Chemalite Inc.

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Letter to Stockholders

Dear Stockholders,

1991 has been a successful year for us and for our Company in which we have accomplished several milestones. We have managed to incorporate a solid company, Chemalite Inc., which will continue to its successful growth in the future.

In the first half of 1991, our company has incurred minimal incorporation and preoperational expenses. The company invested in the main assets of the company such as machinery and inventory items which were partly purchased within this period as well as the patent for the production technique to produce Chemalites.

The Company hasn't gone into production within the first half, and accordingly, hasn't earned any revenues which lead to a misleading negative outlook on our cash status. However, please note that the above mentioned incorporation and preoperational expenses should be considered as investments to our business. Thus, the $145.000 decrease recorded in the first six months shouldn't be considered as losses.

The operations which have taken place in the second half of the year were the most important accomplishments we have achieved.

We have gone into full operation and managed to sell $745.500 of our products, thanks to the prototypes bought in early July. These sales enabled us to further invest in our Company by enhancing our machinery and improving our inventory. In addition, we improved our marketing side by advertising our product on television and trade journal.

When the above explanations are taken into account, the decrease of $117.000 in the second half should not again be considered as loss. On the contrary, the below table shows the upward trend in our cash balance.


When we take a look at the year-end financials, we could see that there is a significant increase in our non-current assets (159%) which is expected in the first year of a...
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