
<PAGE>
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                    U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K

(Mark One)

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<S>        <C>
/X/        ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934.

           FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999.

/ /        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934.

           FOR THE TRANSITION PERIOD FROM              TO
</TABLE>

                         COMMISSION FILE NUMBER 0-16401

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

                         ADVANCED MATERIALS GROUP, INC.

               (Exact name of registrant as specified in charter)

<TABLE>
<S>                                                                 <C>
                      NEVADA                                            33-0215295
          (State or other jurisdiction of                            (I.R.S. Employer
          incorporation or organization)                            Identification No.)

20211 S. SUSANA ROAD, RANCHO DOMINGUEZ, CALIFORNIA                         90221
     (Address of principal executive offices)                           (Zip Code)
</TABLE>

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

Issuer's telephone number, including area code: (310) 537-5444

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.001 par value

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

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /X/ No / /

    Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/

    There were 8,519,055 shares of the registrant's voting common stock with a
par value of $0.001 outstanding at February 4, 2000. The aggregate market value
of the shares of voting common stock held by non-affiliates of the registrant on
February 4, 2000 was $9,389,951.

                      DOCUMENTS INCORPORATED BY REFERENCE

    The definitive proxy statement relating to the registrant's Annual Meeting
of Share Owners, to be held April 4, 2000 are is incorporated by reference in
Part III to the extent described therein.

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<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

GENERAL

    Advanced Materials Group, Inc. ("AMG" or the "Company"), through its
subsidiaries, develops, manufactures and markets a wide variety of industrial
products. The Company's principal subsidiary, Advanced Materials, Inc. (formerly
known as Wilshire Advanced Materials, Inc.) ("AM"), is the successor to a
forty-six year old business that converts specialty materials including foams,
foils, films and adhesive composites into components and finished products such
as printer cartridge inserts and inking felts, disk drive gaskets, automobile
air conditioning insulators, water and dust seals, surgical pads and applicators
for the medical, electronics, automotive and consumer products markets. Advanced
Materials Foreign Sales Corporation Ltd. ("AM FSC") was formed in Fiscal Year
1997 ("FY97") as a wholly-owned subsidiary of AM to conduct the same business
activities in the Asian market. Advanced Materials Ltd., ("AM Ltd.") was formed
in FY97 as a wholly-owned subsidiary of the Company to conduct the same business
activities in the European market.

    The Company, which was formerly known as Far West Ventures, Inc., was
incorporated in Nevada in October 1986. The Company was inactive from
January 1990 until April 1993, when it acquired AM. AM had previously been
formed as a California corporation in August, 1992 for the purpose of acquiring
the assets of the General Foam Products division of Wilshire Technologies, Inc.
("WTI"). The assets acquired by AM constituted a portion of the business and
assets previously acquired by WTI from Wilshire Foam Products, Inc. in November,
1990.

    The Company's principal executive offices are located at 20211 S. Susana
Road, Rancho Dominguez, California 90221, and its telephone number is
(310) 537-5444.

ACQUISITIONS

    In November 1992, AM acquired the General Foam Products division of WTI for
aggregate consideration of approximately $5,971,000, including the assumption of
approximately $3,971,000 of certain liabilities of WTI related to its General
Foam Products division.

    In April 1993, AM effected a reverse acquisition of the Company (formerly
known as Far West Ventures, Inc.). In connection with the transaction, the
Company issued 5,030,160 shares of its Common Stock to the stockholders of AM.

    In October 1993, the Company acquired all of the outstanding stock of Condor
for aggregate consideration of $1,025,000, payable $640,876 in cash and the
issuance of 55,975 shares of the Company's Common Stock. The Company also agreed
to pay additional consideration to the sellers based upon Condor achieving
specified levels of profit for subsequent calendar years, but that agreement was
replaced in 1995 with a bonus plan based on operating performance. The Company
assumed all of the obligations of Condor (other than federal income tax
liabilities) which amounted to approximately $207,000 as of the closing date.

    On November 23, 1993, AM purchased from WTI certain assets of WTI's OEM
Medical Products Division that had been used in connection with the private
label manufacturing of products for medical accounts. The aggregate purchase
price was $2,300,000 plus the assumption of liabilities under certain executory
contracts in the approximate amount of $21,000.

    On September 1, 1996 the Company entered into an asset purchase agreement
with Gasket and Molded Products, Inc. ("GMP"), a Colorado corporation, and its
shareholders, whereby for cash of $130,000, as adjusted, the Company acquired
substantially all of the assets and assumed certain liabilities of GMP.

                                       2
<PAGE>
BUSINESS STRATEGY

    The Company's objective is to become a leading supplier of specialty
polymeric and advanced materials in both domestic and foreign markets. Polymers
are synthetic chemical structures used in a variety of configurations and
products. The worldwide market for specialty industrial products used as
components in industrial products is substantial. Management believes that
manufacturers are increasingly recognizing the value in conserving or
reallocating their resources by outsourcing the specialty components of their
products. The Company is positioning itself in the marketplace to benefit from
this trend. In addition, the Company is reviewing strategic acquisition
candidates for expansion opportunities.

    The Company's long-term strategy is to penetrate foreign marketplaces by
establishing fabrication plants in such areas as Singapore, Ireland and Mexico.
Two fabrication plants, located in Ireland and Singapore, respectively, began
production in fiscal 1998. The Ireland facility operates as Advanced
Materials Ltd., a wholly owned subsidiary of Advanced Materials Group, Inc. The
Company formed Advanced Materials Foreign Sales Corporation Ltd., a wholly-owned
subsidiary of AM to enter into a strategic manufacturing agreement in Singapore.
AM FSC Ltd. has entered into a ten year agreement with Foamtec Pte. Ltd.
("Foamtec"). Terms of the agreement call for AM FSC to lease production
equipment and provide certain technology to Foamtec. Foamtec will in turn
provide its manufacturing facilities and workforce to fabricate foam products at
Foamtec's Singapore facility. The Company's long-term strategy also includes the
identification and acquisition of undervalued entities which will add strategic
and economic value to the Company's product line and competitive positioning.

PRODUCTS

    The Company's AM subsidiary manufactures a variety of specialty materials
including foams, foils, films and adhesive composites, into components and
finished products for the automotive, electronics, medical and consumer products
markets. These products include foam inserts for computer printer cartridges,
insulators used in automobile air conditioners, inking felts used in printers,
water and dust seals for automobiles, computers, printers and HVAC systems, foam
filters for trucks, computers and electrical humidifiers, sound attenuation foam
for printers, and foam/fabric composites for cushions and padding in helmets,
soft luggage and other consumer products. In addition, private label
manufacturing of products for medical accounts include electrosurgical grounding
pads, sponges, neck braces, kneepads and other specialty foam products. All of
these products are designed and produced to meet the specifications of each
customer. AM typically provides no warranty for its products other than
compliance with specifications at the time of delivery.

    All of the products produced by AM are manufactured to specifications
furnished by its customers. Accordingly, the Company does not engage in research
and development of new products. The Company has, however, acquired new and
advanced equipment, an example of which is impulse sealing equipment for making
foam/non-woven filters, in order to maintain production capabilities consistent
with its customers' specifications.

MANUFACTURING

    AM currently has two fabrication facilities located in Rancho Dominguez,
California and Dallas, Texas, and two warehouses located in Portland, Oregon and
Denver, Colorado. The Rancho Dominguez facility is approximately 56,000 square
feet, the Dallas facility is approximately 82,600 square feet, the Portland
facility is approximately 43,100 square feet and the Denver facility is
approximately 3,700 square feet. The four facilities serve different
geographical markets. The Rancho Dominguez, Portland, and Denver facilities
service a region consisting of the Western United States, Northwestern Mexico
and the Pacific Rim area. The Dallas facility primarily services customers in
the Southwestern United States and the central and northeast border area of
Mexico. The Rancho Dominguez, Dallas, Portland and Denver facilities have
substantially the same equipment. A substantial amount of the equipment has been
designed

                                       3
<PAGE>
and constructed by AM. The Rancho Dominguez and Dallas facilities each maintain
a separate sales and production staff, while administration and purchasing are
centralized in the Rancho Dominguez facility.

    AM Ltd. is leasing approximately 24,000 square feet of space in Dublin,
Ireland. The facility serves as the Company's European headquarters and has
substantially the same equipment as in the U.S. facilities.

    AM has developed and employs a wide variety of advanced processing
techniques in fabricating its products. These techniques include thermoforming,
vacuum forming, flame lamination, pressure sensitive lamination, die cutting and
slitting. Thermoforming is a process that involves heating a foam or foam/fabric
laminate until the material is pliable, using pressure to form the material into
a mold, and then cooling the material until it takes the form of the mold. AM
currently produces backpack components and display cases using its thermoforming
equipment. Vacuum forming is a process that involves heating a foam until the
material is pliable and then pulling the material into a cooled mold using a
vacuum to get intimate contact to the mold surface with the material which then
takes the form of the mold. AM currently produces automotive air conditioner
insulators and computer mouse pad components with its vacuum forming equipment.
Flame lamination is a process that involves the use of a flame to melt a thin
layer on the surface of the foam, and then applying fabric against the surface,
and as the foam surface cools it forms a "glue" layer to the fabric. AM to
currently uses this process to fabricate leather substitute products such as
holsters, luggage and weight training belts. Pressure sensitive lamination is a
process that involves the use of heat and pressure to apply an adhesive laminate
to the substrate and a paper liner to the adhesive, which can be pulled off by
the user to attach the substrate to the desired surface. AM currently produces
caulking and sealing foam tape using this process. Die cutting is a process that
involves the use of a match tool die in a hydraulic press to cut material. AM
currently produces a variety of products such as electrosurgical pads, EKG pads,
diagnostic swabs and artificial fingernail adhesive tabs with its die cutting
equipment. Slitting is a process that uses saws or slitters with blades ranging
from saw tooth to razor edge, depending on the material to be processed, to
horiontally and/or vertically slice layers off blocks of raw material.

    AM is able to produce a variety of products for different markets by using
the same fabrication techniques with different materials. For example, using its
slitter, pressure sensitive laminator and die cutter equipment in sequence, AM
can produce a variety of products, such as sound attenuation devices for
computer printers, gaskets for hard disk drives, water seals for automotive air
conditioners, inking pads and nail files. Using its slitter, flame laminating
and thermoforming equipment in sequence, AM can produce other products such as
padding for helmets, mouse pads for computers, sunglass frames, holsters and
back support belts.

    In addition to fabricating polyurethane and polyethylene foam, AM fabricates
other materials used in combination with foam such as fabrics, pressure
sensitive adhesives and foils. AM also fabricates plastic films, pressure
sensitive adhesives and other materials not in combination with foam. This
capability enables AM to minimize its dependence on market sectors, which may be
cyclical in nature.

    AM manufactures its products for its industrial customers pursuant to
customer purchase orders, most of which provide for multiple shipping release
dates. This enables AM to plan raw material purchases and production scheduling.
For its largest accounts, AM will produce a two to four week supply of products
and stock them for quick delivery.

QUALITY CONTROL

    AM is ISO 9002 certified at its Rancho Dominguez, Dallas, Portland and
Ireland facilities. It also maintains systems and procedures that meet customer
quality specifications and has successfully completed qualification surveys
conducted by Fortune 500 OEM manufacturers. AM also maintains procedures for
conducting quality compliance surveys of its major suppliers. AM has specific
procedures in place for receiving inspection, source inspection, process
inspection and control, instrument calibration standards, records maintenance,
training and internal quality audits. AM has implemented systems for statistical

                                       4
<PAGE>
process control, which utilize statistical techniques to identify, monitor and
improve critical manufacturing processes such as sawing, die cutting and
thermoforming.

SUPPLIERS

    AM purchases raw materials primarily consisting of polyurethane foam,
crosslinked polyolefin foams and pressure sensitive adhesives. The Company's
largest supplier of raw materials is Foamex Engineered Polyurethanes ("Foamex"),
which in fiscal 1999, 1998 and 1997 supplied approximately 62%, 60% and 54%,
respectively, of AM's raw materials' requirement.

    AM is an authorized fabricating distributor of a number of raw material
suppliers, including Foamex, Voltek, Avery Dennison (pressure sensitive
adhesives), Zotefoam (crosslinked polyethylenes) and Ensolite (vinyl foam).
Management believes that these supply arrangements, many of which have been
active for 25 years or more, provide AM with a diverse mix of raw materials at
the best available prices. AM purchases raw materials pursuant to purchase
orders placed from time to time in the ordinary course of business. Failure or
delay by such suppliers in supplying necessary raw materials to AM could
adversely affect AM's ability to manufacture and deliver products on a timely
and competitive basis. AM purchases its raw materials on standard credit terms
and considers its relationship with its suppliers to be good.

    Management believes that the loss of either Foamex or Voltek as a major
supplier of foam would not have a materially adverse effect on AM's business in
the long term because other suppliers of foam could be relied upon to meet AM's
requirements at a comparable cost. However, the loss of either Foamex or Voltek
would have a materially adverse effect on AM's business in the short term
(approximately three months). Management believes that the loss of any other
supplier would not have a material adverse effect on AM.

