Gerrard, Theodore
L. Koenig and Bruce M. Fleisher, are either related to DGJ or have been
designated by DGJ. The financial restructuring and loans described in Note 2,
Note 7 and all other transactions between the Company and DGJ will be deemed to
be related party transactions due to the relationships of these directors with
DGJ. Also, Mr. Koenig is counsel to the Chicago-based law firm of Holleb & Coff,
which provides legal services to the Company.

On August 19, 1999, the Company entered into a series of transactions with
LaSalle Business Credit, Inc. and DGJ to refinance its existing indebtedness.
The Company's loan agreement with LaSalle provides it with a $4,000,000
revolving line of credit. This credit facility is secured by a first priority
security interest in the Company's accounts receivable, inventory and certain
other assets. DGJ is the lessor of substantially all the equipment that the
Company uses, under a capital lease, and holds a first priority security
interest in its equipment. LaSalle received a second priority security interest
in the Company's equipment. Certain of the proceeds of this credit facility were
used to retire existing indebtedness the Company owed to Franklin Capital
Corporation, including the factoring agreement and revolving note, while the
remaining proceeds were used to retire some of the Company's other indebtedness
and for working capital purposes. This credit facility bears interest at a
fluctuating rate equal to 1.5% per annum above the prime rate of LaSalle in
effect from time to time and matures in three years.

In addition, the Company and DGJ amended and restated the promissory note in
the original principal amount of $3,200,000, because the Company was unable to
fulfill the financial obligations under the terms of the loan and lease
documents with DGJ. To cure the defaults, the Company restated the note to
include, in addition to the original principal and interest accrued thereunder,
all

F-12
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9: RELATED PARTY TRANSACTIONS (CONTINUED)
amounts outstanding under: (i) an equipment loan made by DGJ to the Company as
of March 1, 1999 in the original principal amount of $218,665; (ii) a series of
advances made to the Company by Franklin during the second quarter of 1999
(which totaled approximately $900,000, and were reduced to approximately
$660,000 after application of proceeds of the credit facility), rights to
repayment of which were subsequently assigned by Franklin to the Company;
(iii) delinquent payments under the DGJ lease of approximately $570,000; and
(iv) interest on the foregoing. The resulting balance of $4,773,585 was restated
as the principal amount of a new amended promissory note. The amended promissory
note is in the original principal amount of $4,773,585 and is payable as
follows: $3,200,000 of principal is due and payable on February 1, 2004, or
earlier by acceleration, as described in the Securities Purchase Agreement
between the Company and DGJ, or otherwise, and $1,573,585 is due and payable
pursuant to the terms of an intercreditor agreement between DGJ and LaSalle. The
amended promissory note bears interest at a rate of 10% per annum, and is
secured by all of the Company's assets, subordinated to LaSalle except as to
equipment.

F-13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS--LIVINGSTON & HAYNES, P.C.

March 22, 1999

To the Board of Directors and Stockholders
of BPI Packaging Technologies, Inc.

We have audited the accompanying consolidated balance sheet of BPI Packaging
Technologies, Inc., (the "Company") and subsidiaries as of December 31, 1998 and
the related consolidated statements of operations, stockholders' equity, cash
flows and Schedule 2, Valuation and Qualifying Accounts for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit. The 1997 financial statements were audited by other auditors whose
report dated May 22, 1998, on those statements, included an explanatory
paragraph describing conditions that raised substantial doubt about the
Company's ability to continue as a going concern.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
and subsidiaries as of December 31, 1998 and the results of their operations,
their changes in stockholders' equity and cash flows for the year then ended are
in conformity with generally accepted accounting principles.

/s/ Livingston & Haynes, P.C.

Livingston & Haynes, P.C.
Wellesley, Massachusetts

F-14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and

Stockholders of BPI Packaging Technologies, Inc.

In our opinion, the consolidated balance sheet and the related consolidated
statements of operations, of cash flows and of changes in stockholders' equity
as of December 31, 1997 and for the ten month period ended December 31, 1997 and
for the year ended February 28, 1997 (appearing on pages F-16 through F-37 of
this Form S-1 Registration Statement) present fairly, in all material respects,
the financial position of BPI Packaging Technologies, Inc. and its subsidiaries
at December 31, 1997, and the results of their operations and their cash flows
for the 10 month period ended December 31, 1997 and for the year ended
February 28, 1997, in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedule on page S-2
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of BPI
Packaging Technologies, Inc. for any periods subsequent to December 31, 1997.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has net working capital and operating cash flow deficiencies. In addition,
the Company is in default on its capital lease obligations and its note payable.
All of these factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

As discussed in Notes 1 and 6 to the financial statements, the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of," for
the year ended February 28, 1997.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
May 22, 1998

F-15
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Current assets:
Cash...................................................... $ 73,116 $ 125,220
Accounts receivable, net.................................. 882,389 721,239
Inventories, net.......................................... 717,413 1,057,866
Prepaid expenses.......................................... 51,420 52,948
------------ ------------
Total current assets...................................... 1,724,338 1,957,273
------------ ------------
Property and equipment, net................................. 15,290,305 17,828,860
------------ ------------
Deposits--leases and equipment purchases.................... 149,851 141,284
Loans to officers, net...................................... 6,072 5,416
Other assets, net........................................... 581,399 1,037,907
------------ ------------
737,322 1,184,607
------------ ------------
$ 17,751,965 $ 20,970,740
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Note payable................................................ $ 814,311 $ 1,162,349
Trade notes payable......................................... 584,433 584,433
Capital lease obligations due within one year............... 3,800,286 4,426,205
Accounts payable............................................ 6,597,223 6,714,870
Accrued expenses............................................ 2,676,239 2,967,348
------------ ------------
Total current liabilities................................... 14,472,492 15,855,205
------------ ------------
Commitments and contingencies

Stockholders' Equity
Series B convertible preferred stock, $.01 par value........ 1,466,954 1,466,954
Series A convertible preferred stock, $.01 par value........ 674,032 1,126,932
Common stock, $.01 par value; shares authorized--60,000,000
at December 31, 1998 and 1997 Shares issued and
outstanding--21,495,621 and 19,513,496 at December 31,
1998 and 1997, respectively............................... 214,956 195,135
Capital in excess of par value.............................. 44,912,833 43,076,603
Accumulated deficit......................................... (43,989,302) (40,750,089)
------------ ------------
3,279,473 5,115,535
------------ ------------
$ 17,751,965 $ 20,970,740
============ ============
</TABLE>

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

F-16
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
10 MONTH PERIOD FISCAL YEAR
FISCAL YEAR ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 FEBRUARY 28, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales.................................... $10,382,819 $ 13,951,725 $ 30,810,037
Cost of goods sold........................... 8,826,905 17,311,037 27,784,329
----------- ------------ ------------
Gross profit (loss).......................... 1,555,914 (3,359,312) 3,025,708
Operating expenses:
Selling, general and administrative.......... 4,301,842 6,137,985 8,695,612
Bad debt expense............................. -- 319,736 93,165
Write-down of impaired assets and related
expenses................................... -- -- 5,385,000
Patent infringement settlement............... -- -- 512,648
----------- ------------ ------------
Loss from operations......................... (2,745,928) (9,817,033) (11,660,717)
Other (expense) income:
Allowance for officer loan................... (68,039) (586,978) --
Interest expense............................. (471,166) (984,064) (1,112,647)
Interest income.............................. 45,920 49,206 9,133
----------- ------------ ------------
Net loss..................................... $(3,239,213) $(11,338,869) $(12,764,231)
=========== ============ ============
Basic and diluted net loss per share......... $ (0.16) $ (0.73) $ (0.96)
Shares used in computing basic and diluted
net loss per share......................... 20,849,356 15,579,747 13,261,815
</TABLE>

