Advanced Materials Group reports results for fiscal 1996 second quarter, debt reduction moves.

RANCHO DOMINGUEZ, Calif.--(BUSINESS WIRE)--July 15, 1996-- Advanced Materials Group (NASDAQ: ADMG) Monday reported results for its fiscal 1996 second quarter ended May 31, 1996.

The company also announced that it concluded negotiations with Wilshire Technologies Inc. (ASE: WIL) to retire the company's note payable at a discount. The settlement will result in a one-time gain of approximately $525,000 in the third quarter of fiscal 1996.

For the quarter, the company achieved net income of $2,543,000, or 24 cents per share, vs. a net loss of $380,000, or 4 cents per share, for the second quarter of fiscal year 1995. The results for the current quarter include a gain of $2,463,000 from the company's sale of investments in securities and a gain of $572,000 on stock rights.

Excluding these one-time gains, net of the alternative minimum tax provision, Advanced Materials incurred a net loss of $340,000 for the second quarter of fiscal year 1996, a 12 percent improvement over the comparable quarter of last year. Sales for the second quarter of fiscal year 1996 were $3,854,000 compared to $4,143,000 for the same period a year ago.

The company attributes both the quarterly and year-to-date sales declines to a significant shift in product mix with slowing sales in auto, medical and contamination product lines that were offset in part by growth in sales of products to the computer industry, production on which began ramping-up during the quarter. Gross profit for both the quarter and six-month periods was favorably influenced by the shift in product mix.

For the first six months of fiscal 1996, net income was $3,402,000, or 33 cents, compared to a loss of $830,000, or 9 cents per share for the year-ago period. Sales for the first half of fiscal year 1996 were $7,664,000 vs. $7,788,000 for the comparable period of fiscal year 1995.

The results for the first six months of fiscal year 1996 include one-time gains totaling $3,742,000 from the company's sale of investments in securities and a gain of $572,000 on stock rights. Excluding these one-time gains, net of the alternative minimum tax provision, Advanced Materials incurred a net loss of $760,000 for the first six months of the fiscal year, a nine percent improvement over the same period a year ago.

The one-time gains on sales of investments in securities reported by Advanced Materials for both the first and second quarters of fiscal year 1996 resulted from its sale of stock in Innovative Technologies plc (IT), the company's United Kingdom- based research and development partner.

The sale of stock does not affect the company's worldwide marketing rights from IT for the waterproof, breathable coating system that the companies are jointly developing and currently testing in the United Kingdom. The testing is scheduled to conclude by Sept. 1, 1996.

Commenting on the company's results, Advanced Materials President and Chief Executive Officer Steve Scott said: "We viewed the increased value of our investment in Innovative Technologies as an opportunity to make a tactical shift in our operating strategy. We are investing some of the proceeds from the sale of our position in IT to make further improvements to our core operation that we believe will enhance our efficiency and competitive position going forward.

"We used another portion of the proceeds to eliminate outstanding debt with Trilon Partnership and Wilshire Technologies, resulting in reductions of interest expense and, in the transaction with Wilshire Technologies, a gain. We intend to use the balance of the proceeds, along with the interest savings that accrue, to fund strategic acquisitions, further capital additions and to satisfy working capital requirements in order to meet our internal growth projections over the next two-and-a-half years."

BUSINESS OUTLOOK

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially.

Advanced Material has shifted its marketplace strategy to place primary marketing emphasis on the computer and related products niche. The company is beginning to see positive results from that shift in emphasis in terms of sales mix and gross margins.

The company has sufficient orders from OEMs to believe that sales will grow substantially in the second half of the year, with sales for the year to be up from 10% to 15%.

The company is currently negotiating a restructuring of its asset-based lending agreement, which expires on Nov. 1, 1996, with several potential lenders. The company believes it will be successful in completing the agreement on more favorable terms.

This plan is part of management's efforts to strengthen the company's balance sheet and improve its ability to continue its planned growth. As a result of the aforementioned debt reduction moves, the company expects interest expense to be significantly lower for fiscal 1996.

The statements contained in the previous "Business Outlook" are forward-looking statements that involve a number of risks and uncertainties. In addition to the factors discussed, among the other factors that could cause actual results to differ materially are the following: general business conditions, competitive factors, concentration of sales in markets and customers, concentration of raw materials suppliers, delays or cancellations in orders, fluctuations in margins, timing of significant orders, and other risks and uncertainties currently unknown to management.