    AM's business is subject to the risk of price fluctuations and periodic
shortages of raw materials. AM purchases raw materials pursuant to purchase
orders placed from time to time in the ordinary course of business. Failure or
delay by such suppliers in supplying necessary raw materials to AM could
adversely affect AM's ability to manufacture and deliver products on a timely
and competitive basis.

MARKETING AND SALES

    AM's products are marketed and sold primarily to major divisions of large
industrial customers, many of which are industry leaders whose products have
significant market share. All of AM's products are components or finished
products manufactured to order for its industrial customers. The customer's
purchase decision often involves the engineering, manufacturing and purchasing
groups within the customer's management.

    AM's eighteen full-time salesmen make sales in the United States on a direct
basis. Nine salesmen are in the field and nine salesmen provide inside sales
support. The nine field salesmen receive a base salary plus a commission and the
nine inside salesmen receive a salary. AM Ltd. has three full-time salesmen who
concentrate on the European market. AM's domestic sales as a percentage of total
sales were approximately 66%, 92% and 100% for fiscal years 1999, 1998 and 1997,
respectively.

    AM currently does business in a number of foreign regions including Asia,
Europe, South America and the Middle East. Foreign sales, which accounted for
approximately 34%, 8% and 0% of fiscal 1999, 1998 and 1997 sales, respectively,
are made on a direct basis and through sales agents who receive commissions.

    AM relies primarily upon referrals by its customers and vendors and the
activities of its salesmen for new business. AM advertises in the Thomas
Register, a sourcing guide for industrial engineering and purchasing groups. AM
also participates in industrial design and engineering trade shows as a means of
marketing its products.

                                       5
<PAGE>
BACKLOG

    AM manufactures all of its products pursuant to customer purchase orders.
Backlog is comprised of firm orders for products, which have a scheduled
shipment date within the next 12 months. Certain orders in the backlog may be
cancelled under certain conditions without significant penalty. At November 30,
1999, 1998 and 1997, AM's backlog of orders was approximately $6,207,000,
$8,248,000 and $8,597,000, respectively.

CUSTOMERS

    AM generally sells its products pursuant to customer purchase orders. There
can be no assurance that any such customers will continue to purchase products
from AM in the future. These customers are in the computer printer, medical
disposables, automotive air conditioning and consumer cleaning supply markets.
Management believes that this diversity spreads the risk of dependence upon one
customer or one market sector. However, Hewlett Packard accounted for 41% and
39% of consolidated revenues for the years ended November 30, 1999 and 1998,
respectively. Hewlett Packard and Ethicon Endo-Surgery accounted for 39% and
10%, respectively, of consolidated revenues for the year ended November 30,
1997. While AM has acquired new customers as well as orders for new products
from existing customers, the loss of one or more of its largest customers or a
decline in the economic prospects of such customers could have an adverse effect
on AM's business.

    AM's prices are competitive with other fabricators of custom materials. AM
sales are typically made on terms, which require payment of the net amount due
in 30 days.

    AM's domestic customers are located primarily in the West, Southwest and
Southeast regions of the United States. For bulky, low value products, high
freight costs on long distance shipments from AM's Rancho Dominguez, Portland,
Denver and Dallas facilities make it difficult for AM to be competitive in other
regions of the United States or internationally.

LICENSES AND PROPRIETARY RIGHTS

    The Company has secured a patent on a manufacturing process for fabricating
plastic foam sheet material with compound radius. AM relies on proprietary
know-how, exclusive license rights and distribution agreements, and employs
various methods to protect its processes. However, such methods may not afford
complete protection, and there can be no assurance that others will not
independently develop such processes.

COMPETITION

    The custom materials fabrication industry in which AM competes is highly
competitive. High barriers to entry and fragmented competition characterize the
industry. Barriers to entry are high because most of the products must be
produced by customized, proprietary equipment which is designed and/or built
in-house and cannot be produced with standard equipment. Most of the Company's
competitors are small, privately held companies, which generally specialize in
only one product or process. Three of the Company's principal competitors are
Boyd Industrial, which has four locations in the Western United States,
Packaging Alternatives Corp. and Foam Molders. AM competes primarily on the
basis of its ability to meet customers' specifications promptly and cost
effectively, and on the quality of its products.

    Current competitors or new market entrants could introduce new or enhanced
products with features which render AM's products obsolete or less marketable,
or could develop means of producing competitive products at a lower cost. The
ability of AM to compete successfully will depend in large measure on its
ability to adapt to technological changes in the industry. There can be no
assurance that AM will be able to keep pace with the technological demands of
the market place or successfully develop new products, which are in demand by
the industry.

                                       6
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GOVERNMENT REGULATION

    The manufacture of certain products by AM requires the purchase and use of
chemicals and other materials, which are or may be, classified as hazardous
substances. The Company and its subsidiaries do not maintain environmental
impairment insurance. There can be no assurance that the Company and its
subsidiaries will not incur environmental liability or that hazardous substances
are not or will not be present at their facilities.

    The Company and its subsidiaries are subject to regulations administered by
the United States Environmental Protection Agency, various state agencies,
county and local authorities acting in conjunction with federal and state
agencies and EU and Irish agencies. Among other things, these regulatory bodies
impose restrictions to control air, soil and water pollution. The extensive
regulatory framework imposes significant complications, burdens and risks on the
Company. Governmental authorities have the power to enforce compliance with
these regulations and to obtain injunctions and/or impose civil and criminal
fines or sanctions in the case of violations.

    The Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), imposes strict, joint and several liability
on the present and former owners and operators of facilities which release
hazardous substances into the environment. The Federal Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), regulates the generation,
transportation, treatment, storage and disposal of hazardous waste. In
California, the handling and disposal of hazardous substances is governed by the
law, which contains the California counterparts of CERCLA and RCRA. The Company
and its subsidiaries believe that their manufacturing activities are in
substantial compliance with all material Federal, state, EU, and Irish laws and
regulations governing their respective operations. Amendments to existing
statutes and regulations could require the Company or its subsidiaries to modify
or alter methods of operations at costs, which could be substantial. There can
be no assurance that the Company or its subsidiaries will be able, for financial
or other reasons, to comply with applicable laws and regulations.

    Various laws and regulations relating to safe working conditions, including
the Occupational Safety and Health Act ("OSHA"), are also applicable to the
Company and its subsidiaries. The Company believes it and its subsidiaries are
in substantial compliance with all material Federal, state, local, EU and Irish
laws and regulations regarding safe working conditions.

EMPLOYEES

    As of November 30, 1999, the Company and its subsidiaries had approximately
123 full-time employees, of whom approximately 63 were located at AM's Rancho
Dominguez, California facility, approximately 39 were located at AM's Dallas,
Texas facility, 6 were located at AM's Portland, OR facility, 3 were located at
AM's Denver, Colorado facility, and 12 were located at the Company's Ireland
subsidiary. Of the Company's full-time employees, approximately 83 are employed
in manufacturing, 15 are in sales, 19 perform general and administrative
functions and 6 perform other functions. The Company also utilizes the services
of contract workers as needed from time to time in its manufacturing operations.
As of November 30, 1999, the number of contract workers being utilized by the
Company was approximately 106.

    None of the employees of the Company or its subsidiaries are presently
represented by a labor union, and management considers the relationship of the
Company and its subsidiaries with its employees to be good.

ITEM 2. DESCRIPTION OF PROPERTY.

    The Company leases approximately 56,000 square feet of manufacturing and
office space in Rancho Dominguez, California, approximately 82,600 square feet
of manufacturing and office space in Dallas,

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Texas, approximately 28,500 and 14,600 square feet of warehousing and office
space in Portland, Oregon and approximately 3,700 square feet in Denver,
Colorado. The Company pays rent of approximately $22,400 per month under its
Rancho Dominguez lease, approximaely $22,700 per month under its Dallas lease,
approximately $8,300 and $7,700 under its Portland leases and approximately
$1,600 under its Denver lease. The Rancho Dominguez lease expires May 2002, the
Dallas lease expires in November 2000, the Portland leases expire February 2000
and July 2001 and the Denver lease expires in July 2001.

    The Company's Ireland subsidiary, Advanced Materials, Ltd., leases
approximaely 24,000 square feet of manufacturing and office space in Dublin,
Ireland. AM ltd. pays rent of approximately 9,750 Irish Pounds per month
(equivalent to approximately $14,650 per month at November 30, 1999) and the
lease expires in February 2003.

ITEM 3. LEGAL PROCEEDINGS.

    In October 1996, the Company was notified that it had been named in a bodily
injury lawsuit pending in the 192(nd) Judicial District Court of Dallas County
Texas, involving silicon breast implants. Such suit alleges that AM supplied
certain foam "wipers" which were incorporated into certain implants by
manufacturers also named in the suit, which have allegedly caused adverse
effects to the plaintiffs. The suit asks for unspecified damages. The Company
believes it has no exposure in this case as: (1) AM was not incorporated at the
time of such implants; (2) AM has had no involvement with silicone or other
breast implants; (3) AM has never marketed such "wipers"; and, (4) there exists
two indemnification agreements that provide protection to the Company. The
Company believes the aforementioned provide several layers of protection in the
event this case progresses. Accordingly, no provision for any liability has been
made in the accompanying consolidated financial statements. An adverse ruling
could, however, have a marked adverse effect on the Company's financial
condition.

    AM currently maintains product liability insurance in the amount of
$1,000,000, with excess umbrella coverage in the amount of $10,000,000. Except
for the breast implant suit, no product liability claims have been made to date.
However, there can be no assurance that any such claims will not be made in the
future in excess of such limits or that any such claims, if successful and in
excess of such limits, will not have a material adverse effect on AM's assets
and its ability to conduct its business.

    The Company's Condor subsidiary was named in a lawsuit originally filed in
the Superior Court of California, San Joaquin County, on January 24, 1992 by
Vern Auten and Shirley Auten, doing business as Aglo Plastics Company.
Plaintiffs alleged that Condor breached a supply contract by obtaining various
molds from a competing supplier, and sought damages therefor. Plaintiffs also
sought damages based upon an alleged intentional infliction of emotional
distress upon plaintiffs by a Condor employee and by its then owner. Condor
filed a cross-complaint alleging that plaintiffs breached the contract.
Plaintiffs received a non-binding arbitration award of approximately $267,000
plus interest. Condor had requested a trial de novo. Condor subsequently
received notice from an attorney representing the plaintiffs of an alleged
infringement by Condor of a patent held by the plaintiffs.

    On October 5, 1998, a jury entered a partial verdict finding that Condor had
breached the supply contract. A judgment in the amount of $382,500 was entered
in favor of the plaintiffs. In response to a motion by the plaintiffs the court,
on December 22, 1998 awarded attorneys' fees in the amount of $266,000. Condor
has recorded a provision in the amount of $975,000, which also includes
estimated interest on the award.

    The jury was unable to reach a verdict on the alleged intentional infliction
of emotional distress upon plaintiffs by a Condor employee and by its then
owner. This matter has been remanded back to the Superior Court of California,
San Joaquin County. The jury further found that the plaintiffs had not breached
the supply contract. The jury also found that Condor did not infringe on the
patent held by the plaintiffs.

                                       8
<PAGE>
    On July 19, 1999 the Company filed a complaint for declaratory relief
against Vern Auten and Shirley Auten, individually and doing business as Aglo
Plastics Co, in United States District Court, Southern District of California.
The relief sought by the Company is a declaration by the Court that Advanced
Materials Group, Inc., the parent company of Condor Utility Products, Inc., has
no obligation to pay the Condor Judgment. The ultimate outcome of this
litigation cannot presently be determined.

    In October 1999, the Company was notified that it and its Condor subsidiary
had been named in a lawsuit in the United States District Court, Eastern
District of California. Such suit alleges that the Company and its Condor
subsidiary and several other parties also named in the suit maliciously
prosecuted Vern and Shirley Auten. The suit seeks unspecified damages. The
ultimate outcome of this litigation cannot presently be determined.

    The sellers of Condor had agreed to indemnify the Company and Condor with
respect to any potential liability from the alleged breach of contract. Condor
has determined that it will be unable to collect against the indemnification
agreement. Since the assets of Condor are not sufficient to pay the full amount
of the award, Condor attempted to reach a settlement with the plaintiffs but was
unable to do so. It is unclear at this time if a settlement can be reached. The
plaintiffs have now indicated in writing that they may assert a claim against
the Company under principles of alter ego and related theories of liability. The
Company would vigorously defend itself against any such claim. An adverse ruling
could, however, have a material adverse effect on the Company's financial
condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    The Company did not submit any matter to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.

                                       9
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                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    The Company's common stock has traded on the NASDAQ Small-Cap Stock Market
("NASDAQ") under the symbol ADMG since June 23, 1993. The high and low closing
prices for the common stock for the past two fiscal years as reported by NASDAQ
are set forth in the following table. Such quotations reflect inter-dealer
prices, without retail mark-up, markdown or commission, and may not represent
actual transactions.