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

F-17
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 1998, THE 10 MONTH PERIOD ENDED
DECEMBER 31, 1997 AND FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1997
<TABLE>
<CAPTION>
SERIES A SERIES B
CONVERTIBLE CONVERTIBLE
COMMON STOCK PREFERRED STOCK PREFERRED STOCK CAPITAL IN
--------------------- --------------------- --------------------- EXCESS OF
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT PAR VALUE
---------- -------- -------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 23, 1996..... 11,800,909 118,009 303,946 1,215,784 146,695 1,466,954 33,615,213
Sale of common stock pursuant
to Regulation S and
Regulation D private
placement offerings, net of
issuance costs............... 1,207,500 12,075 2,194,793
Sale of common and preferred
stock pursuant to partial
exercise of underwriter's
warrants from prior public
offerings, net of issuance
costs........................ 402,600 4,026 100,000 225,000 851,024
Conversion of Series A
convertible preferred stock
to common stock.............. 56,800 568 (56,800) (227,200) 226,632
Sale of common stock pursuant
to exercise of class B
warrants from the Company's
third public offering, net of
issuance costs............... 511,761 5,118 1,092,799
Issuance of common stock based
on RC America's FY96
results...................... 2,550 26 5,074
Issuance of 92,308 Regulation S
common shares in exchange for
Series C redeemable preferred
stock........................ 92,308 923 149,077
Net loss for the year ended
February 28, 1997............
---------- -------- -------- ---------- ------- ---------- -----------
Balance at February 28, 1997..... 14,074,428 140,745 347,146 1,213,584 146,695 1,466,954 38,134,612
Conversion of Series A
convertible preferred stock
to common stock.............. 21,663 217 (21,663) (86,652) 86,435
Issuance of common stock based
on RC America FY 97
results...................... 5,280 52 8,527
Sale of common stock pursuant
to Regulation S and
Regulation D private
placement offerings, net of
issuance costs............... 4,991,125 49,911 4,354,080
Issuance of common stock in
exchange for commission on
private placement
offerings.................... 387,500 3,875 383,626
Issuance of common stock in
exchange for consulting
services..................... 33,500 335 33,165
Warrants granted to
consultants.................. 76,158
Net loss for the 10 month
period ended December 31,
1997.........................
---------- -------- -------- ---------- ------- ---------- -----------
Balance at December 31, 1997..... 19,513,496 195,135 325,483 1,126,932 146,695 1,466,954 43,076,603
Sale of Stock pursuant to
Regulation D private
offerings, net of issuance
costs........................ 1,868,900 18,689 1,264,262
Warrants granted for lease
extension.................... 120,200
Conversion of Series A
Convertible Preferred........ 113,225 1,132 (113,225) (452,900) 451,768
Net loss for the year ended
December 31, 1998............
---------- -------- -------- ---------- ------- ---------- -----------
Balance at December 31, 1998..... 21,495,621 $214,956 212,258 $ 674,032 146,695 $1,466,954 $44,912,833
========== ======== ======== ========== ======= ========== ===========

ACCUMU-
LATED
DEFICIT TOTAL
------------ ------------
<S> <C> <C>
Balance at February 23, 1996..... (16,646,989) 19,768,971
Sale of common stock pursuant
to Regulation S and
Regulation D private
placement offerings, net of
issuance costs............... 2,206,868
Sale of common and preferred
stock pursuant to partial
exercise of underwriter's
warrants from prior public
offerings, net of issuance
costs........................ 1,080,050
Conversion of Series A
convertible preferred stock
to common stock.............. --
Sale of common stock pursuant
to exercise of class B
warrants from the Company's
third public offering, net of
issuance costs............... 1,097,917
Issuance of common stock based
on RC America's FY96
results...................... 5,100
Issuance of 92,308 Regulation S
common shares in exchange for
Series C redeemable preferred
stock........................ 150,000
Net loss for the year ended
February 28, 1997............
------------ ------------
Balance at February 28, 1997..... (29,411,220) 11,544,675
Conversion of Series A
convertible preferred stock
to common stock.............. --
Issuance of common stock based
on RC America FY 97
results...................... 8,579
Sale of common stock pursuant
to Regulation S and
Regulation D private
placement offerings, net of
issuance costs............... 4,403,991
Issuance of common stock in
exchange for commission on
private placement
offerings.................... 387,501
Issuance of common stock in
exchange for consulting
services..................... 33,500
Warrants granted to
consultants.................. 76,158
Net loss for the 10 month
period ended December 31,
1997......................... (11,338,869) (11,338,869)
------------ ------------
Balance at December 31, 1997..... (40,750,089) 5,115,535
Sale of Stock pursuant to
Regulation D private
offerings, net of issuance
costs........................ 1,282,951
Warrants granted for lease
extension.................... 120,200
Conversion of Series A
Convertible Preferred........ --
Net loss for the year ended
December 31, 1998............ (3,239,213) (3,239,213)
------------ ------------
Balance at December 31, 1998..... $(43,989,302) $ 3,279,473
============ ============
</TABLE>

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

F-18
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
10 MONTH
FISCAL YEAR ENDED PERIOD ENDED FISCAL YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 FEBRUARY 28, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss.......................................... $(3,239,213) $(11,338,869) $(12,764,231)
----------- ------------ ------------
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization................... 2,538,880 2,186,621 3,417,849
Write-down of impaired assets and related
Expenses...................................... -- -- 5,897,648
Inventory reserve............................... (290,000) (925,000) 1,215,000
Allowance for lease losses...................... -- 1,643,377 --
Allowance for officer loan...................... -- 586,978 --
Warrants and common stock granted to
consultants................................... -- 109,658 --
Allowance for uncollectible trade receivables... -- 175,000 --
Changes in assets and liabilities:
(Increase) Decrease in accounts
receivable--trade............................. (161,150) 1,197,521 84,372
(Increase) Decrease in inventories.............. 630,453 4,401,587 (1,821,856)
(Increase) Decrease in prepaid expenses......... 1,528 217,538 (302,566)
Increase (Decrease) in other assets, net........ 456,508 840,896 (198,418)
(Decrease) Increase in accounts payable......... (117,647) 209,020 3,218,584
(Decrease) Increase in other accrued expenses... (291,109) 364,134 132,409
----------- ------------ ------------
Total Adjustments............................. 2,767,463 11,007,330 11,643,022
----------- ------------ ------------
Net cash used in operating activities......... (471,750) (331,539) (1,121,209)
----------- ------------ ------------
Cash flows from investing activities:
Additions to property and equipment............. (325) (212,144) (1,549,878)
Cost of patents................................. -- -- (144,928)
Decrease (increase) in deposits, net............ (8,567) (12,823) 388,922
Advances to officers............................ (656) (112,597) (44,560)
----------- ------------ ------------
Net cash used in investing activities....... (9,548) (337,564) (1,350,444)
----------- ------------ ------------
Cash flows from financing activities:
Net (payments) borrowings under note payable...... (348,038) (2,571,128) (19,127)
Principal payments on long-term debt and capital
lease Obligations............................... (625,919) (1,492,754) (1,945,014)
Net proceeds from sales and issuances of stock.... 1,403,151 4,800,071 4,384,835
----------- ------------ ------------
Net cash provided by financing activities..... 429,194 736,189 2,420,694
----------- ------------ ------------
Net (decrease) increase in cash................... (52,104) 67,086 (50,959)
Cash at beginning of period....................... 125,220 58,134 109,093
----------- ------------ ------------
Cash at end of period............................. $ 73,116 $ 125,220 $ 58,134
=========== ============ ============
Cash paid for interest............................ $ 471,166 $ 900,855 $ 1,093,648
=========== ============ ============
</TABLE>

Non-cash investing and financing activities:

Capital lease obligations of $590,069 were incurred in fiscal year 1997 when
the Company entered into capital lease agreements to purchase machinery and
equipment.

