Innovative Composites Signs an Option Agreement to Acquire Component Supplier

Innovative Composites International Inc. apprised that it has entered into an option agreement to purchase the assets of Eleison Composites LLC ("Eleison"), a current ICI supplier and leading producer of fibre reinforced thermoplastic skin.

The integration of Eleison equipment would result in a significant reduction in the material cost of all ICI products which in turn would enhance margins and allow ICI to compete in lower price segments of certain markets. Eleison holds six patents and is on pace to generate approximately USD $2 million in revenue in 2011, net of sales to ICI. This transaction is the first step in ICI's vertical integration strategy and would only close subject to ICI securing a major housing contract in the near future.

According to the terms of the option agreement ICI has an exclusive right to acquire substantially all of the Eleison assets including inventory, equipment, customer lists and purchase orders, patents and any other intellectual property, for a period of 120 days. The purchase price is USD $2 million payable on closing plus a product royalty of USD $1 million payable over a maximum of three years after the acquisition. The closing of the transaction is subject to due diligence and the execution of an Acquisition Agreement ("AA") containing such representations and warranties as are customary in a transaction of this type. It is anticipated that current staff would continue managing Eleison's day-to-day operations after the acquisition.

This acquisition would allow ICI to control supply of a strategic raw material that is used in all its products and which is currently subject to lengthy lead times. In addition, patents held by Eleison allow for utilization of recycled Polyethylene Terephthalate (commonly known as PET), in the manufacture of thermoplastic skin and core materials. According to the U.S. Government Accountability Office approximately 1 million tons of PET water and soft drink bottles end up in landfills annually, potentially making it a readily accessible, no cost raw material for ICI products.