<TABLE>
<CAPTION>
FISCAL 1999                          HIGH           LOW       FISCAL 1998                         HIGH           LOW
-----------                      ------------   -----------   -----------                      -----------   ------------
<S>                              <C>            <C>           <C>                              <C>           <C>
Fourth Quarter.................  $     1 5/32   $    11/16    Fourth Quarter.................  $    1 7/16   $       7/8
Third Quarter..................  $    1 13/32   $         1   Third Quarter..................  $     2 5/8   $      1 1/2
Second Quarter.................  $     1 7/32   $    27/32    Second Quarter.................  $    3 7/16   $      2 5/8
First Quarter..................  $    1 17/32   $         1   First Quarter..................  $     3 1/2   $    2 23/32
</TABLE>

    There were 1,253 stockholders of record as of February 4, 2000.

    The present policy of the Company is to retain earnings to provide funds for
the operation and expansion of its business. The Company has paid no cash
dividends during the past three fiscal years and management does not anticipate
that it will do so in the foreseeable future.

                                       10
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ITEM 6. SELECTED FINANCIAL DATA.

                   CONSOLIDATED STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
                                   1999          1998          1997          1996          1995
                                -----------   -----------   -----------   -----------   -----------
<S>                             <C>           <C>           <C>           <C>           <C>
Revenues:
  Net sales...................  $34,798,000   $28,916,000   $28,898,000   $17,133,000   $14,728,000
Costs and expenses:
  Cost of sales...............   30,257,000    22,513,000    21,460,000    14,044,000    13,076,000
  Selling, general and
    administrative............    4,528,000     4,027,000     3,554,000     2,526,000     2,725,000
  Write-off of start-up costs            --       608,000            --            --            --
  Write-off of capitalized
    license...................           --       158,000            --            --            --
  Write-down of goodwill......           --       909,000            --            --       719,000
  Interest expense............      504,000       298,000       211,000       561,000       783,000
  Loss on discontinued
    operations................           --     1,627,000       223,000        94,000            --
  Depreciation and
    amortization..............      220,000       322,000       369,000       369,000       401,000
  Other.......................      163,000       247,000       124,000        11,000            --
                                -----------   -----------   -----------   -----------   -----------
    Total costs and
      expenses................   35,672,000    30,709,000    25,941,000    17,605,000    17,704,000
                                -----------   -----------   -----------   -----------   -----------
Other income:
  Realized gain on sale of
    securities................           --            --       139,000     4,310,000            --
  Gain on forgiveness of
    debt......................           --            --            --       508,000            --
                                -----------   -----------   -----------   -----------   -----------
Income (loss) before income
  taxes.......................     (874,000)   (1,793,000)    3,096,000     4,346,000    (2,976,000)
Income taxes..................           --      (538,000)     (180,000)     (162,000)       (3,000)
                                -----------   -----------   -----------   -----------   -----------
Net income (loss).............  $  (874,000)  $(2,331,000)  $ 2,916,000   $ 4,184,000   $(2,979,000)
                                ===========   ===========   ===========   ===========   ===========
Net income (loss) per share
  Basic.......................  $     (0.10)  $     (0.27)  $      0.30   $      0.40   $     (0.32)
                                ===========   ===========   ===========   ===========   ===========
  Diluted.....................  $     (0.10)  $     (0.27)  $      0.27   $      0.39   $     (0.32)
                                ===========   ===========   ===========   ===========   ===========
Working capital...............  $ 1,356,000   $ 2,055,000   $ 3,505,000   $ 4,266,000   $ 1,051,000
Total assets..................  $16,092,000   $12,682,000   $12,601,000   $13,661,000   $14,126,000
Total liabilities.............  $13,105,000   $ 8,565,000   $ 6,265,000   $ 7,091,000   $10,497,000
Stockholders' equity..........  $ 2,987,000   $ 4,117,000   $ 6,336,000   $ 6,570,000   $ 3,629,000
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.

RESULTS OF OPERATIONS FOR FISCAL 1999 COMPARED WITH 1998 AND 1998 COMPARED WITH
  1997

    The Company's revenue from continuing operations for the fiscal year ended
November 30, 1999 was $34.8 million, an increase of 20.3% compared to fiscal
1998. Revenues from the Singapore strategic manufacturing venture grew to
$8,409,000 in fiscal 1999 from $2,035,000 in 1998. Revenues in Ireland grew to
$3,313,000 in fiscal 1999 from $423,000 in 1998. Revenues from U.S. operations
declined to $23,076,000 in fiscal 1999 from $26,458,000 in 1998. The shift in
revenues from U.S.-based plants to overseas operations is due to local sourcing
requirements of a major customer. This shift first began in mid-1998. Revenues
in 1998 were essentially flat compared to fiscal 1997. Revenues from the
Singapore strategic manufacturing venture grew to $2,035,000 in fiscal 1998 from
$0 in 1997. Revenues in Ireland grew to $423,000 in fiscal 1998 from $0 in 1997.
Revenues from U.S. operations declined to $26,458,000 in fiscal 1998 from
$28,898,000 in 1997.

                                       11
<PAGE>
    Cost of sales in fiscal 1999 increased by 34.4% to $30,257,000, from
$22,513,000 in 1998. Lower volumes at the Company's domestic locations has led
to lower capacity utilization and negatively impacted labor and overhead
absorption. The Company has responded to declining U.S. volumes by announcing
closures of plants in Portland, Oregon and Denver, Colorado. AMG's expansion in
Ireland added fixed cost. Profit sharing in the Singapore strategic
manufacturing venture also added significantly to cost of sales. The Company
also experienced pricing pressures during the year. Cost of sales increased 4.9%
in 1998 from 1997. AMG added manufacturing capacity with expansions in Ireland
and a strategic manufacturing relationship with a company in Singapore. Lower
volumes at the Company's domestic locations led to lower capacity utilization
and negatively impacted labor and overhead absorption. The Company also
experienced pricing pressures and larger than expected start-up costs on certain
new products in the second half of the year.

    AMG's gross profit percentage was 13.1% in 1999, compared to 22.1% in 1998
and 25.7% in 1997.

    Selling, general and administrative expense increased in 1999 to $4,528,000,
versus $4,027,000, excluding $608,000 of Ireland start-up expenses and a
$158,000 write-off of a capitalized license. The increase is due primarily to
the expansion of the U.S. sales force and as a result of the manufacturing
expansion at the Company's subsidiary in Ireland. Selling, general and
administrative expense increased 13% to $4,027,000 in 1998 due to the
manufacturing expansion at the Company's subsidiary in Ireland.

    Interest expense in fiscal 1999 was $504,000 compared to $298,000 in fiscal
1998. The increase was due to a change in the discount factor used for deferred
compensation, higher borrowing levels to support the Company's expansion in
Ireland and Singapore and higher interest rates. In 1998 interest expense
increased by $87,000 as a result of the Company's expansion in Ireland and
Singapore.

    The Company has no income tax expense in fiscal 1999 due primarily to the
1999 net loss and an increase in the valuation allowance relative to deferred
tax assets. The Company recorded a tax provision of $538,000 in fiscal 1998 due
to foreign losses without tax benefit and an increase in the valuation allowance
relative to deferred tax assets. This resulted in an effective tax rate of 35.7%
in 1998.

    Net loss from continuing operations for fiscal 1999 was $874,000 compared to
a net loss from continuing operations in 1998 of $704,000. Fiscal 1998 results
included several non-recurring items including start-up costs incurred of
approximately $608,000 related to the Company's Ireland facility, a write-off of
$158,000 for license rights relative to technology which has been discontinued
and an impairment charge of $909,000 on goodwill associated with the
discontinuance of product sales relative to the purchase of certain assets of
Wilshire Technologies Inc.'s OEM Medical Products Division in 1993. Exclusive of
these items, fiscal 1998 net income from continuing operations would have been
$971,000.

    Fiscal 1997 results included a one-time transaction relating to the sale of
50,000 shares of IT stock in January 1997. Excluding this one-time transaction
the Company would have reported net income from continuing operations of
$3.2 million.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's operating activities consumed $1,245,000 from operating
activities in fiscal 1999, compared to cash generated of $749,000 and $2,740,000
in 1998 and 1997, respectively.

    Accounts receivable increased by approximately $2.1 million in 1999 as a
result of shipments to Singapore, which is partially offset by increases to
accounts payable and deferred income totaling $1.7 million. Inventory, primarily
in raw materials, increased in 1999 as a direct result of the increase in sales
volume. During the three-year period the Company experienced an increase in its
concentration of credit risk as one customer, Hewlett Packard, accounted for 41%
of revenue during fiscal 1999, compared to 39% in 1998 and 1997. The same
customer accounted for 29% and 34% of accounts receivable at the end of 1999 and
1998, respectively.

                                       12
<PAGE>
    AMG invested $1,012,000 and $1,315,000 in capital equipment to start-up
operations in Ireland and to support domestic product-line expansion, in 1999
and 1998, respectively. In 1997, the Company invested $794,000 in capital
equipment to support increases in production volumes and upgrade computer
systems throughout the Company. The Company currently has outstanding capital
equipment commitments totaling $100,000.

    The Company had approximately $496,000 of cash and cash equivalents at
November 30, 1999. The Company's operating credit line with its primary lenders
has current availability, as of February 4, 2000, of $5,000,000 with $3,800,000
currently outstanding. AML has a commitment from an Irish lender to provide up
to $800,000 for capital equipment expenditures. AML currently has $396,000
outstanding against this line. AML also has a commitment from an Irish bank to
provide a $200,000 overdraft facility. Currently, there is no outstanding
balance against this line. The Company anticipates that existing cash, cash from
operations and existing lines of credit will supply sufficient cash for
investment, working capital requirements, capital expenditures and debt payments
for the next twelve months.

    Prior to year end the Company entered in to a forbearance agreement with its
bank after it violated several debt covenants during fiscal 1999. In February
2000, the Company also entered into a new asset-based credit agreement which
will provide a borrowing base of $5,650,000.

BUSINESS OUTLOOK

    The outlook section contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may differ materially.

    The Company currently has sufficient orders from OEMs to believe that sales
growth will continue in fiscal 2000. Based on current projected order releases
from major customers, the sales growth year-to-year is projected to be
approximately 15% in fiscal 2000. Ireland is expected to show substantial growth
in 2000, with more modest growth projected from the Singapore strategic
manufacturing venture and U.S. operations.

    Gross profit and operating profit margins are expected to improve in 2000,
primarily due to the Company's plant closures in the U.S. and growth in Ireland.

    Interest expense is expected to increase in fiscal 2000 due to anticipated
higher average interest rates.

IMPACT OF YEAR 2000

    In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $35,000 during 1999 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

    The Private Securities Litigation Reform Act of 1995 provides for a "safe
harbor" for forward looking statements to encourage Companies to provide
prospective information about their companies without fear of litigation so long
as those statements are identified as forward looking and are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in the statement. The
Act only became law in late December 1995 and,

                                       13
<PAGE>
except for the Conference Report, no official interpretations of the Act's
provisions have been published. Accordingly, the Company hereby identifies the
following important factors which could cause the Company's actual financial
results to differ materially from any such results which might be projected,
forecast, estimated or budgeted by the Company in forward looking statements.

a)  General business conditions, including a worsening economy which might slow
    the overall demand for the Company's products; increased inflationary
    pressures which might lead to increasing prices for raw materials, labor,
    and increases of interest costs based on the Company's borrowing activities.

b)  Competitive factors, including the entry of new competitors into the
    marketplace and/or heightened competition from existing competitors leading
    to increased price competition and margin erosion; and the introduction of
    new products or technologies by customers or competitors.

c)  Under utilization of the Company's factories and plants, or of any new
    plants.

d)  Concentrations of sales in markets and customers.

e)  Failures to obtain new customers, retain existing customers or volume
    reductions by current customers.

f)  Concentrations of raw material suppliers, including difficulties or delays
    in obtaining raw materials.

g)  Inability to execute marketing and sales plans, including price increases.

h)  Inability to develop cost effective means for timely production of new
    product orders in required quantities.

i)  Delays or cancellations of orders; timing of significant orders; and
    introduction of new products.

j)  Delays in development of production equipment required for new products.

k)  Short-term fluctuations in margins due to yields and efficiencies.

l)  The effects of changes in foreign currencies.

m) Loss of executive management or other key employees.

n)  Changes in financing amount, availability or cost.

o)  The effects of changes in costs and availability of insurance coverage.

p)  The effects of changes in compensation or benefit plans.

q)  Adoptions of new, or changes in, accounting policies and practices and the
    application of such policies and practices.

r)  Adverse results in significant litigation matters.

    The foregoing review of factors pursuant to the Private Litigation
Securities Reform Act of 1995 should not be construed as exhaustive or as any
admission regarding the adequacy of disclosures made by the Company prior to the
effective date of said Act.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures its product in the
United States, Ireland and Singapore and sells the products in those markets as
well. As a result, the Company's financial results could be affected by factors
such as changes in foreign currency exchange rates or weak economic conditions
in the foreign markets in which the Company distributes its products. The
Company's functional currency has been determined to be of the United States
dollars since the parent company funds all the capital and start-up costs,
ongoing capital expenditures as well as the operating losses of the foreign
subsidiaries. In addition,

                                       14
<PAGE>
the majority of the sales is also denominated in Unites States dollars. The
Company maintained the books of its Singapore operations in the Unites States
dollar and maintained the books of its Ireland operations in Irish pounds.
Accordingly, the financial statements of the Irish subsidiary are remeasured to
the United States dollars and the translation gains or losses are reflected in
the Company's statement of operations. The Company believes its exposure to
translation gains and losses with respect to its foreign operations in minimal
due to the stability of the foreign markets in which the Company operates.