During the 10 month period ended December 31, 1997, two trade payables,
totaling $584,433, were converted into trade notes payable (Note 10).

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

F-19
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

BPI Packaging Technologies, Inc. (the "Company") converts commercially
available high molecular weight, high density polyethylene resins into thin
film, which is either sold directly into industrial or packaging applications or
converted in-house into carryout bags of "T-shirt sack" design for supermarkets,
convenience stores and other retail markets. The Company utilizes advanced, high
quality extrusion, printing and bag making equipment, which was installed
between 1990 and 1997. The Company operated two wholly-owned subsidiaries: RC
America, Inc., which purchased surplus inventory from manufacturers of consumer
products and markets and sells the products to mass merchandise retailers and
other retail chains; and Market Media, Inc., which sells and markets in store
advertising and promotion programs and anti-smoking advertising programs in
public schools. Operations of these two subsidiaries ceased during the year
ended December 31, 1998.

SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR

The Company changed its fiscal year during the period ended December 31,
1997 to coincide with the calendar year, resulting in a 10 month period. In the
previous year, the Company's fiscal year ended February 28, 1997. The Company
was unable to accurately recast operating results to provide for a 12 month
period ending December 31, 1997 because monthly closing of the records were not
undertaken during the months in question. The months of January and February are
the lowest sales periods of the year under normal seasonality trends.

REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK

The Company recognizes revenues on an accrual basis upon shipment of
products and passage of title to the Company's customers. Concentration of
credit risk with respect to accounts receivable is limited due to the number and
diversity of customers comprising the Company's customer base. The Company
maintains reserves for potential credit losses.

INVENTORIES

The Company values its inventories at the lower-of-cost, determined using
the first-in, first-out (FIFO) method, or market. Cost includes material and
conversion costs.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost which includes costs of assets
constructed or purchased, related delivery and installation costs and interest
incurred on significant capital projects during their construction and
installation periods. Property under capital leases is recorded at the lower of
the present value of future minimum rental payments or the fair value of the
property at the beginning of the lease term. Maintenance and repairs that do not
extend the useful life of the asset or improve capacity are charged to expense
when incurred. Machinery and equipment are depreciated using the straight-line
method over a period of eleven years. Leasehold improvements consist of costs
relating to buildings and equipment under lease and are amortized using the
straight-line method over the shorter of the life of the asset or the remaining
life of the lease.

F-20
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The carrying value of property and equipment is periodically reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying values may not be recoverable.

PATENTS

Costs associated with obtaining patents are capitalized as incurred and
amortized on a straight-line basis over the shorter of the legal term of
17 years or the estimated economic life of the patent.

INCOME TAXES

The Company utilizes the asset and liability method of accounting for income
taxes. This method requires the recognition of deferred tax assets and
liabilities for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. In addition, it requires the recognition of future
tax benefits, like net operating loss carry-forwards, to the extent that
realization of these benefits is more likely than not to occur.

ADVERTISING COSTS

Advertising and trade show costs are expensed as incurred. Total advertising
expenses were $42,127, $113,478 and $309,316 for the year ended December 31,
1998, the 10 month period ended December 31, 1997 and for the fiscal year ended
February 28, 1997.

BASIS OF CONSOLIDATION

The consolidated financial statements include the results of the Company's
wholly-owned subsidiaries, RC America, Inc., and Market Media, Inc. Operations
of these two subsidiaries ceased during the year ended December 31, 1998. All
inter-company activity has been eliminated in consolidation. The Company
operates in one reportable segment under SFAS No. 131. The activities of RC
America, Inc. and Market Media, Inc. were not significant to the overall
operations of the Company. Therefore, RC America, Inc. and Market Media, Inc.
are not presented as discontinued operations.

BASIC AND DILUTED NET LOSS PER SHARE

In February 1997, the Financial Accounting Standards Boards issued SFAS
No. 128, "Earnings per Share", which supersedes Accounting Principles Board
Opinion No. 15 and specifies the computation, presentation and disclosure
requirements of earnings per share. SFAS No. 128 requires the presentation of
"basic" and "diluted" earnings per share. Basic earnings per share is computed
by dividing the income available to common stockholders by the weighted average
number of common shares outstanding for the period. For the purposes of
calculating diluted earnings per share, the denominator includes both the
weighted average number of common shares outstanding and potential dilutive
common shares outstanding for the period. As required, the Company adopted SFAS
No. 128 in the fourth quarter of the 10 month period ended December 31, 1997.
All prior periods earnings per share amounts have been restated to comply with
SFAS No. 128.

For each of the years presented the Company has recorded a net loss.
Therefore, basic and diluted earnings per share are the same due to the
antidilutive effect of potential common shares outstanding.

F-21
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Antidilutive potential common shares excluded from the year ended December 31,
1998, the 10 month period ended December 31, 1997 and the fiscal year ended
February 28, 1997 computation include 649,557, 783,117 and 773,830 common
shares, respectively, issuable upon the exercise of stock options. Antidilutive
potential common shares excluded from the year ended December 31, 1998, the
10 month period ended December 31, 1997 and the fiscal year ended February 28,
1997 computation also included 358,953, 472,178 and 493,841 common shares
issuable upon the conversion of redeemable convertible preferred stock.
Antidilutive potential common shares excluded from the 10 month period ended
December 31, 1997 computation included 109,323 issuable upon the exercise of
warrants. Antidilutive potential common shares excluded from the year ended
December 31, 1998 computation included 120,200 common shares issuable upon the
exercise of warrants.

USE OF ESTIMATES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments are comprised of cash, accounts
receivable, deposits, accounts payable and bank borrowings, all of which
approximate fair value.

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
("SFAS 123"). SFAS 123 allows an entity to account for employee stock
compensation under a fair value based method or SFAS 123 also allows an entity
to continue to measure costs for employee stock based compensation plans using
the intrinsic value-based method of accounting under APB Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB 25"), supplemented by the
appropriate note disclosure. The Company continues to account for employee
stock-based compensation under APB 25 and has made the pro forma disclosures
required under SFAS 123 (Note 20).

IMPAIRMENT OF LONG-LIVED ASSETS

In Fiscal Year ended February 28, 1997, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of." The statement requires the recognition of an impairment loss for
an asset held for use when the estimate of undiscounted future cash flows
expected to be generated by the asset is less than its carrying amount.
Measurement of the impairment loss is based on fair value of the asset.
Generally, fair value will be determined using valuation techniques, including
the present value of expected future cash flows method.

F-22
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS

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

NOTE 2: GOING CONCERN AND MANAGEMENT'S PLAN

A going-concern footnote was included with the February 28, 1997 and
December 31, 1997 financial statements because the Company had unfavorable
working capital, debt-to-equity ratios and operating cash flow deficiencies,
which raised substantial doubt about the Company's ability to continue as a
going-concern. The restructuring with DGJ (as described below) significantly
improved both the working capital and debt-to-equity ratios subsequent to
December 31, 1998. New management of the Company put into place in the middle of
1998 an operating plan that reduced fixed costs and increased revenues in the
second half of 1998. These changes brought about by the new management have
resulted in an improvement in the results of operations and produce a positive
cash flow from operations for the last six months in 1998 and during the first
three months of 1999.

On January 27, 1999, the Company entered into a Securities Purchase
Agreement (the "Purchase Agreement") with an investor, DGJ, L.L.C., a Delaware
limited liability company, under which the Company agreed to issue and sell to
DGJ, and DGJ agreed to purchase from the Company the following:

1. a Promissory Note in the aggregate principal amount of $3,200,000
(the "Note");

2. a Common Stock Purchase Warrant for the purchase of up to 80,000,000
shares of the Company's common stock, $0.01 par value per share (the "Common
Stock"), at an exercise price of $0.04 per share, exercisable until
January 27, 2009; and

3. 1,629,930 shares of Series C Preferred Stock of the Company for
$100.