Advanced Materials Group Inc. is a leading manufacturer and fabricator of foams, foils, films and pressure sensitive adhesive components for a broad base of industrial and medical customers in the United States and abroad.

The company also produces specialized systems for mixing, handling and dispensing multi-component chemicals, sealants and adhesives and has an investment in two firms conducting advanced research on polymer-based materials. -0-

                   Advanced Materials Group Inc.
           Interim Consolidated Statement of Operations
               ($ in thousands, except per-share data)

                             Three months ended   Six months ended
                                   May 31,             May 31,
                            1996        1995        1996        1995
                         (unaudited)

Net sales                 $3,854     $4,143     $7,664     $7,788
Cost of sales              3,281      3,559      6,469      6,728
Gross profit                 573        584      1,195      1,060

Operating expenses:
Selling, general &
  administrative             644        639      1,363      1,289
Research, development
  and engineering             20         20         37         38
Intangible asset
  amortization                73         87        147        174
Total operating
  expenses                   737        746      1,547      1,501

Operating loss              (164)      (162)      (352)      (441)

Other income (expense):
Interest expense            (184)      (221)      (405)      (414)
Gain on sale of stock      2,463         --      3,742         --
Gain on stock rights         572         --        572         --
Other, net                     9          3          2         28
Total other income
  (expense)                2,860       (218)     3,911       (386)

Earnings (loss)
  before income taxes      2,696       (380)     3,559       (827)
Income tax provision         153         --        157          3
Earnings (loss) after
  income taxes            $2,543     $ (380)    $3,402     $ (830)
Primary earnings (loss)
  per share of
  common stock            $ 0.24     $(0.04)    $ 0.33     $(0.09)
Average number of
  common and common
  stock equivalent
  shares                  10,450      9,174     10,300      9,174

                        Advanced Materials Group Inc.
                         Consolidated Balance Sheets
                              ($ in thousands)

                                      May 31,           Nov. 30,
                                       1996               1995
                                    (unaudited)

Assets
Current assets:
Cash                                 $ 135               $ 66
Available-for-sale securities          150                 88
Accounts and notes receivable,
 net of allowance for
 doubtful accounts of $138,000
 at May 31, 1996 and $127,000
 at Nov. 30, 1995                    2,075              1,484
Inventories                          1,964              2,096
Prepaid expenses                       118                108
Other                                3,223                154
Total current assets                 7,665              3,996
Fixed assets, net of
 accumulated depreciation
 of $1,514,000 and $1,270,000
 at May 31, 1996 and
 Nov. 30, 1995, respectively         2,258              2,480
Goodwill, net                        2,674              2,783
Available-for-sale securities           --              3,322
Other assets                           432                485
Total assets                      $ 13,029           $ 13,066
-0-

                        Advanced Materials Group Inc.
                         Consolidated Balance Sheets
                              ($ in thousands)

                                          May 31,         Nov. 30,
                                           1996             1995
                                       (unaudited)

Liabilities and shareholders' equity
Current liabilities:
Accounts payable                        $ 1,480          $ 1,524
Accrued expenses                            683              955
Accrued income taxes                        152               --
Notes payable                                --            1,119
Current portion of long-term debt         1,187              466
Total current liabilities:                3,350            4,064

Long-term debt:
Notes payable and other long-term debt    1,977            3,555
Deferred compensation                     1,341            1,283
Convertible debentures                      535              535
Total long-term debt:                     3,853            5,373

Shareholders' equity:
Preferred stock - $.001 par value;
 5 million shares authorized; no
 shares issued or outstanding                --               --
Common stock - $.001 par value;
 25 million shares authorized;
 10,450,316 and 9,173,541 shares
 issued and outstanding at
 May 31, 1996 and Nov. 30, 1995,
 respectively                                 7                7
Paid-in capital                          10,195            9,495
Accumulated deficit                      (4,502)          (7,904)
Unrealized holding gain (loss)
 on available-for-sale securities           (26)           2,031
Total shareholders' equity                5,674            3,629
Total liabilities and
 shareholders' equity                  $ 13,029         $ 13,066
-0-

CONTACT: Advanced Materials Group

Steve F. Scott/J. Douglas Graven, 310/537-5444

or

Silverman Heller Associates

Lou Alkana, 310/208-2550