    The Company's interest expense is most sensitive to changes in interest
rates relating primarily to the Company's current and future debt obligations.
The Company is vulnerable, however, to significant fluctuations of interest
rates on its floating rate debt.

    The following table provides information about the Company's debt
obligations that are sensitive to changes in interest rates (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                                                          FAIR
                                                                                                         VALUE
                                 2000       2001       2002       2003     2004 THEREAFTER    TOTAL     11/30/99
                               --------   --------   --------   --------   ---------------   --------   --------
<S>                            <C>        <C>        <C>        <C>        <C>               <C>        <C>
LIABILITIES
Line of credit...............   $5,600                                                        $5,600     $5,600
Avg. interest rate...........  P+1.25

Term loan....................   $ 800      $ 800      $ 800                                   $2,400     $2,400
Avg. interest rate...........  LIBOR      LIBOR      LIBOR
                                +2.5       +2.5       +2.5

Conv. Debentures.............   $ 405      $ 405      $ 405       $405          $405          $2,025     $2,025
Avg. interest rate...........     7.5%       7.5%       7.5%       7.5%          7.5%
</TABLE>

                                       15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS.

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors

Advanced Materials Group, Inc.

    We have audited the accompanying consolidated balance sheets of Advanced
Materials Group, Inc. and its subsidiaries (the "Company") as of November 30,
1999 and 1998 and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended November 30, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of the
Company for the year ended November 30, 1997 were audited by other auditors
whose report dated January 14, 1998 expressed an unqualified opinion on those
statements.

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Advanced
Materials Group, Inc. and its subsidiaries at November 30, 1999 and 1998, and
the consolidated results of their operations and their cash flows for the two
years in the period ended November 30, 1999, in conformity with accounting
principles generally accepted in the United States.

                                                           /s/ Ernst & Young LLP

Orange County, California
January 21, 2000, except for Note 15
as to which the date is February 23, 2000

                                       16
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors

Advanced Materials Group, Inc.

    We have audited the accompanying consolidated statements of operations,
stockholder's equity and cash flows of Advanced Materials Group, Inc. and its
subsidiaries (the "Company") for the year ended November 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
financial statements based on our audit.

    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 consolidated results of operations
and cash flows of Advanced Materials Group, Inc. and its subsidiaries for the
year ended November 30, 1997 in conformity with generally accepted accounting
principles.

                                          CORBIN & WERTZ

Irvine, California
January 14, 1998

                                       17
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                 1999          1998          1997
                                                              -----------   -----------   -----------
<S>                                                           <C>           <C>           <C>
Net sales...................................................  $34,798,000   $28,916,000   $28,898,000
Cost of sales (including depreciation of $741,000, $618,000
  and $499,000 for the years ended November 30, 1999, 1998
  and 1997, respectively)...................................   30,257,000    22,513,000    21,460,000
                                                              -----------   -----------   -----------
Gross profit................................................    4,541,000     6,403,000     7,438,000
                                                              -----------   -----------   -----------
Operating expenses:
  Selling, general and administrative.......................    4,528,000     4,027,000     3,554,000
  Write-off of start-up costs...............................           --       608,000            --
  Write-off of capitalized license..........................           --       158,000            --
  Write-down of goodwill....................................           --       909,000            --
  Depreciation and amortization.............................      220,000       322,000       369,000
                                                              -----------   -----------   -----------
    Total operating expenses................................    4,748,000     6,024,000     3,923,000
Income (loss) from operations...............................     (207,000)      379,000     3,515,000
Other income (expense):
  Realized gain on sale of securities.......................           --            --       139,000
  Interest expense..........................................     (504,000)     (298,000)     (211,000)
  Foreign exchange loss.....................................       (5,000)      (44,000)           --
  Other, net................................................     (158,000)     (203,000)     (124,000)
                                                              -----------   -----------   -----------
    Total other income (expense)............................     (667,000)     (545,000)     (196,000)
Income (loss) from continuing operations before income
  taxes.....................................................     (874,000)     (166,000)    3,319,000
Income tax expense..........................................           --      (538,000)     (180,000)
                                                              -----------   -----------   -----------
Income (loss) from continuing operations....................     (874,000)     (704,000)    3,139,000
Discontinued operations:
  Loss from operations of Condor Utility Products, Inc. (net
    of
    income tax benefit of $0, $390,000 and $0 for the years
    ended
    November 30, 1999, 1998 and 1997, respectively).........           --    (1,405,000)     (223,000)
  Estimated loss on disposal of Condor Utility Products,
    Inc. (net of income tax benefit of $148,000)............           --      (222,000)           --
                                                              -----------   -----------   -----------
Net loss from discontinued operations.......................           --    (1,627,000)     (223,000)
                                                              -----------   -----------   -----------
Net income (loss)...........................................  $  (874,000)  $(2,331,000)  $ 2,916,000
                                                              ===========   ===========   ===========
Basic earnings (loss) per common share:
  Income (loss) from continuing operations..................  $     (0.10)  $     (0.08)  $      0.32
  Loss from discontinued operations.........................           --         (0.16)        (0.02)
  Estimated loss on disposal of Condor Utility Products,
    Inc.....................................................           --         (0.03)           --
                                                              -----------   -----------   -----------
    Net income (loss) per share.............................  $     (0.10)  $     (0.27)  $      0.30
                                                              ===========   ===========   ===========
Diluted earnings (loss) per common share:
  Income (loss) from continuing operations..................  $     (0.10)  $     (0.08)  $      0.29
  Loss from discontinued operations.........................           --         (0.16)        (0.02)
  Estimated loss on disposal of Condor Utility Products,
    Inc.....................................................           --         (0.03)           --
                                                              -----------   -----------   -----------
    Net income (loss) per share.............................  $     (0.10)  $     (0.27)  $      0.27
                                                              ===========   ===========   ===========
Basic weighted average common shares outstanding............    8,581,630     8,717,609     9,664,513
                                                              ===========   ===========   ===========
Diluted weighted average common shares outstanding..........    8,581,630     8,717,609    10,622,187
                                                              ===========   ===========   ===========
</TABLE>

          See accompanying notes to consolidated financial statements

                                       18
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

                          CONSOLIDATED BALANCE SHEETS

                           NOVEMBER 30, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                 1999          1998
                                                              -----------   -----------
<S>                                                           <C>           <C>
                           ASSETS
Current assets:
  Cash and cash equivalents.................................  $   496,000   $   528,000
  Accounts receivable, net of allowance for doubtful
    accounts of $100,000 as of November 30, 1999 and 1998,
    respectively............................................    7,238,000     5,188,000
  Inventories, net of allowance for obsolescense of $166,000
    and $77,000 as of November 30, 1999 and 1998,
    respectively............................................    3,857,000     2,543,000
  Income taxes receivable...................................      261,000       199,000
  Deferred income taxes.....................................      337,000       526,000
  Prepaid expenses and other................................      172,000       119,000
                                                              -----------   -----------
    Total current assets....................................   12,361,000     9,103,000
                                                              -----------   -----------
Property and equipment, net.................................    2,507,000     2,392,000
Goodwill, net of accumulated amortization of $441,000 and
  $377,000 as of November 30, 1999 and 1998, respectively...      514,000       578,000
Deferred income taxes.......................................      473,000       504,000
Other assets................................................      237,000       105,000
                                                              -----------   -----------
    Total assets............................................  $16,092,000   $12,682,000
                                                              ===========   ===========

            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 4,448,000   $ 2,887,000
  Income taxes payable......................................      308,000       137,000
  Accrued liabilities.......................................    1,807,000     1,763,000
  Deferred income...........................................      337,000       224,000
  Line of credit............................................    3,823,000     1,800,000
  Current portion of long-term obligations..................      282,000       237,000
                                                              -----------   -----------
    Total current liabilities...............................   11,005,000     7,048,000
                                                              -----------   -----------
  Term loan.................................................      396,000       150,000
  Convertible debentures....................................      405,000       405,000
  Deferred compensation, net of current portion of $203,000
    and $210,000 at November 30, 1999 and 1998,
    respectively............................................    1,056,000       931,000
  Capital lease obligations, net of current portion of
    $79,000 and $27,000 at November 30, 1999 and 1998,
    respectively............................................      243,000        31,000
                                                              -----------   -----------
    Total liabilities.......................................   13,105,000     8,565,000
                                                              -----------   -----------
Commitments and contingencies (Note 9)
Stockholders' equity:
  Preferred stock--$.001 par value; 5,000,000 shares
    authorized; no shares issued and outstanding............           --            --
  Common stock--$.001 par value; 25,000,000 shares
    authorized; 8,519,055 and 8,729,455 shares issued and
    outstanding at November 30, 1999 and 1998,
    respectively............................................        9,000         9,000
  Additional paid-in capital................................    6,987,000     7,243,000
  Accumulated deficit.......................................   (4,009,000)   (3,135,000)
                                                              -----------   -----------
    Total stockholders' equity..............................    2,987,000     4,117,000
                                                              -----------   -----------
    Total liabilities and stockholders' equity..............  $16,092,000   $12,682,000
                                                              ===========   ===========
</TABLE>

          See accompanying notes to consolidated financial statements

                                       19
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                    ACCUMULATED
                                 COMMON STOCK         ADDITONAL        OTHER                         TOTAL
                             ---------------------     PAID-IN     COMPREHENSIVE   ACCUMULATED   STOCKHOLDERS'   COMPREHENSIVE
                               SHARES      AMOUNT      CAPITAL     INCOME (LOSS)     DEFICIT        EQUITY          INCOME
                             ----------   --------   -----------   -------------   -----------   -------------   -------------
<S>                          <C>          <C>        <C>           <C>             <C>           <C>             <C>
Balances, November 30,
  1996.....................  10,458,742   $10,000    $10,192,000      $ 88,000     $(3,720,000)   $6,570,000      $       --
Net income.................          --        --             --            --       2,916,000     2,916,000       2,916,000
Expense recorded in
  connection with stock
  issued...................      16,877        --         12,000            --              --        12,000              --
Stock options exercised....      95,000     1,000        135,000            --              --       136,000              --
Stock issued as a result of
  conversion of debt, at
  $3.59 or $4.37 per
  share....................      34,186        --        130,000            --              --       130,000              --
Common stock repurchased by
  the Company and
  retired..................  (2,000,000)   (2,000)    (3,498,000)           --              --    (3,500,000)             --
Consulting expense recorded
  as a result of options
  granted to a
  non-employee.............          --        --        160,000            --              --       160,000              --
Reclassification adjustment
  for realized gain on
  available-for-sale
  securities included in
  net income...............          --        --             --       (88,000)             --       (88,000)        (88,000)
Comprehensive income.......          --        --             --            --              --            --       2,828,000
                             ----------   -------    -----------      --------     -----------    ----------      ----------
Balances, November 30,
  1997.....................   8,604,805     9,000      7,131,000            --        (804,000)    6,336,000              --
Net loss...................          --        --             --            --      (2,331,000)   (2,331,000)             --
Stock options exercised....     154,250        --        151,000            --              --       151,000              --
Common stock repurchased by
  the Company and
  retired..................     (29,600)       --        (39,000)           --              --       (39,000)             --
                             ----------   -------    -----------      --------     -----------    ----------      ----------
Balances, November 30,
  1998.....................   8,729,455     9,000      7,243,000            --      (3,135,000)    4,117,000              --
Net loss...................          --        --             --            --        (874,000)     (874,000)             --
Stock options exercised....      15,000        --         10,000            --              --        10,000              --
Common stock repurchased by
  the Company and
  retired..................    (225,400)       --       (266,000)           --              --      (266,000)             --
                             ----------   -------    -----------      --------     -----------    ----------      ----------
Balances, November 30,
  1999.....................   8,519,055   $ 9,000    $ 6,987,000      $     --     $(4,009,000)   $2,987,000      $       --
                             ==========   =======    ===========      ========     ===========    ==========      ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       20
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                            1999          1998          1997
                                                         -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>
Cash flows from operating activities:
  Net income (loss)....................................  $  (874,000)  $(2,331,000)  $ 2,916,000
  Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
    Depreciation.......................................      897,000       951,000       729,000
    Amortization.......................................       64,000       415,000       313,000
    Write-off of capitalized license...................           --       158,000            --
    Provision for bad debt.............................           --        (2,000)        2,000
    Provision for obsolete inventory...................       89,000      (113,000)       98,000
    Write-down of goodwill.............................           --     1,523,000            --
    Deferred income taxes..............................      220,000      (619,000)     (377,000)
    Interest and other on deferred compensation........      170,000       138,000      (137,000)
    Loss on disposal of fixed assets...................           --         5,000         7,000
    Expense recorded in connection with stock issued...           --            --        12,000
    Consulting expense recorded as a result of options
      granted to a non-employee........................           --            --       160,000
    Gain on sale of available-for-sale securities......           --            --      (139,000)
    Write-off of note receivable from affiliate........           --        50,000            --
    Discontinued operations (Note 12)..................      (71,000)      975,000            --
    Changes in operating assets and liabilities:
      Accounts receivable--trade.......................   (2,050,000)   (1,464,000)     (990,000)
      Income taxes receivable..........................      (62,000)     (199,000)       20,000
      Inventories......................................   (1,403,000)       36,000      (454,000)
      Prepaid expenses and other.......................      (53,000)       11,000        60,000
      Other assets.....................................     (132,000)       22,000       (51,000)
      Accounts payable and accrued liabilities.........    1,676,000     1,071,000       386,000
      Deferred income..................................      113,000       224,000            --
      Income taxes payable.............................      171,000      (102,000)      185,000
                                                         -----------   -----------   -----------
  Net cash (used in) provided by operating
    activities.........................................   (1,245,000)      749,000     2,740,000
                                                         -----------   -----------   -----------
Cash flows from investing activities:
    Purchases of property and equipment................   (1,012,000)   (1,315,000)     (794,000)
    Proceeds from sale of available-for-sale
      securities.......................................           --            --       163,000
                                                         -----------   -----------   -----------
  Net cash used in investing activities................  $(1,012,000)  $(1,315,000)  $  (631,000)
                                                         -----------   -----------   -----------
</TABLE>