The Note matures on February 1, 2004 or earlier in the event of a default,
the sale of 50% or more of the Company's assets, the merger or consolidation of
the Company, the purchase of 50% or more of the shares of the Common Stock by a
person who was not a stockholder of the Company at the time of the execution of
the Purchase Agreement, or a primary public offering of the Company's securities
in excess of $10,000,000. The Note has an interest rate of 6% per annum payable
monthly in arrears, principle is due at its maturity and it is secured by all
assets of the Company. The Note is subordinated to the equipment lease and the
factoring agreement, described below.

In conjunction with the financing, DGJ required certain members of the
Company's management to invest, in the aggregate, $300,000 in warrant exercises
that appear as subscribed stock on the Pro Forma Balance Sheet. The 49,062,500
shares of Common Stock underlying by the warrants cannot be issued until
approval for an increase in the authorized shares outstanding is obtained at the
next annual meeting of stockholders.

In conjunction with the financing, the Company entered into agreements with
most of its unsecured creditors that provided for a discounted payment in
February 1999 or a non-interest bearing agreement to pay the entire balance over
a three-year period. The unsecured creditor agreements, together with the
financing referred to above, allowed the Company to restructure trade notes
payable of $584,000 and accounts payable of $6,597,000, or a total of
$7,181,000, compared to $1,874,000 of

F-23
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: GOING CONCERN AND MANAGEMENT'S PLAN (CONTINUED)
current accounts payable and $1,426,000 of long-term debt, or a total of
$3,300,000 after refinancing. Unsecured creditors of the Company owed
approximately $3,009,000 as of January 27, 1999 selected the discounted payment
plan resulting in extraordinary income of $1,731,762 during the first quarter of
1999. The balance of the unsecured creditors selected the three year payment
plan or are currently negotiating with the Company or did not reach discounted
or deferred agreements with the Company. The Company did not recognize any gain
under the three year payment arrangement. This gain of $1,731,762 was recorded
as extraordinary income amounting to $0.08 per share. The tax effect of this
gain reduced the net operating tax loss carry forward from prior years which has
been fully reserved and, therefore, has no impact on current operations.

A factoring agreement with a company related to DGJ now provides the Company
with $2,000,000 of financing secured by the Company's accounts receivable and
$1,000,000 secured by its inventory. The term for both accounts receivable and
inventory financing is six months, subject to automatic renewal unless the
Company gives at least 90 days written notice of termination. Written
termination regarding this factoring agreement was given by the Company on
March 30, 1999. The financing bears interest at prime rate plus 5% on the
outstanding balance on the inventory loan and the prime rate plus 2% on all
accounts receivable submitted for financing. The Company may borrow up to 85% of
its qualified accounts receivable and 33% of its qualified inventory.

The gain on the restructuring of trade notes payable and accounts payable
will be accounted for as an extraordinary item in the Company's Consolidated
Statement of Operations in future periods. The creditors who selected the
long-term debt agreement are being paid their balances due over a 36-month
period in 36 equal installments with no interest. The Company was involved in a
patent infringement suit and reached a settlement on January 27, 1999 to pay the
balance due of $200,000 as part of the restructuring of the Company's debt as
described above.

The Company's equipment, capital and operating leases were funded by the new
equipment lease with DGJ. Current obligations of $3,800,000 and accrued lease
obligations of $1,643,000 were retired and $1,679,000 of equipment previously
treated as operating leases were added to the property and equipment accounts.
The new lease carries no debt reduction obligation and is treated as long-term
debt. The combined monthly payments under the retired leases were reduced from
approximately $305,000 per month to $102,000 per month under the new lease
agreement with DGJ. The term of the lease is ten years and its monthly payments
of $102,000 represent interest only. The total principal amount of the lease is
$6,800,000 and is due at the end of the lease term. The lease has been recorded
as a capital lease during the quarter ended March 31, 1999 and will be treated
as similarly in future periods. The lease required the Company to meet certain
financial covenants, including, but not limited to, earnings targets and
debt-to-equity ratios.

The Note, warrants and Series C Preferred Stock purchased by DGJ for
$3,200,200 were valued at the discounted fair market value at an assumed rate of
14%. Of the $3,200,200, $480,000 has been recorded as additional capital in
excess of par value related to the warrants because it is not convertible to
Common Stock and its redemption price is the same as its purchase price, $100,
plus accrued interest at 6% per annum, beginning on January 27, 1999. Also, the
Series C Preferred Stock has no preference in liquidation, although, it has a
voting preference.

F-24
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: GOING CONCERN AND MANAGEMENT'S PLAN (CONTINUED)
The plan to restructure the Company's operations and management, which began
in the third quarter of 1998, to satisfy past due trade creditors and past due
operating and capital lease balances, is progressing.

F-25
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: GOING CONCERN AND MANAGEMENT'S PLAN (CONTINUED)
BPI PACKAGING TECHNOLOGIES, INC.
PRO FORMA BALANCE SHEET
DECEMBER 31, 1998

<TABLE>
<CAPTION>
AS AUDITED PRO FORMA
DECEMBER 31, DECEMBER 31,
1998 ADJUSTMENTS 1998
------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets

Cash.............................. $ 73,116 3,500,000 (1,960,900) 250,000 (885,000) $ 977,216
Accounts receivable, net.......... 882,389 882,389
Inventories, net.................. 717,413 717,413
Prepaid expenses.................. 51,420 51,420
Total current assets.............. 1,724,338 2,628,438
Property and equipment, net....... 15,290,305 1,678,973 16,969,278
Deposits--leases and equipment
purchases....................... 149,851 (75,940) 73,911
Loans to officers, net............ 6,072 6,072
Other assets, net................. 581,399 885,000 (246,696) 1,219,703
------------ ---------- ---------- ---------- ---------- ---------- ------------
737,322 1,299,686
------------ ---------- ---------- ---------- ---------- ---------- ------------
Total assets...................... $17,751,965 3,500,000 (1,960,900) 250,000 0 1,356,337 $ 20,897,402
============ ========== ========== ========== ========== ========== ============
Current liabilities

Note payable...................... $ 814,311 250,000 $ 1,064,311
Trade notes payable............... 584,433 (584,433) --
Capital lease obligations due
within one year................. 3,800,286 (3,800,286) --
Accounts payable.................. 6,597,223 584,433 (1,960,900) (1,425,540) (1,846,100) (75,116) 1,874,000
Accrued expenses.................. 2,676,239 (1,643,377) 1,032,862
------------ ------------
Total current liabilities......... 14,472,492 3,971,173
------------ ------------
Capital lease
obligations--long-term
portion......................... -- 6,800,000 6,800,000
------------
Long-term debt.................... -- 1,425,540 1,425,540
------------
Accounts Payable

Notes payable..................... -- 3,200,000 (480,000) 2,720,000
------------
Stockholders' equity

Subscribed stock.................. -- 300,000 300,000
Series B convertible preferred
stock, $.01 par value........... 1,466,954 1,466,954
Series A convertible preferred
stock, $.01 par value........... 674,032 674,032
Series C redeemable preferred
stock, $.01 par value........... -- 100 100
Common stock, $.01 par value;
shares authorized--60,000,000... 214,956 214,956
Capital in excess of par value.... 44,912,833 480,000 (100) 45,392,733
Accumulated deficit............... (43,989,302) 1,846,100 75,116 (42,068,086)
------------ ---------- ---------- ---------- ---------- ---------- ------------
3,279,473 5,980,689
------------ ---------- ---------- ---------- ---------- ---------- ------------
Total liabilities and
stockholders' equity............ $17,751,965 3,500,000 (1,960,900) 250,000 0 1,356,337 $ 20,897,402
============ ========== ========== ========== ========== ========== ============
</TABLE>

F-26
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: ACCOUNTS RECEIVABLE--TRADE

Accounts receivable-trade consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Accounts receivable-trade................... $1,066,841 $1,071,239
Allowance for doubtful accounts............. (109,452) (275,000)
Allowance for credits....................... (75,000) (75,000)
---------- ----------
$ 882,389 $ 721,239
========== ==========
</TABLE>

NOTE 4: INVENTORIES

Inventories, net of valuation reserves, consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Raw material................................ $296,427 $ 285,058
Finished goods.............................. 420,986 1,062,808
Reserves.................................... -- (290,000)
-------- ----------
$717,413 $1,057,866
======== ==========
</TABLE>

Raw material includes virgin high density, high molecular weight
polyethylene ("HDHMWPE") resin, re-processed HDHMWPE material, color inks and
additives, and post-industrial scrap generated during the manufacturing process.