                                       21
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                            1999          1998          1997
                                                         -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>
Cash flows from financing activities:
    Exercise of common stock options...................  $    10,000   $   151,000   $   136,000
    Purchase and retirement of common stock............     (266,000)      (39,000)   (3,500,000)
    Net borrowings under line of credit................    2,023,000       625,000       136,000
    Borrowings under term loan.........................      246,000       150,000            --
    Proceeds received from capitalized financing.......      323,000        55,000            --
    Payments on debt...................................           --            --      (988,000)
    Payments on capital lease obligations..............      (30,000)      (31,000)      (79,000)
    Payments on deferred compensation..................      (59,000)     (123,000)     (141,000)
    Payments on capitalized financing..................      (22,000)       (6,000)           --
                                                         -----------   -----------   -----------
  Net cash provided by (used in) financing
    activities.........................................    2,225,000       782,000    (4,436,000)
                                                         -----------   -----------   -----------
  Net change in cash and cash equivalents..............      (32,000)      216,000    (2,327,000)
  Cash and cash equivalents, beginning of year.........      528,000       312,000     2,639,000
                                                         -----------   -----------   -----------
  Cash and cash equivalents, end of year...............  $   496,000   $   528,000   $   312,000
                                                         ===========   ===========   ===========

  Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest...........................................  $   377,000   $   222,000   $   312,000
                                                         ===========   ===========   ===========

    Income taxes.......................................  $        --   $   924,000   $   352,000
                                                         ===========   ===========   ===========
</TABLE>

Supplemental schedule of non-cash investing and financing activities:

    During the year ended November 30, 1999, the Company acquired approximately
    $323,000 of property and equipment through capitalized financing agreements.

    During the year ended November 30, 1998, the Company acquired approximately
    $55,000 of property and equipment through capitalized financing agreements.

    During the year ended November 30, 1997, the Company issued common stock in
    connection with the conversion of certain Convertible debt totaling
    $130,000.

          See accompanying notes to consolidated financial statements

                                       22
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.
                       VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                                  DEDUCTIONS
                                                                          UNCOLLECTIBLE
                                                                            ACCOUNTS
                                               BALANCE AT    ADDITIONS    WRITTEN OFF,                 BALANCE AT
                                              BEGINNING OF   CHARGES TO      NET OF       INVENTORY      END OF
                                                 PERIOD       EXPENSES     RECOVERIES     WRITEN OFF     PERIOD
                                              ------------   ----------   -------------   ----------   ----------
<S>                                           <C>            <C>          <C>             <C>          <C>
Year Ended November 30, 1997
  Allowance for doubtful accounts...........    $ 98,000     $   2,000       $    --       $     --     $100,000
  Allowance for obsolete, discontinue
    inventory...............................      92,000        98,000            --         24,000      166,000
                                                --------     ---------       -------       --------     --------
      Total.................................    $190,000     $ 100,000       $    --       $ 24,000     $266,000
                                                --------     ---------       -------       --------     --------
Year Ended November 30, 1998
  Allowance for doubtful accounts...........    $100,000     $  (2,000)      $(2,000)            --     $100,000
  Allowance for obsolete, discontinue
    inventory...............................     166,000      (113,000)           --        (24,000)      77,000
                                                --------     ---------       -------       --------     --------
      Total.................................    $266,000     $(115,000)      $(2,000)      $(24,000)    $177,000
                                                --------     ---------       -------       --------     --------
Year Ended November 30, 1999
  Allowance for doubtful accounts...........    $100,000     $      --       $    --       $     --     $100,000
  Allowance for obsolete, discontinue
    inventory...............................      77,000        89,000            --             --      166,000
                                                --------     ---------       -------       --------     --------
      Total.................................    $177,000     $  89,000       $    --       $     --     $266,000
                                                --------     ---------       -------       --------     --------
</TABLE>

                                       23
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

    Advanced Materials Group, Inc. and its subsidiaries ("AMG" or the "Company")
engage in the conversion of specialty materials, including foams, films and
adhesive composites into components and finished products for the computer
peripheral, medical, automotive, aerospace and consumer products markets. The
Company has manufacturing facilities throughout the United States and Ireland,
as well as a strategic manufacturing alliance in Singapore. During 1998 the
Company discontinued the operations of its Condor Utility Products, Inc.
subsidiary. See Note 12, Discontinued Operations.

Principles of Consolidation

    The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The Company's Ireland subsidiary, Advanced
Materials Ltd., operates under a fiscal year ending October 31. There were no
intervening events from October 31, 1999 to November 30, 1999 that would
materially affect the consolidated financial statements for the year ended
November 30, 1999.

Reclassifications

    Certain fiscal 1998 and 1997 amounts in the accompanying consolidated
financial statements have been reclassified to conform to the fiscal 1999
presentation.

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 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 in the near term.

Cash and Cash Equivalents

    The Company considers highly liquid investments with a remaining maturity of
three months or less when purchased to be cash equivalents. The Company's cash
equivalents at November 30, 1999 consist primarily of investments in a money
market fund.

Fair Value of Financial Instruments

    The carrying amounts of financial instruments including cash equivalents,
accounts receivable and accounts payable approximated fair value at
November 30, 1999 because of the relatively short maturity of these instruments.
The carrying value of debt approximated fair value at November 30, 1999 due to
the Company's ability to obtain financing at similar interest rates from other
lenders.

Inventories

    Inventories consist of raw materials, work-in-progress and finished goods
and are stated at the lower of cost (first-in, first-out basis) or market.

                                       24
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment

    Property and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation and amortization are computed using the straight-line
method over estimated useful lives of three to seven years. Leasehold
improvements are being amortized on a straight-line basis over the lesser of the
useful life of the related improvements or term of the lease. Depreciation
expense was approximately $897,000, $951,000 and $729,000 for the years ended
November 30, 1999, 1998 and 1997, respectively, of which $741,000, $618,000 and
$499,000, respectively, is included in cost of sales in the accompanying
consolidated statements of operations.

Goodwill

    Goodwill, which represents the excess of the purchase price over the fair
value of net assets acquired, is amortized on a straight-line basis over
15 years.

Impairment of Long-Lived Assets

    The Company assesses the recoverability of its long-lived and certain
intangible assets, including goodwill, by determining whether the related asset
balance can be recovered through projected undiscounted cash flows. The amount
of impairment, if any, is measured based on projected discounted future cash
flows (fair value) and charged to operations in the period in which impairment
is determined by management. During the year ended November 30, 1998, management
determined that $909,000 of goodwill associated with the Company's purchase of
certain assets of Wilshire Technologies Inc.'s OEM Medical Products Division had
been impaired, as these products have been discontinued and no future cash flow
is anticipated. Accordingly, this amount was charged to operations as reflected
in the accompanying 1998 consolidated statement of operations.

    Additionally, approximately $614,000 of goodwill related to the Condor
facility was written-off in 1998 as part of the discontinuation of the
operations of Condor Utility Products, Inc. See Note 12, Discontinued
Operations.

    During 1998 the Company wrote-off the net balance of capitalized license
rights, approximately $158,000. The license pertained to a worldwide license to
manufacture, use and sell certain industrial products utilizing proprietary
polymers and processes to be developed by Innovative Technologies ("IT"). IT
never successfully developed such technologies and during 1998 cancelled all
plans to develop such technologies. Based on these events management of the
Company determined that the valuation of capitalized license rights had been
impaired, and accordingly, charged approximately $158,000 to operations as
reflected in the accompanying 1998 consolidated statement of operations.

    There were no impairment charges for the years ended November 30, 1999 and
1997.

Revenue Recognition

    The Company recognizes revenue upon shipment of product.

                                       25
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising Costs

    Advertising costs are expensed as incurred. Advertising costs were
approximately $23,000, $33,000, and $44,000 for the years ended November 30,
1999, 1998 and 1997, respectively and are included in selling, general and
administrative expenses in the accompanying consolidated statements of
operations.

Concentrations of Credit Risk

CASH AND CASH EQUIVALENTS

    At November 30, 1999 and 1998 the Company maintained cash balances at
certain financial institutions in excess of federally insured limits.

ACCOUNTS RECEIVABLE

    The Company generally sells its products pursuant to customer orders. The
Company extends credit to customers and performs periodic credit evaluations of
such customers. The Company periodically evaluates its accounts receivable for
collectibility and provides a reserve for losses resulting therefrom.

CUSTOMERS

    Hewlett Packard accounted for 41% and 39% of the consolidated revenues for
the years ended November 30, 1999 and 1998, respectively. Hewlett Packard and
Ethicon Endo-Surgery accounted for 39% and 10%, respectively, of the
consolidated revenues for the year ended November 30, 1997. Hewlett Packard
accounted for 29% and 34% of the consolidated accounts receivable as of
November 30, 1999 and 1998, respectively. While the Company has acquired new
customers as well as orders for new products from existing customers, the loss
of one or more of its largest customers or a decline in the economic prospects
of such customers could have a material adverse effect on the Company's
business.

SUPPLIERS

    Foamex accounted for 62% of the consolidated purchases for the year ended
November 30, 1999. Foamex and Voltek accounted for 60% and 11%, respectively, of
the consolidated purchases for the year ended November 30, 1998. Foamex and
Voltek accounted for 54% and 16% of the consolidated purchases for the year
ended November 30, 1997. Foamex accounted for 19% of the consolidated accounts
payable at November 30, 1999. Foamex and Voltek accounted for 27% and 15%,
respectively, of the consolidated accounts payable at November 30, 1998.
Management believes that the loss of any of its major suppliers would not have a
material adverse effect on the Company's operations long-term, due to the
availability of other suppliers. However, the loss of a major supplier could
have a material adverse effect on operations in the short-term (estimated by
management to be less than three months).

                                       26
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Risks and Uncertainties

LICENSES AND PROPRIETARY RIGHTS

    The Company has secured a patent on a manufacturing process for fabricating
plastic foam sheet material with compound radius. The patent number is 5,939,009
and the date of patent is August 17, 1999. The Company relies on proprietary
know-how, exclusive distribution agreements, and employs various methods to
protect its processes, including employment contracts with key personnel. There
can be no assurance that others will not independently develop similar
processes.

ENVIRONMENTAL REGULATION AND OPERATING CONSIDERATIONS

    The Company's operations are subject to a variety of extensive and changing
federal, state and local environmental laws, regulations and ordinances that
govern activities or operations that may have adverse effects on human health or
the environment. Such laws, regulations and ordinances may impose liability for
the cost of remediating, and for certain damages resulting from sites of past
releases of hazardous materials. The Company believes that it currently
conducts, and in the past has conducted, its activities and operations in
substantial compliance with applicable environmental laws, and believes that
costs arising from existing environmental laws will not have a material adverse
effect on the Company's consolidated financial condition or results of
operations. There can be no assurance, however, that environmental laws will not
become more stringent in the future or that the Company will not incur costs in
the future in order to comply with such laws.

Foreign Currency Transactions

    The functional currency of foreign subsidiaries is considered to be the
United States dollar. Foreign translation gains and losses from remeasurement
are included in the consolidated statements of operations. Foreign exchange loss
for the years ended November 30, 1999 and 1998 was approximately $5,000 and
$44,000, respectively.

Income Taxes

    The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "ACCOUNTING FOR INCOME TAXES"
("SFAS 109"). Under the asset and liability method of SFAS 109, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using enacted
tax rates expected to apply when the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to amounts which are more likely than not to be realized. The provision
for income taxes is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and liabilities.

Stock-based Compensation

    The Company accounts for stock option grants in accordance with APB Opinion
No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES". The Company adopted the
disclosure requirements of Statement of

                                       27
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Accounting Standards No. 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION", ("SFAS 123"), which require the disclosure of pro forma net
income and earnings per share as if the Company adopted the fair value-based
method in measuring compensation expense.

Accounting for Start-up Costs

    Expenditures directly related to and incurred during the start-up phase of
the Company's foreign manufacturing facility were expensed in the period
incurred. Such costs amounted to approximately $608,000 for the year ended
November 30, 1998.

Earnings per Share

    The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128, "EARNINGS PER SHARE" ("SFAS 128"). SFAS 128 requires the
presentation of basic and diluted net income per share. Basic earnings per share
excludes dilution and is computed by dividing net income by the weighted average
of common shares outstanding during the period. Diluted earnings per share
reflects the potential dilution that would occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
Common share equivalents including stock options, warrants, and convertible
debentures have been excluded for the years ended November 30, 1999 and 1998 as
their effect would be antidilutive.

    Basic and Diluted net income per share computed in accordance with SFAS 128
for the years ended November 30 are as follows:

<TABLE>
<CAPTION>
                                             1999         1998          1997
                                           ---------   -----------   ----------
<S>                                        <C>         <C>           <C>
BASIC EPS:
Net income (loss)........................  $(874,000)  $(2,331,000)  $2,916,000
Denominator: Weighted average common
  shares outstanding.....................  8,581,630     8,717,609    9,664,513
                                           ---------   -----------   ----------
Net income (loss) per share--basic.......  $   (0.10)  $     (0.27)  $     0.30
                                           =========   ===========   ==========

DILUTED EPS:
Net income (loss)........................  $(874,000)  $(2,331,000)  $2,916,000
Denominator: Weighted average common
  shares outstanding.....................  8,581,630     8,717,609    9,664,513
  Common equivalent shares outstanding
    (options and warrants)...............     --           --         1,835,272
  Hypothetical shares repurchased at
    average market price with proceeds of
    exercise.............................     --           --          (877,598)
                                           ---------   -----------   ----------
Total shares.............................  8,581,630     8,717,609   10,622,187
                                           ---------   -----------   ----------
Net income (loss) per share--diluted.....  $   (0.10)  $     (0.27)  $     0.27
                                           =========   ===========   ==========
</TABLE>

                                       28
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income

    Effective December 1, 1998, the Company adopted Statement No. 130,
("SFAS 130"), "REPORTING COMPREHENSIVE INCOME". SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose consolidated financial statements. The adoption of
SFAS 130 had no impact upon the Company's net loss. SFAS 130 requires that the
unrealized gains (losses) on available-for-sale securities be included in other
comprehensive income (loss) which is reflected on the consolidated statements of
stockholders' equity.

Segment Disclosure

    Effective December 1, 1998, the Company adopted Statement No. 131,
("SFAS 131"), "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION." SFAS 131 changes the way public companies report information about
segments of their business in their annual financial statements and requires
them to report selected segment information in their quarterly reports issued to
shareholders. The adoption of SFAS 131 did not affect the results of operations
or financial position of the Company.

NOTE 2--SALE OF SECURITIES

    During 1997, the Company sold 50,000 shares of Innovative
Technologies, Inc. resulting in a net realized gain of $139,000 which is
included in the accompanying consolidated statements of operations.

NOTE 3--INVENTORIES

    Inventories consist of the following at November 30:

<TABLE>
<CAPTION>
                                                          1999         1998
                                                       ----------   ----------
<S>                                                    <C>          <C>
Raw materials........................................  $2,700,000   $2,042,000
Work-in-progress.....................................     624,000      313,000
Finished goods.......................................     699,000      265,000
                                                       ----------   ----------
                                                        4,023,000    2,620,000
Less allowance for obsolete inventory................    (166,000)     (77,000)
                                                       ----------   ----------
                                                       $3,857,000   $2,543,000
                                                       ==========   ==========
</TABLE>

                                       29
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 4--PROPERTY AND EQUIPMENT

    Property and equipment consists of the following at November 30:

<TABLE>
<CAPTION>
                                                                           USEFUL
                                                   1999         1998        LIFE
                                                ----------   ----------   --------
<S>                                             <C>          <C>          <C>
Machinery and equipment.......................  $4,150,000   $3,657,000       7
Furniture and fixtures........................     956,000      995,000       5
Transportation equipment......................     203,000      204,000       5
Leasehold improvements........................     410,000      328,000       5
Construction in progress......................     364,000      110,000
                                                ----------   ----------
                                                 6,083,000    5,294,000
Less accumulated depreciation and
  amortization................................  (3,576,000)  (2,902,000)
                                                ----------   ----------
                                                $2,507,000   $2,392,000
                                                ==========   ==========
</TABLE>

    Property and equipment, net at November 30, 1999 and 1998 includes the net
book value of property and equipment relating to the discontinued operations of
$308,000 and $304,000, respectively (Note 13).

NOTE 5--LINE OF CREDIT

    The line of credit consists of the following at November 30:

<TABLE>
<CAPTION>
                                                          1999         1998
                                                       ----------   ----------
<S>                                                    <C>          <C>
Revolving line of credit agreement with a bank which
  provides for borrowings up to $4,000,000, as
  defined. The line bears interest at prime plus
  1.0.% (9.5% at November 30, 1999). The line of
  credit is secured by substantially all of the
  assets of the Company and expires March 1, 2000....  $3,823,000   $1,800,000
</TABLE>

    The line of credit agreement requires the Company to maintain certain
restrictions and financial covenants including maintenance of working capital
and tangible net worth ratios. The Company's financial results for fiscal year
ended November 30, 1999 created certain defaults under the amended credit
agreement. The current lender granted forbearance on the defaults. As a
condition of granting forbearance, the Company and lender agreed to a reduction
in the Company's credit facility from $5,000,000 to $4,000,000 and an increase
in the interest rate to prime +1%. The Company was also in violation of certain
financial covenants in fiscal 1998 and had obtained a waiver from the bank
through the period ended November 30, 1998. The Company subsequently entered
into a new asset based line of credit in the amount of $5,650,000 (Note 15).

    Interest expense related to lines of credit totaled approximately $267,000,
$179,000 and $152,000 for the years ended November 30, 1999, 1998 and 1997,
respectively.

                                       30
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 6--TERM LOAN

    Advanced Materials Limited, the Company's Ireland subsidiary, is party to a
term loan agreement with a bank which provides for borrowings up to 592,000
Irish Pounds (approximately $786,000 and $869,000 at November 30, 1999 and 1998,
respectively), as defined, and bears interest at 2.5% over 3 month LIBOR (8.0%
and 7.77% at November 30, 1999 and 1998, respectively). The loan facility is
secured by substantially all of the plant and equipment acquired by Advanced
Materials Limited and is additionally guaranteed by Advanced Materials
Group, Inc. for an amount of $800,000 plus accrued interest thereon. The loan
facility expires in October, 2002, at such time the Company intends to repay any
outstanding balance thereon. Interest expense related to the term loan was
approximately $32,000 for the year ended November 30, 1999. Interest expense
related to the term loan was insignificant for the year ended November 30, 1998.

NOTE 7--CONVERTIBLE DEBENTURES

    The Company had outstanding covertible debentures totaling $405,000 at
November 30, 1999 and November 30, 1998, respectively. The debentures bear
interest at 7.5% per annum, with interest payable quarterly in arrears. The
debentures were issued in denominations of $1,000, or multiples thereof, and,
together with all then accrued and undeclared interest, are convertible at the
election of the holder at any time after their purchase at a conversion premium
of 125% of the closing bid price of the common stock on the date prior to the
effective date of the original offering (convertible at prices ranging from
$3.59 to $4.37 per share). The debentures mature in March 2004. The debentures
may be prepaid for cash at the option of the Company upon 20 days prior notice,
in whole or in part, at the offering price plus accrued and unpaid dividends to
the prepayment date. If the Company's stock trades at a price equal to 150% of
the closing bid price of its common stock on the date prior to the effective
date of the original offering for 10 consecutive trading days, the Company will
have the right to force conversion. The debentures carry no voting rights. The
common stock underlying the debentures was registered pursuant to a registration
statement that was effective January 17, 1995.

    Interest expense related thereto totaled approximately $31,000, $31,000 and
$39,000 for the years ended November 30, 1999, 1998 and 1997, respectively.

NOTE 8--DEFERRED COMPENSATION

    The Company is obligated to: (i) make monthly payments beginning
December 1996, of $5,500 (reduced to $3,500 in December 2006) and provide life
insurance to a former employee who is currently a stockholder of the Company and
(ii) make monthly payments beginning December 1995, of $3,500 to a former
employee.

    These obligations are based upon the actuarially determined remaining lives
of the obligees, are subject to cost-of-living adjustments based on the Consumer
Price Index (CPI), estimated by management at 3% per annum, and are due until
the later of the death of the obligees or their spouses. These obligations have
been discounted at November 30, 1999.

                                       31
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 8--DEFERRED COMPENSATION (CONTINUED)
    The present value of the estimated future non-contingent payments under the
above-mentioned agreements is approximately $1,259,000, net of a discount of
approximately $3,128,000. Estimated future payments are due as follows:

<TABLE>
<CAPTION>
YEARS ENDING
NOVEMBER 30,
------------
<S>                                                           <C>
2000........................................................  $  151,000
2001........................................................     155,000
2002........................................................     159,000
2003........................................................     163,000
2004........................................................     149,000
Thereafter..................................................   3,610,000
                                                              ----------
                                                               4,387,000
Amount representing interest................................   3,128,000
                                                              ----------
                                                              $1,259,000
                                                              ==========
</TABLE>

NOTE 9--COMMITMENTS AND CONTINGENCIES

Leases

    The Company and its subsidiaries lease facilities and equipment under
non-cancelable operating leases which expire at various dates through
November 2003. The Company and its subsidiaries also lease certain machinery and
equipment under capital lease obligations which expire in 2004.

    Approximate future minimum operating and capital lease obligations at
November 30, 1999 are as follows:

<TABLE>
<CAPTION>
                                                        OPERATING    CAPITAL
                                                          LEASES      LEASES
                                                        ----------   --------
<S>                                                     <C>          <C>
2000..................................................  $  885,000   $100,000
2001..................................................     525,000     93,000
2002..................................................     299,000     84,000
2003..................................................      59,000     81,000
2004..................................................          --     54,000
                                                        ----------   --------
Total minimum lease obligations.......................  $1,768,000    412,000
                                                        ==========
Amount representing interest..........................                 90,000
                                                                     --------
Present value of lease payments.......................                322,000
Current portion.......................................                 79,000
                                                                     --------
Long-term portion.....................................               $243,000
                                                                     ========
</TABLE>

    Rent expense for the years ended November 30, 1999, 1998 and 1997 was
$774,000, $667,000 and $592,000, respectively.

                                       32
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 9--COMMITMENTS AND CONTINGENCIES (CONTINUED)
    Interest expense incurred under capital lease obligations was insignificant
for the years ended November 30, 1999, 1998 and 1997.

Employment Contracts

    On September 1, 1996, the Company purchased substantially all the assets and
assumed all the liabilities of Gasket and Molded Products, Inc. ("GMP"), a
Colorado corporation. In connection with the acquisition of GMP, the Company
entered into a five year employment contract with one of the prior stockholders
of GMP, which expires August 2001. Under terms of the agreement, the Company is
to pay $66,000 per annum plus a $630 per month auto allowance. The agreement
also specifies incentive bonuses equal to 1% of net sales and 7.5% of operating
profits, as defined, for each of the first two years and for the last three
years of the employment term, respectively. During 1999, 1998 and 1997 such
stockholder was paid an insignificant amount in stock and cash pursuant to this
agreement in connection with incentive bonuses.

    The Company has entered into three employment contracts with officers, which
expire through June 2004. Under terms of the agreements, the Company is to pay
base salaries ranging from $137,000 to $235,000 per year.

    Approximate minimum future obligations under employment contracts are as
follows as of November 30, 1999:

<TABLE>
<CAPTION>
YEARS ENDING
NOVEMBER 30,
------------
<S>                                                           <C>
2000........................................................  $  369,000
2001........................................................     235,000
2002........................................................     235,000
2003........................................................     235,000
2004........................................................     137,000
                                                              ----------
                                                              $1,211,000
                                                              ==========
</TABLE>

Purchase Commitment

    At November 30, 1999 the Company has outstanding capital equipment purchase
commitments totaling $100,000.

Litigation

    In October 1996, the Company, and Wilshire Technologies, Inc. ("WTI"), were
notified that they had been named in a bodily injury lawsuit pending in the
192nd Judicial District Court of Dallas County Texas, involving silicon breast
implants. Such suit alleges that AM supplied certain foam "wipers" which were
incorporated into certain implants by manufacturers also named in the suit,
which had allegedly caused adverse effects to the plaintiffs. The suit asks for
unspecified damages. The Company believes it has no exposure in this case as:
(1) Advanced Materials ("AM") was not incorporated at the time of such implants;
(2) AM has had no involvement with silicone or other breast implants; (3) AM has
never marketed such "wipers"; and, (4) there exists two indemnification
agreements that provide protection to

                                       33
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 9--COMMITMENTS AND CONTINGENCIES (CONTINUED)
the Company. The Company believes the aforementioned provide several layers of
protection in the event this case progresses. Accordingly, no provision for any
liability has been made in the accompanying consolidated financial statements.
An adverse ruling could, however, have a marked adverse effect on the Company's
financial condition.