NOTE 5: PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Machinery and equipment..................... $ 24,817,161 $ 24,817,161
Leasehold improvements...................... 3,611,407 3,611,082
Office furniture and fixtures............... 303,731 303,731
Motor vehicles.............................. 19,900 19,900
------------ ------------
28,752,199 28,751,874
============ ============
Less accumulated depreciation and
Amortization.............................. (13,461,894) (10,923,014)
------------ ------------
$ 15,290,305 $ 17,828,860
============ ============
</TABLE>

Assets recorded under capital leases and included in property and equipment
were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Machinery and equipment..................... $13,041,270 $13,041,270
Less accumulated amortization............... (5,478,653) (4,055,971)
----------- -----------
$ 7,562,617 $ 8,985,299
=========== ===========
</TABLE>

F-27
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5: PROPERTY AND EQUIPMENT, NET (CONTINUED)
Depreciation and amortization expense relating to fixed assets was
$2,538,880, $2,186,621 and $3,216,189 for the year ended December 31, 1998, the
10 month period ended December 31, 1997 and for the year ended February 28,
1997, respectively, of which $1,422,682, $1,185,568 and $1,158,749, related to
amortization of equipment held under capital leases, respectively.

During fiscal year 1997, in accordance with SFAS No. 121, the Company
wrote-down machinery and equipment to their estimated fair value, which resulted
in a non-recurring charge of $3,335,070, which is included in the $5.9 million
write-down of impaired assets and related expenses (Note 6).

NOTE 6: WRITE-DOWN OF IMPAIRED ASSETS AND PATENT INFRINGEMENT SETTLEMENT

During the fourth quarter of the fiscal year ended February 28, 1997, the
Company made the decision to exit the traditional T-shirt bag business. The
application of Statement of Financial Standard No. 121, "Accounting for the
Impairment of Ling-Lived Assets and Long-Lived Assets to be Disposed Of," caused
the Company to recognize a non-cash charge of $5,385,000 to write down to fair
value certain long-lived assets consisting principally of machinery and
equipment, patents and goodwill, together with other related expenses. The
method used to determine fair value was a discounted cash flow approach. The
assets consist of those related to the manufacture of the traditional T-shirt
bag business.

Description of impaired assets; patents, goodwill and plant assets relating
to bag making facilities:

Fair value of all assets, except plant equipment, was determined to be zero
based upon the Company's decision to exit the traditional T-shirt bag business.
Fair value of the plant equipment was determined based upon projected future
cash flows for the remaining useful life, present book value and residual value
of assets at the end of its useful life, with cash flows both discounted at 14%
per year (average cost of secured debt financing).

A patent infringement suit settlement of $512,648, including legal defense
costs, was recorded during fiscal year 1997.

Due to the increase in the Company's conversion capacity, the Company
re-entered the standard grocery T-shirt bag business in the third quarter of
1998 to realize marginal contributions to fixed costs.

NOTE 7: PATENTS

The Company owns several patents. No costs associated with patent
applications were capitalized during the year ended December 31, 1998, the
10 month period ended December 31, 1997 and fiscal year ended February 28, 1997.
Amortization expense of approximately $87,000 was recorded in the Fiscal Year
ended February 28, 1997.

F-28
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: PATENTS (CONTINUED)
In conjunction with the write-down of impaired assets and related expenses,
the write-off of all patent costs and associated accumulated amortization
resulted in a charge of $1,045,000 to the Statement of Operations in the Fiscal
Year ended February 28, 1997. The total accumulated amortization balance at
February 23, 1996 was approximately $313,000. As more fully described in
Note 6, this charge is the result of the Company's decision to exit the
traditional T-shirt bag product lines.

NOTE 8: OTHER ASSETS

Other assets are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Spare parts and supplies, net............... $334,703 $ 669,405
Other assets................................ 246,696 368,502
-------- ----------
$581,399 $1,037,907
======== ==========
</TABLE>

NOTE 9: ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Employee compensation and benefits.......... $ 50,750 $ 207,283
Accrued lease expense....................... 1,643,377 1,643,377
State taxes and penalties................... 299,096 550,000
Professional fees........................... 47,000 140,000
Other....................................... 636,016 426,688
---------- ----------
$2,676,239 $2,967,348
========== ==========
</TABLE>

NOTE 10: TRADE NOTES PAYABLE

The Company converted two trade payables into unsecured trade notes payable
which matured on March 15, 1998 and April 17, 1998 and bear fixed interest rates
of 10% and 8.5%. As of December 31, 1998, the Company was in default on both of
the above trade notes payable. These notes payable were satisfied in connection
with the financial restructuring, which occurred subsequent to December 31, 1998
(Note 2).

NOTE 11: NOTE PAYABLE

At December 31, 1998, the Company had a $2,000,000 revolving line of credit
secured by accounts receivable. Borrowings under the line of credit were subject
to 70% of qualifying accounts receivable, less the aggregate amount utilized
under all commercial and standby letters of credit and bank acceptances. The
line of credit bore interest at prime plus 6% (14.5% at December 31, 1998). In
addition, the Company paid 2% interest on all new invoices submitted for
financing. The credit line was for one year and subject to renewal annually. At
December 31, 1998, the balance under the line of credit was $814,311, which was
the maximum available based on the qualifying accounts receivable.

F-29
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: NOTE PAYABLE (CONTINUED)
Subsequent to December 31, 1998, the Company repaid this note payable in full in
connection with its financial restructuring (Note 2).

At December 31, 1997, the Company had an $8,000,000 revolving line of credit
secured by accounts receivable and inventory. Borrowings under the line of
credit are subject to 80% of qualifying accounts receivable and 35% of
qualifying inventories, less the aggregate amount utilized under all commercial
and standby letters of credit and bank acceptances. The line of credit bore
interest at 5% above the variable interest rate quoted by Norwest Bank of
Minnesota with a minimum rate of 8% (13.5% at December 31, 1997) and provides
for a 1/2 of 1% unused line fee. The credit line was for 5 years and is subject
to renewal annually. At December 31, 1997, the balance under the line of credit
was $1,162,349, which was the maximum available based on the qualifying accounts
receivable and inventory balances. The line of credit included certain financial
covenants that the Company must maintain to avoid a default, including current
ratio, debt to equity ratio, maintaining a net worth of $14 million, limitation
on capital spending, and profitability. As of and during the 10 month period
ended December 31, 1997, the Company failed to meet several of the financial
covenants. The lender waived the condition of default for the financial
covenants that were not met.