    The Company's Condor subsidiary has been named in a lawsuit originally filed
in the Superior Court of California, San Joaquin County, on January 24, 1992 by
Vern Auten and Shirley Auten, doing business as Aglo Plastics Company.
Plaintiffs allege that Condor breached a supply contract by obtaining various
molds from a competing supplier, and are seeking damages therefor. Plaintiffs
are also seeking damages based upon an alleged intentional infliction of
emotional distress upon plaintiffs by a Condor employee and by its then owner.
Condor filed a cross-complaint alleging that plaintiffs breached the contract.
Plaintiffs received a non-binding arbitration award of approximately $267,000
plus interest. Condor had requested a trial de novo. Condor subsequently
received notice from an attorney representing the plaintiffs of an alleged
infringement by Condor of a patent held by the plaintiffs.

    On October 5, 1998, a jury entered a partial verdict finding that Condor had
breached the supply contract. A judgment in the amount of $382,500 was entered
in favor of the plaintiffs. In response to a motion by the plaintiffs the court,
on December 22, 1998 awarded attorneys' fees in the amount of $266,000. Condor
has recorded a provision in the amount of approximately $975,000, which also
includes estimated interest on the award.

    The jury was unable to reach a verdict on the alleged intentional infliction
of emotional distress upon plaintiffs by a Condor employee and by its then
owner. This matter has been remanded back to the Superior Court of California,
San Joaquin County. The jury further found that the plaintiffs had not breached
the supply contract. The jury also found that Condor did not infringe on the
patent held by the plaintiffs.

    On July 19, 1999 the Company filed a complaint for declaratory relief
against Vern Auten and Shirley Auten, individually and doing business as Aglo
Plastics Co, in United States District Court, Southern District of California.
The relief sought by the Company is a declaration by the Court that Advanced
Materials Group, Inc., the parent company of Condor Utility Products, Inc., has
no obligation to pay the Condor Judgment. The ultimate outcome of this
litigation cannot presently be determined. In October 1999, the Company was
notified that it and its Condor subsidiary had been named in a lawsuit in the
United States District Court, Central District of California. Such suit alleges
that the Company and its Condor subsidiary and several other parties also named
in the suit maliciously prosecuted Vern and Shirley Auten. The suit seeks
unspecified damages. The ultimate outcome of this litigation cannot presently be
determined.

    The sellers of Condor had agreed to indemnify the Company and Condor with
respect to any potential liability from the alleged breach of contract. Condor
has determined that it will be unable to collect against the indemnification
agreement. Since the assets of Condor are not sufficient to pay the full amount
of the award, Condor attempted to reach a settlement with the plaintiffs but was
unable to do so. It is unclear at this time if a settlement can be reached. The
plaintiffs have now indicated in writing that they may assert a claim against
the Company under principles of alter ego and related theories of liability. The
Company would vigorously defend itself against any such claim. An adverse ruling
could, however, have a material adverse effect on the Company's financial
condition.

                                       34
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 10-- STOCKHOLDERS' EQUITY

Common Stock

    During 1999 the Company repurchased 225,400 shares of its common stock at
prices ranging from $1.00 to $1.49, for an aggregate price of approximately
$266,000. These shares were subsequently retired.

    During 1998 the Company repurchased 29,600 shares of its common stock at
prices ranging from $1.04 to $1.38, for an aggregate purchase price of
approximately $39,000. These shares were subsequently retired.

    During 1997 the Company repurchased 2,000,000 shares of its common stock for
cash of $1.75 per share for an aggregate purchase price of $3.5 million. These
shares were subsequently retired.

    During 1997, the Company issued 34,186 shares of common stock in connection
with the conversion of an aggregate $130,000 of convertible debentures, at $3.59
and $4.37 per share.

    On April 2, 1997 the Company issued an aggregate 16,877 shares of common
stock valued at $0.69 per share. Such shares were issued in connection with
certain provisions contained in the Condor Utility Products, Inc. Stock Purchase
Agreement.

Stock Options

1993 STOCK OPTION PLAN

    The 1993 Stock Option Plan ("1993 Plan"), approved by the stockholders of
the Company, authorizes the granting of various options and rights to purchase
1,250,000 shares of common stock of the Company. The 1993 Plan was effectively
completed during 1997.

    The 1993 Plan provided for the grant by the Company of options to purchase
common stock to employees, consultants, officers and directors of the Company.
Options granted under the 1993 Plan could be either "incentive stock options,"
within the meaning of Section 422 of the Internal Revenue Code, or
"non-qualified stock options". Options could be granted for terms of up to
10 years, except for incentive stock options granted to 10% stockholders, which
were limited to 5 years. The exercise price in the case of incentive stock
options granted under the 1993 Plan had to be at least equal to the fair market
value of the common stock as of the date of grant.

    During the year ended November 30, 1997, the Company issued options,
pursuant to the 1993 Plan, to purchase 95,217 shares of the Company's common
stock at exercise prices ranging from $0.41 to $1.78 per share. No compensation
expense was recorded in connection with the issuance of these options as they
were issued at the fair market value of the underlying stock at the date of
grant.

1997 STOCK OPTION PLAN

    On May 4, 1997, the 1997 Stock Option Plan ("1997 Plan") was adopted,
effective January 1, 1997, and approved by the Board of Directors of the
Company. The 1997 Plan authorized the granting of various options and rights to
purchase up to 1,250,000 shares of common stock of the Company. The 1997 Plan
was terminated on August 25, 1997.

    The 1997 Plan provided for the grant by the Company of options to purchase
shares of the Company's common stock to employees, consultants, officers and
directors of the Company. Options granted under

                                       35
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 10-- STOCKHOLDERS' EQUITY (CONTINUED)
the 1997 Plan could only be "non-qualified stock options". No "incentive stock
options", within the meaning of Section 422 of the Internal Revenue Code, could
be granted.

    During the year ended November 30, 1997, the Company issued options to
purchase 215,000 shares of the Company's common stock at exercise prices ranging
from $1.28 to $2.22 per share. No compensation expense was recorded in
connection with the issuance of these options as they were issued at the fair
market value of the underlying stock at the date of grant.

1998 STOCK OPTION PLAN

    In April, 1998, the stockholders of the Company approved the 1998 Stock
Option Plan ("1998 Plan"). The Plan authorizes the granting of various options
and rights to purchase up to 1,250,000 shares of common stock of the Company.

    The 1998 Plan provides for the grant by the Company of options to purchase
shares of the Company's common stock to its officers, directors, employees and
consultants. The 1998 Plan provides that it is to be administered by a committee
consisting of two or more members of the Board of Directors. The Committee has
discretion, subject to the terms of the 1998 Plan, to select the persons
entitled to receive options under the Plan, the terms and conditions on which
options are granted, the exercise price, the time period for vesting such shares
and the number of shares subject thereto.

    Options granted under the 1998 Plan may be either "incentive stock options",
within the meaning of Section 422 of the Internal Revenue Code, or
"non-qualified stock options". No incentive stock option may be granted to any
person who is not an employee of the Company at the date of grant. Options may
be granted under the 1998 Plan for terms of up to 10 years, except for incentive
stock options granted to 10% Stockholders, which are limited to 5-year terms.
The exercise price in the case of incentive stock options granted under the 1998
Plan has to be at least equal to the fair market value of the common stock as of
the date of grant.

    During the year ended November 30, 1998, the Company issued options under
the 1998 Plan to purchase 115,256 shares of the Company's common stock at
exercise prices ranging from $1.59 to $1.75 per share. No compensation expense
was recorded in connection with the issuance of these options as they were
issued at the fair market value of the underlying stock at the date of grant.

    During 1999, the Company issued non-qualifying options to its directors to
purchase 70,000 shares of the Company's common stock under the 1998 plan, at an
exercise price periods up to four years and expiring through January 2004. No
compensation expense was recorded in connection with the issuance of these
options as they were issued at the fair market value of the underlying stock at
the date of grant.

OTHER STOCK OPTIONS

    On March 31, 1997, the Company extended the terms of 140,000 options to
expire March 31, 2007. These options were issued outside of the aforementioned
1993, 1997 and 1998 Plans and were originally due to expire in June of 1998.
Pursuant to the provisions of SFAS 123, the fair value for the incremental
benefit received by the option holder was estimated at the date of extension
using the Black Scholes option pricing model. Compensation expense, related to
the fair value of such options, of approximately $100,000

                                       36
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 10-- STOCKHOLDERS' EQUITY (CONTINUED)
was recorded in connection therewith and is included in other expense in the
accompanying 1997 consolidated statement of operations.

    On March 31, 1997, the Company issued options to a director for consulting
services, outside of the 1997 Plan, to purchase 50,000 shares of the Company's
common stock at an exercise price of $1.50 per share (fair market value of the
underlying stock at the date of grant), expiring March 2007. Such options were
fully exercisable at the date of grant. Pursuant to the provisions of SFAS 123,
the fair value of these options was estimated at the date of grant using the
Black Scholes option pricing model. Compensation expense, related to the fair
value of such options, of $60,000 was recorded in connection with the issuance
of these options, and is included in other expense in the accompanying 1997
consolidated statement of operations.

    During 1997, the Company issued options to purchase 21,388 shares of the
Company's common stock outside of the 1993 and 1997 Plans, at exercise prices
ranging from $2.84 to $3.44 per share, expiring through August 2007. Such
options vest within six months from the date of grant. No compensation expense
was recorded in connection with the issuance of these options as they were
issued at the fair market value of the underlying stock at the date of grant.

    During 1998, the Company issued options to purchase 301,000 shares of the
Company's common stock outside of the 1998 Plan, at exercise prices ranging from
$3.38 to $4.00 per share, with vesting periods up to four years and expiring
through December 2008. No compensation expense was recorded in connection with
the issuance of these options as they were issued at the fair market value of
the underlying stock at the date of grant.

    The following table summarizes the options granted and outstanding as of
November 30, 1999:

<TABLE>
<CAPTION>
                                                                           WEIGHTED
                                              NUMBER OF SHARES             AVERAGE
                                    ------------------------------------   EXERCISE
                                    EMPLOYEE    NON-EMPLOYEE     TOTAL      PRICE
                                    ---------   ------------   ---------   --------
<S>                                 <C>         <C>            <C>         <C>
Outstanding, November 30, 1996....  1,002,000     260,000      1,262,000    $0.99
Granted...........................    332,000      50,000        382,000     1.28
Exercised.........................    (45,000)    (50,000)       (95,000)    1.42
Canceled..........................    (15,000)         --        (15,000)    1.00
                                    ---------     -------      ---------
Outstanding, November 30, 1997....  1,274,000     260,000      1,534,000     1.08
Granted...........................    416,000          --        416,000     3.70
Exercised.........................    (84,000)    (70,000)      (154,000)    0.98
Canceled..........................     (1,000)         --         (1,000)    1.00
                                    ---------     -------      ---------
Outstanding, November 30, 1998....  1,605,000     190,000      1,795,000     1.59
Granted...........................         --      70,000         70,000     1.19
Exercised.........................    (15,000)         --        (15,000)    0.69
Canceled..........................    (74,000)         --        (74,000)    2.48
                                    ---------     -------      ---------
Outstanding, November 30, 1999....  1,516,000     260,000      1,776,000    $1.63
                                    =========     =======      =========
</TABLE>

                                       37
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 10-- STOCKHOLDERS' EQUITY (CONTINUED)
    The following table sets forth the exercise prices, the number of options
outstanding and exercisable, and the remaining contractual lives of the
Company's stock options at November 30, 1999.