NOTE 12: CAPITAL LEASE OBLIGATIONS

The Company's capital lease obligations consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Total minimum lease payments................ $4,307,824 $5,006,262
Less amount representing interest........... 507,538 580,057
---------- ----------
Obligations under capital leases............ 3,800,286 4,426,205
Less amounts due within one year............ 3,800,286 4,426,205
---------- ----------
Long-term portion........................... $ -- $ --
========== ==========
</TABLE>

As all capital leases were in default as of December 31, 1998 and 1997, all
future payments have been classified as current. Subsequent to December 31,
1998, these capital lease obligations were satisfied in connection with the
financial restructuring (Note 2).

NOTE 13: STOCKHOLDERS' EQUITY

As of December 31, 1998 the Company had 21,495,621 shares of common stock
outstanding. During fiscal year 1997, covering the period from February 24, 1996
to February 28, 1997, a total of 1,207,500 shares were issued in a private
placement with net proceeds of $2,206,868. From March 1, 1997 to December 31,
1997, a total of 4,991,125 shares were issued in a private placement with net
proceeds of $4,403,991. An additional 387,500 shares were issued relating to the
private placements from March 1, 1997 to December 31, 1997. During the year
ended December 31, 1998, a total of 1,868,900 shares were issued in a private
placement with net proceeds of $1,282,951.

The Board of Directors has designated two classes of preferred stock
included within stockholders' equity as follows:

Series A, 8.5% Non-Cumulative, Redeemable, Convertible Preferred Stock
("Series A Preferred Stock"), convertible at the holder's option into one
share of common stock of the

F-30
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13: STOCKHOLDERS' EQUITY (CONTINUED)
Company at any time prior to redemption. At the Company's option, the stock
is redeemable at $4.00 per share after not less than 30, nor more than
60 days written notice provided the closing bid price of the Company's
common stock averages in excess of $9.00 per share for 30 consecutive
trading days ending within five days of the notice of redemption. The
Series A Preferred Stock votes with the common stock as a single class. At
December 31, 1998 and 1997, there were 212,258 and 325,483 shares issued and
outstanding, respectively.

Series B, 6% Non-Cumulative, Non-Voting Convertible Preferred Stock
("Series B Preferred Stock"), redeemable at $10 per share at the Company's
option and convertible at any time at $10 per share. This series of stock
retains a liquidation preference over the Series A Preferred Stock at a rate
of $10 per share plus any declared but unpaid dividends. At December 31,
1998 and 1997, there were 146,695 shares of Series B Preferred Stock issued
and outstanding.

The Company has reserved 3,472,536 shares of common stock for issuance upon
exercise of outstanding warrants and employee stock options granted or available
for grant (Note 20), upon the conversion of preferred stock and in connection
with the agreement with RC America, Inc. For the year ended December 31, 1998
and the 10 month period ended December 31, 1997, no shares of common stock were
issued. Based on the operating results of RC America, Inc. for fiscal year 1997
and Fiscal Year 1996, an additional 2,640 and 2,550 shares were issued in
May 1997 and May 1996, respectively.

Holders of the Series A Preferred Stock are entitled to receive, in each
fiscal year in which the Company attains net earnings after tax, as defined,
non-cumulative dividends at the annual rate of $0.34 per share. These dividends
will be payable in cash if net earnings after tax exceed 150% of the amount
necessary to pay the dividends and in cash, common stock, or any combination
thereof if net earnings are less than this amount. Dividends on the Series B
Preferred Stock are payable before any dividends are paid or declared for the
Series A Preferred Stock and the common stock. The holders of the Series B
Preferred Stock are entitled to receive non-cumulative dividends at an annual
rate of $.60 per share payable in cash.

NOTE 14: WARRANTS TO PURCHASE SECURITIES OF THE COMPANY

An aggregate of 153,000 shares of Common Stock and 50,000 shares of
Series A Preferred Stock were issued to the underwriters of the second public
offering, at an exercise price of $2.25 in May 1996 upon the exercise of
Class A Warrants which would have expired on June 13, 1996.

In conjunction with the third public offering, an aggregate of 48,725
Class A Warrants were exercised at $5.00 before the expiration date of June 15,
1995 and an aggregate of 456,931 Class B Warrants were exercised at $2.80 before
the expiration date of October 6, 1996. Additionally, an aggregate of 299,600
shares of Common Stock were issued to the underwriters of the third public
offering at an exercise price of $2.25 in May 1996 upon the exercise of Class B
Warrants which would have expired on October 7, 1997.

As of December 31, 1997 all Class A and Class B warrants issued to the
public stockholders and the underwriters were exercised or expired.

F-31
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14: WARRANTS TO PURCHASE SECURITIES OF THE COMPANY (CONTINUED)
In May 1996, the Company issued warrants to financial consultants to
purchase an aggregate of 200,000 shares of Common Stock at an exercise price of
$4.25 per share. The warrants expired on December 31, 1997 and were not
exercised.

In December 1997, the Company issued 109,422 warrants with a three year life
to purchase one share of common stock at $1.10 per share in connection with a
private placement of its common stock, net of costs in the amount of $109,658.
In April 1998, the Company issued 150,000 warrants with a three year life to
purchase one share of common stock at $1.08 per share in connection with a
private placement of its securities.

During the year ended December 31, 1998, the Company issued 200,000 warrants
with a three year life to purchase one share of common stock at $1.05 per share
to lessors in connection with the restructuring of certain Capital and Operating
Leases that were in default as of December 31, 1997. Settlement expense in the
amount of $240,400 was recorded for the 10 month period ended December 31, 1997
(Note 12).

All warrants issued in 1998 have been issued at the current market price at
date of issuance.

NOTE 15: INCOME TAXES

Due to the taxable loss incurred and the availability of net operating
losses, there was no tax provision or benefit recorded for the year ended
December 31, 1998. Accordingly, the effective tax rate is zero percent as
compared to the Federal statutory rate of 34% because the Company has placed a
full valuation allowance on its net deferred tax assets. Cumulative temporary
differences under SFAS No. 109 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Deferred tax assets:
Allowance for uncollectible accounts...... $ 310,655 $ 377,322
Net operating loss carryforward........... 13,270,876 12,825,784
Inventory................................. 53,522 151,993
Write-down of fixed assets................ 1,114,955 1,226,450
Write-down of patents..................... 367,862 400,031
Allowance for lease losses................ 685,606 685,606
Investment tax credit..................... 528,200 528,200
Other items............................... 482,291 489,712
------------ ------------
Deferred tax assets..................... $ 16,813,967 $ 16,685,098

Deferred tax liabilities:
Excess depreciation....................... $ 162,376 $ 76,197
Prepaid rent.............................. 99,345 143,281
------------ ------------
Net deferred tax assets..................... $ 16,552,246 $ 16,465,620
============ ============
Deferred tax asset valuation allowance...... $(16,552,246) $(16,465,620)
============ ============
</TABLE>

A valuation allowance is required to be established for deferred tax assets
if, based on the weight of available evidence, it is more likely than not that
some portion or all of the deferred tax asset will

F-32
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15: INCOME TAXES (CONTINUED)
not be realized. The Company has determined that a valuation allowance is
required as it is not certain that the results of future operations will
generate sufficient taxable income to realize the deferred tax asset.

At December 31, 1998 the Company had available for federal and state income
tax purposes unused net operating loss (NOL) carryforwards of approximately
$34,956,000 and $29,039,000, respectively. The federal carryforwards expire in
various amounts beginning in the year 2003, and the state carryforwards expire
in various amounts from 1999 through 2004. The Company has available state
investment tax credit carryforwards of approximately $528,000 expiring in
various amounts from 1999 to 2004, and approximately $113,000 in carryforwards
with unlimited expirations.

A substantial change in the Company's ownership, as defined in Section 382
of the Internal Revenue Code, may significantly limit the future utilization of
the federal NOL carryforwards incurred prior to an ownership change. In Fiscal
Years 1994 and 1991, substantial changes in ownership occurred. In addition, the
Company has had a number of transactions subsequent to Fiscal Year 1994 which
may have further limited the Company's ability to use its federal NOL
carryforwards. The Company's ability to use its federal NOL carryforwards may be
further impacted by transactions subsequent to December 31, 1998 (Note 2).

NOTE 16: MAJOR CUSTOMERS

During the year ended December 31, 1998, sales to two customers represented
20% and 10% of total sales. During the 10 month period ended December 31, 1997,
no customer represented more than 10% of total sales. In Fiscal Year ended
February 28, 1997, sales to one customer represented 16% of total sales.

NOTE 17: RELATED PARTY TRANSACTIONS

In November 1990, the Company established an officer's loan receivable from
Dennis N. Caulfield, its then Chairman for $132,197. The note was amended in
April 1998 and the interest rate changed to 6% effective from November 1990 and
is now payable on or before January 1, 2001. Interest on the loan, along with
advances from travel not offset by expense reports, caused the loan balance to
equal $586,978 at December 31, 1997. Mr. Caulfield did not make any payments
against the loan from the period beginning 1990 through December 31, 1997.
Accordingly, the Company reserved the full amount of this loan on that date.
Also, no payments were made in 1998. In addition, the Company paid, on behalf of
Mr. Caulfield, approximately $36,000 of a $200,000 personal income tax levy
imposed by the Massachusetts Department of Revenue on Mr. Caulfield in exchange
for an interest bearing note due on or before June 30, 1998, which has not been
repaid. This note was reserved for as of March 31, 1999.

Loans made to another officer totaled $6,072 and $5,416 at December 31, 1998
and 1997, respectively, and bear interest at a rate of 9.5%.

The Company acquired, in Fiscal 1993, a 50.5% interest, in exchange for
$125,000, in a company (RC America, Inc.) founded and managed by the 49.5%
minority shareholder, Ronald Caulfield, a brother of the Company's Chairman. On
February 26, 1994, the Company entered into a stock exchange agreement (the
"Agreement") to exchange 200,000 shares of its common stock at their estimated
fair market value for Ronald Caulfield's 49.5% minority interest in RC
America, Inc.

F-33
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17: RELATED PARTY TRANSACTIONS (CONTINUED)
Effective February 26, 1994, Ronald Caulfield exchanged his shares in accordance
with the Agreement. As a result, RC America, Inc. became a wholly owned
subsidiary of the Company. The Agreement also contains demand and piggy-back
registration rights and provides for the issuance to Ronald Caulfield of up to
an additional 100,000 shares of the Company's common stock over a five year
period based on RC America, Inc. attaining certain levels of pre-tax earnings.
RC America, Inc. ceased operations during the year ended December 31, 1998.

For the year ended December 31, 1998 and the 10 month period ended
December 31, 1997, no shares of common stock were issued. Based on the operating
results of RC America, Inc. for fiscal year 1997 a total of 2,640 shares were
earned and were issued to Mr. Caulfield in May. In addition, Ronald Caulfield
entered into a five year employment agreement with RC America, Inc. which
provided for certain bonus, severance and non-compete arrangements. This
employment agreement has since terminated.

The value of the stock issued pursuant to the Agreement exceeded the book
value of the assets acquired and the Company has recorded goodwill of $800,000,
amortizing the goodwill pro-rata over ten years. Issuance of the additional
2,640 and 2,550 shares of common stock resulted in an insignificant amount of
additional goodwill. At February 28, 1997, the Company wrote off approximately
$620,000 of goodwill as part of the impairment of long-lived assets Ivan J.
Hughes, a director of the Company is President of the Plastics Division Duro Bag
Manufacturing Company ("Duro"). For the year ended December 31, 1998 and the
10 month period ended December 31, 1997, there were no sales to Duro. For fiscal
year ended February (Note 6).

NOTE 18: EMPLOYMENT AGREEMENTS

During the year ended December 31, 1998, the Company renewed an employment
agreement with an officer for an additional one year term expiring on June 30,
1999. This agreement provides for minimum base compensation of $180,000.

On January 27, 1999 and March 22, 1999, the Company entered into employment
agreements with certain officers. Among other provisions, these agreements
provide for a minimum base compensation of $650,000 in the aggregate plus
incentive compensation based on pre-tax profits and for severance payments.
These agreements expire on various dates from June 30, 2000 through March 2002.

NOTE 19: OPERATING LEASES AND COMMITMENTS

The Company's lease agreement for its North Dighton facility was
renegotiated effective January 1, 1996 and runs for a period of 12 years. The
Company has entered into various operating leases for certain manufacturing
equipment expiring on various dates through 2007.

F-34
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19: OPERATING LEASES AND COMMITMENTS (CONTINUED)
The future minimum rental commitments under non-cancelable operating leases
as of December 31, 1998 are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR OPERATING LEASES
- ----------- ----------------
<S> <C>
1999........................................................ 1,180,000
2000........................................................ 893,000
2001........................................................ 480,000
2002........................................................ 383,000
2003........................................................ 383,000
Thereafter.................................................. 2,243,000
----------
$5,562,000
==========
</TABLE>

F-35
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19: OPERATING LEASES AND COMMITMENTS (CONTINUED)

Expense under operating leases was $937,340, $1,410,000 and $1,646,000 for
the year ended December 31, 1998, the 10 month period ended December 31, 1997
and the Fiscal Year ended February 28, 1997, respectively. All operating leases
and real-estate leases were in default as of December 31, 1997. Subsequent to
December 31, 1998, the Company reached agreement with all lessors as part of its
financial restructuring. (Note 2).

At December 31, 1998, the Company had commitments to purchase approximately
$275,000 of machinery and equipment.

NOTE 20: STOCK OPTION PLANS

In May 1990, the Company adopted a stock option plan and on October 25,
1993, the Company approved a stock option plan that provides certain individuals
the right to purchase up to 200,000 shares and 750,000 shares, respectively, of
common stock. In September 1996, the Company adopted a stock option plan that
entitles certain individuals the right to purchase up to 1,000,000 shares of
common stock. The Board of Directors determines those individuals who shall
receive options, the time period during which the options may be exercised, and
the number of shares of common stock that may be purchased and the exercise
price (which can not be less than the fair market value of the common stock on
the date of grant). Options generally vest ratably over two to five years. The
Company may not grant employee incentive stock options with a fair value in
excess of $100,000 that is first exercisable during any one calendar year.
Options granted under the stock option plan generally expire ten years from the
date of grant.

There was no activity under the 1996 Stock Option Plan during the 10 month
period ended December 31, 1997 and the year ended February 28, 1997.
Transactions under the 1990 and 1993 Stock Option Plans during the 10 month
period ended December 31, 1997 and the year ended February 28, 1997 are
summarized as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED TEN MONTH PERIOD ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------- --------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
------------------------- --------------------------
OPTIONS SHARES EXERCISE PRICE SHARES EXERCISE PRICE
- ------- -------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year................ 783,117 $3.54 773,830 $3.98

Options granted whose exercise price equal the
market price of the stock on grant date....... 25,000 $1.25 156,000 $1.75

Options granted whose exercise price is greater
than the market price of the stock on grant
date Canceled................................. (424,430) $2.23 (146,713) $3.98
-------- --------

Outstanding at year end......................... 383,687 $2.70 783,117 $3.54
======== ========

Options exercisable at period end............... 358,687 629,317
======== ========

Weighted average fair value of options granted
during the period............................. $1.25 $1.75
</TABLE>

F-36
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 20: STOCK OPTION PLANS (CONTINUED)
In April of 1997, the Company changed the exercise price for selected
options granted in prior periods from $6.25, $4.00, $3.88 and $3.00 to $2.50 per
share.

<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28, 1997
-------------------------
WEIGHTED AVERAGE
-------------------------
OPTIONS SHARES EXERCISE PRICE
- ------- -------- --------------
<S> <C> <C>
Outstanding at beginning of year............................ 795,630 $4.04

Options granted whose exercise price equal the market price
of the stock on grant date................................ 12,500 2.40

Options granted whose exercise price is greater than the
market price of the stock on grant date................... 9,200 2.40

Canceled.................................................... (43,500) 3.49
-------

Outstanding at year end..................................... 773,830 3.98
=======

Options exercisable at period end........................... 589,377
=======

Weighted average fair value of options granted during the
period.................................................... $2.40
</TABLE>

In March 1996, the Company granted 18,500 options with an exercise price of
$2.38. In January 1997, the Company granted 3,200 options with an exercise price
of $2.50. In March 1996, the Company changed the exercise price for selected
options, which were granted in fiscal year 1993, from $6.25 to $4.00, and
selected options, which were granted in fiscal year 1994, from $6.63 to $4.00.

The following table summarizes information about employee options
outstanding at December 31, 1998:

OPTIONS OUTSTANDING

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
RANGE OF NUMBER OUTSTANDING AT REMAINING WEIGHTED AVERAGE
EXERCISE PRICES DECEMBER 31, 1998 CONTRACTUAL LIFE EXERCISE PRICE
--------------- --------------------- ---------------- ----------------
<S> <C> <C> <C>
$1.25 - 3.00 336,937 4.79 $2.42
3.88 - 4.75 24,250 4.78 4.13
5.50 - 5.75 22,500 6.10 5.58
-------
383,687 4.86 2.71
=======
</TABLE>

F-37
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 20: STOCK OPTION PLANS (CONTINUED)
OPTIONS EXERCISABLE

<TABLE>
<CAPTION>
RANGE OF NUMBER EXERCISABLE AT WEIGHTED AVERAGE
EXERCISE PRICES DECEMBER 31, 1998 EXERCISE PRICE
--------------- --------------------- ----------------
<S> <C> <C>
$1.25 - 3.00 313,737 $2.51
3.88 - 4.75 22,450 4.14
5.50 - 5.75 22,500 5.58
-------
358,687 2.81
=======
</TABLE>

FAIR VALUE DISCLOSURES

At December 31, 1998, the Company had three option plans, which are
described above. The Company applies APB 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its stock option plans. Had compensation cost for the Company's three stock
option plans been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of FASB Statement 123, the
Company's net loss and loss per share would have been increased to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
TEN MONTH PERIOD
FISCAL YEAR ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C> <C>
Net Loss As reported $(3,239,213) $(11,338,869)
Pro forma $(3,245,145) $(11,468,958)

Basic and diluted As reported $ (0.16) $ (0.73)
Net loss per share Pro forma $ (0.16) $ (0.74)
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants during the applicable periods: dividend yield of
0.0% for both periods; risk free interest rate of 5.16% for options granted
during the year ended December 31, 1998 and 5.81% for options granted and
re-priced during the 10 month period ended December 31, 1997; a weighted average
expected option term of 10 years for options granted during the year ended
December 31, 1998, and 10 years for options granted during the 10 month period
ended December 31, 1997; and expected volatility of 153.87% for options granted
during the year ended December 31, 1998 and 67.57% for options granted during
the 10 month period ended December 31, 1997.

NOTE 21: RETIREMENT SAVINGS PLAN

The Company provides an employee retirement savings plan under
Section 401(k) of the Internal Revenue Code (the "Plan") which covers
substantially all employees. Under the terms of the Plan, employees may
contribute a percentage of their salary, up to a maximum of 15%, which is then
invested in one or more of several mutual funds selected by the employee. The
Company matches 100% of the employee contribution up to a maximum of 2% of their
salary. Contributions to the plan were $33,165, $47,604 and $80,503 for the year
ended December 31, 1998, 10 month period ended December 31, 1997, and fiscal
year ended February 28, 1997, respectively.

F-38
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 22: SEGMENT REPORTING

Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SAFS No. 131
superseded SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards for reporting information about
operating segments, products and services, geographic areas and major customers.
The adoption of SFAS No. 131 did not affect the Company's results of operations
or financial position. The Company operates in one reportable segment under SFAS
No. 131.

NOTE 23: SIGNIFICANT FOURTH QUARTER ADJUSTMENTS TO THE 10 MONTH PERIOD ENDING
DECEMBER 31, 1997

All capital, operating and real estate leases were in default as of
December 31, 1997. All future capital lease payments have been classified as
current. As a result of these defaults and based on negotiations which began in
1997, total expenses of $1,643,400 were accrued as of December 31, 1997 for
interest, penalties and extension fees related to the default of the capital and
operating leases (Note 12 and 19).

Loans made to a former officer totaled $586,979 at December 31, 1997 and
bear interest at a rate of 9.5%. The loans are due and payable January 1, 2001.
The officer had agreed to apply any bonus payments received under the Company's
executive bonus plan to reduce the amounts outstanding under the loan. As the
Company has suffered recurring net losses and operating cash flow deficiencies,
a reserve of $586,978 has been established for this loan as of December 31,
1997.

Management decided to exit the traditional T-shirt bag business during the
10 month period ended December 31, 1997. Accordingly, an analysis of the fair
value of assets related to these product lines was performed during the fourth
quarter 1997 which resulted in a write-down of impaired assets and recognition
of related expenses totaling $5,897,648.

NOTE 24: LEGAL PROCEEDINGS

The Company has been notified by its insurance carrier of a potential claim
brought by a group of investors related to the registration of certain
securities. The Company believes that any settlement in connection with this
potential claim will not have a material effect on its operations.

F-39
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.
SCHEDULE II
RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- ---------- ---------- ----------- --------------
ADDITIONAL DEDUCTIONS
BALANCE AT CHARGED TO ACCOUNTS BALANCE AT END
DESCRIPTION 1/1/98 EXPENSES WRITTEN-OFF OF PERIOD DESCRIPTION OF CHANGES
- ----------- ---------- ---------- ----------- -------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Reserve for Accounts
Receivable Credits..... 75,000 0 0 75,000

Allowance for Doubtful
Accounts............... 275,000 0 (165,548) 109,452 Allowance was reduced based on
evaluation of Accounts
Receivable at 12/31/98

Inventory Reserve........ 290,000 0 (290,000) 0 Inventory reserved at 12/31/97
was sold during the year ended
12/31/98
</TABLE>

S-1
<PAGE>
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE 10 MONTH PERIOD ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- ---------- ---------- ----------- --------------
ADDITIONAL DEDUCTIONS
BALANCE AT CHARGED TO ACCOUNTS BALANCE AT END
DESCRIPTION 3/1/97 EXPENSES WRITTEN-OFF OF PERIOD DESCRIPTION OF CHANGES
- ----------- ---------- ---------- ----------- -------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Reserve for Accounts
Receivable Credits..... 75,000 0 0 75,000

Allowance for Doubtful
Accounts............... 50,000 225,000 0 275,000 Allowance was Increased based
on evaluation of Accounts
Receivable at 12/31/97

Inventory Reserve........ 850,000 0 (560,000) 290,000 Reserve was reduced based on
evaluation of Inventory at
12/31/97
</TABLE>

S-2
<PAGE>
BPI PACKAGING TECHNOLOGIES, INC.

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

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

3,800,097 SHARES OF COMMON STOCK
$0.01 PAR VALUE PER SHARE

OCTOBER 28, 1999

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE UNDER THIS PROSPECTUS WILL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF OUR COMPANY OR
THE FACTS SET FORTH WITHIN SINCE THE DATE OF THIS PROSPECTUS.