<TABLE>
<CAPTION>
EXERCISE                NUMBER OF OPTIONS                     WEIGHTED AVERAGE
 PRICE           OUTSTANDING         EXERCISABLE         CONTRACTUAL LIFE REMAINING
--------         -----------         -----------         --------------------------
<C>              <C>                 <C>                 <S>
4.00..              150,000              50,000          7.0 years
3.69..               70,000              70,000          3.1
3.44..               20,000              20,000          4.0
3.38..               75,000              25,000          8.2
2.84..                1,000               1,000          7.8
2.22..               10,000              10,000          2.6
2.06..               10,000              10,000          2.5
1.97..               10,000              10,000          2.5
1.75..              122,000              32,000          8.1
1.65..               10,000              10,000          7.3
1.59..                3,000               3,000          8.7
1.50..              190,000             190,000          7.3
1.28..              175,000             175,000          7.1
1.27..               10,000              10,000          1.5
1.23..               10,000              10,000          1.5
1.19..               70,000                   0          4.1
1.00..              355,000             355,000          6.8
0.91..               10,000              10,000          2.6
0.78..              125,000             125,000          6.4
0.69..              110,000             110,000          5.9
0.59..               10,000              10,000          0.2
0.52..               10,000              10,000          0.6
0.44..               10,000              10,000          0.5
0.43..               10,000              10,000          0.5
0.30..              200,000             200,000          3.1
                  ---------           ---------
                  1,776,000           1,466,000
                  =========           =========
</TABLE>

SFAS 123 Pro forma Information

    Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123. The fair
value of these options was estimated at the date of grant using the Black

                                       38
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 10-- STOCKHOLDERS' EQUITY (CONTINUED)
Scholes option pricing model with the following assumptions for the years ended
November 30, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                      YEARS ENDING NOVEMBER 30:
                                                    ------------------------------
                                                      1999       1998       1997
                                                    --------   --------   --------
<S>                                                 <C>        <C>        <C>
Interest rate.....................................    5.50%      5.50%        6.50%
Dividend yield....................................    0.00%      0.00%        0.00%
Expected life of options (years)..................       5          5     5 and 10
Volatility factor.................................   73.00%     73.00%      100.00%
</TABLE>

    For purposes of pro forma disclosures, the estimated fair value of the
options granted after December 15, 1995, is amortized to expense over the
options vesting period. Adjustments are made for options forfeited prior to
vesting. The effect on compensation expense, net income (loss), and net income
(loss) per share had compensation costs for the Company's stock option plans
been determined based on the fair value method at the date of grant consistent
with the provisions of SFAS 123, for the years ended November 30:

<TABLE>
<CAPTION>
                                             1999          1998          1997
                                          -----------   -----------   ----------
<S>                                       <C>           <C>           <C>
Net income (loss), as reported..........  $  (874,000)  $(1,247,000)  $2,916,000
                                          ===========   ===========   ==========

Net income (loss), pro forma............  $(1,247,000)  $(2,755,000)  $2,102,000
                                          ===========   ===========   ==========

Earnings (loss) per share, as reported
  Basic.................................  $     (0.10)  $     (0.27)  $     0.30
                                          ===========   ===========   ==========
  Diluted...............................  $     (0.10)  $     (0.27)  $     0.27
                                          ===========   ===========   ==========

Earnings (loss) per share, pro forma
  Basic.................................  $     (0.15)  $     (0.32)  $     0.22
                                          ===========   ===========   ==========
  Diluted...............................  $     (0.15)  $     (0.32)  $     0.20
                                          ===========   ===========   ==========
</TABLE>

Warrants

    On December 22, 1995, in connection with an amendment to a line of credit
agreement with a stockholder, the lender/stockholder was granted a warrant to
purchase 60,000 shares of the Company's common stock exercisable for 5 years at
an exercise price of $0.75 per share.

                                       39
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 11-- INCOME TAXES

    Income tax expense (benefit) from continuing operations are as follows:

<TABLE>
<CAPTION>
                                                  YEARS ENDED NOVEMBER 30:
                                               -------------------------------
                                                 1999        1998       1997
                                               ---------   --------   --------
<S>                                            <C>         <C>        <C>
Current:
  Federal....................................  $(220,000)  $427,000   $285,000
  State......................................         --     78,000    272,000
                                               ---------   --------   --------
                                                (220,000)   505,000    557,000

Deferred:
  Federal....................................    220,000     66,000   (403,000)
  State......................................         --    (33,000)    26,000
                                               ---------   --------   --------
                                                 220,000     33,000   (377,000)
                                               ---------   --------   --------
Total income tax provision...................  $      --   $538,000   $180,000
                                               =========   ========   ========
</TABLE>

    The components of deferred tax assets and liabilities at November 30 are as
follows:

<TABLE>
<CAPTION>
                                                         1999          1998
                                                      -----------   ----------
<S>                                                   <C>           <C>
Deferred tax assets:
  Tax over book depreciation........................  $    48,000   $       --
  Accounts receivable...............................       43,000       43,000
  Inventory.........................................      139,000       92,000
  Accrued expenses..................................      746,000      801,000
  State taxes.......................................           --           --
  Goodwill and other intangible assets..............    1,022,000      969,000
  Other.............................................       54,000       85,000
                                                      -----------   ----------
    Total deferred tax assets.......................    2,052,000    1,990,000
    Less valuation allowance for deferred tax
      assets........................................   (1,186,000)    (902,000)
                                                      -----------   ----------
Deferred tax assets.................................      866,000    1,088,000
Deferred tax liabilities:
  Tax over book depreciation........................           --       44,000
  State taxes.......................................       56,000       14,000
                                                      -----------   ----------
    Total deferred tax liabilities..................       56,000       58,000
                                                      -----------   ----------
Net deferred tax assets.............................  $   810,000   $1,030,000
                                                      ===========   ==========
</TABLE>

    At November 30, 1999 the Company had a valuation allowance of $1,186,000 to
reduce its deferred tax assets to estimated realizable value. Based on the level
of historical taxable income and projections for future taxable income over the
periods in which temporary differences are anticipated to reverse, management
believes it is more likely than not that the Company will realize the benefits
of these deferred tax assets, net of the valuation allowance. However, the
amount of the deferred tax asset considered

                                       40
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 11-- INCOME TAXES (CONTINUED)
realizable could be adjusted in the future if estimates of taxable income are
revised due to changes in circumstances.

    United States and foreign income (loss) from continuing operations before
income taxes are as follows:

<TABLE>
<CAPTION>
                                                  YEARS ENDED NOVEMBER 30:
                                             ----------------------------------
                                               1999        1998         1997
                                             ---------   ---------   ----------
<S>                                          <C>         <C>         <C>
Pretax income (loss)
  Domestic.................................  $(714,000)  $ 517,000   $3,139,000
  Foreign..................................   (160,000)   (683,000)          --
                                             ---------   ---------   ----------
  Total....................................  $(874,000)  $(166,000)  $3,139,000
                                             =========   =========   ==========
</TABLE>

    The reconciliation of the income tax provision (benefit) for continuing
operations to taxes computed at U.S. federal statutory rates is as follows:

<TABLE>
<CAPTION>
                                                  YEARS ENDED NOVEMBER 30:
                                              ---------------------------------
                                                1999        1998        1997
                                              ---------   --------   ----------
<S>                                           <C>         <C>        <C>
Income tax (benefit) at statutory rates.....  $(297,000)  $(56,000)  $1,128,000
Change in federal valuation allowance.......    284,000    326,000   (1,085,000)
Foreign losses recorded without tax
  benefit...................................     54,000    232,000           --
Foreign Sales Corporation benefit...........    (33,000)        --           --
State and local income taxes, net of federal
  income tax benefit........................      1,000     30,000      137,000
Other.......................................     (9,000)     6,000           --
                                              ---------   --------   ----------
Total.......................................  $      --   $538,000   $  180,000
                                              =========   ========   ==========
</TABLE>

NOTE 12--DISCONTINUED OPERATIONS

    In November 1998 the Company discontinued the operations of its subsidiary,
Condor Utility Products, Inc. In connection with the closure, the Company
incurred a charge in fiscal 1998 of $1,627,000, net of $538,000 relative to
income taxes. Net sales of Condor Utility Products, Inc. for the year ended
November 30, 1998 and 1997 were $954,000 and $1,144,000, respectively. Net
assets of the discontinued operations at November 30, 1998 were as follows:

<TABLE>
<S>                                                           <C>
Accounts receivable, net....................................  $   280,000
Property, plant and equipment...............................      304,000
Accounts payable............................................     (132,000)
Accrued liabilities.........................................   (1,200,000)
                                                              -----------
                                                              $  (748,000)
                                                              ===========
</TABLE>

                                       41
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 12--DISCONTINUED OPERATIONS (CONTINUED)
    At November 30, 1999 property, plant and equipment includes $308,000
relative to discontinued operations and $986,000 is included in accrued
liabilities for discontinued operations.

NOTE 13--EMPLOYEE BENEFIT PLAN

    The Company has a 401(k) retirement plan that covers the majority of the
Company's domestic employees. An employee, at their discretion, can elect to
make voluntary contributions to the plan from 0% to 20% of their compensation,
up to the maximum amount set by the Internal Revenue Service. The plan requires
the Company to make a matching contribution of 33% of the first 6% of the
voluntary employee contribution. The Company may also contribute an additional
amount determined in its sole judgment. Total expense from this plan related to
continuing operations was approximately $51,000, $46,000 and $38,000 for the
years ended November 30, 1999, 1998 and 1997, respectively.

NOTE 14--SEGMENT REPORTING

    The Company's foreign operations include both manufacturing and sales. The
manufacturing facility is located in Ireland and the sales joint venture is
located in Singapore. Both facilities began operations in fiscal 1998. All of
their sales are made to unaffiliated customers. The following is a summary of
selected financial information by entities within geographic areas for the years
ended November 30, 1999, 1998 and 1997:

    REVENUE:

<TABLE>
<CAPTION>
                                        AMI-US OPERATIONS   AMI-SINGAPORE   AMI IRELAND   CONSOLIDATED
                                        -----------------   -------------   -----------   ------------
<S>                                     <C>                 <C>             <C>           <C>
1999..................................     $23,076,000       $ 8,409,000    $3,313,000    $34,798,000
1998..................................      26,458,000         2,035,000       423,000     28,916,000
1997..................................      28,898,000                --            --     28,898,000
</TABLE>

    NET INCOME (LOSS):

<TABLE>
<CAPTION>
                                        AMI-US OPERATIONS   AMI-SINGAPORE   AMI IRELAND   CONSOLIDATED
                                        -----------------   -------------   -----------   ------------
<S>                                     <C>                 <C>             <C>           <C>
1999..................................     $(1,815,000)      $ 1,141,000     $(200,000)   $   (874,000)
1998..................................      (2,038,000)          428,000      (721,000)     (2,331,000)
1997..................................       2,916,000                --            --       2,916,000
</TABLE>

    ASSETS

<TABLE>
<CAPTION>
                                        AMI-US OPERATIONS   AMI-SINGAPORE   AMI IRELAND   CONSOLIDATED
                                        -----------------   -------------   -----------   ------------
<S>                                     <C>                 <C>             <C>           <C>
1999..................................     $  9,953,000       $3,655,000    $2,484,000    $16,092,000
1998..................................        8,657,000        2,920,000     1,105,000     12,682,000
</TABLE>

                                       42
<PAGE>
                         ADVANCED MATERIALS GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997

NOTE 15--SUBSEQUENT EVENT

LINE OF CREDIT

    On February 24, 2000 the Company agreed to enter into a new line of credit
(the "Line") with its bank. Such Line allows for borrowings up to $5,650,000, as
defined, and bears initial interest of prime plus 1.25%, as defined. The Line
matures February 22, 2003 and replaces the Company's existing line of credit
(see Note 5). The Company is required to maintain certain financial ratios and
pay certain fees, as defined.

                                       43
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

       None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    The information for Part III, items 10, 11, 12 and 13 are hereby
incorporated by reference to the Company's Proxy Statement for a meeting to be
held on April 4, 2000, which will be filed with the Commission within (120) one
hundred twenty days of the close of the fiscal year pursuant to Regulation 14A.

ITEM 14. EXHIBIT AND REPORTS ON FORM 8-K.

    (a) List of Exhibits:

<TABLE>
<CAPTION>
         NO.                                      EXHIBITS
         ---                                      --------
<C>                     <S>
     2.1                Agreement and Plan of Reorganization dated April 21, 1993
                          between Far West Ventures, Inc. (now known as Advanced
                          Materials Group, Inc.), Wilshire Advanced Materials, Inc.
                          and the stockholders of Wilshire Advanced Materials, Inc.
                          (1)
     3.1                Articles of Incorporation of Advanced Materials Group, Inc.
                          (formerly known as Far West Ventures, Inc.). (1)
     3.2                Certificate of Amendment of Articles of Incorporation of
                          Advanced Materials Group, Inc. (1)
     3.3                Bylaws, as amended, of Advanced Materials Group, Inc. (1)
    10.1                Asset Purchase Agreement dated August 4, 1992 between
                          Wilshire Advanced Materials, Inc. and Wilshire
                          Technologies, Inc. (1)
    10.2                Amendment to Asset Purchase Agreement dated August 4, 1992
                          between Wilshire Advanced Materials, Inc. and Wilshire
                          Technologies, Inc. dated December 2, 1992. (1)
    10.3                Stock Purchase Agreement dated October 6, 1993 between
                          Advanced Materials Group, Inc. and the stockholders of
                          Condor Utility Products, Inc. (2)
    10.4                The 1993 Stock Option Plan of Advanced Materials Group, Inc.
                          (3)
    10.5                Form of Convertible Debenture. (4)
    10.6                Promissory Note of the Company dated March 25, 1994 payable
                          to Michael W. Crow in the amount of $787,618. (5)
    10.7                Amended and Restated Promissory Note dated August 16, 1995
                          between Advanced Material Group, Inc. and Hiram H. Johnson
                          and Beth A. Johnson. (6)
    10.8                Industrial Lease Agreement executed August 31, 1995 between
                          New York Life Insurance and Annuity Corporation, as
                          Landlord and Advanced Materials, Inc., as Tenant. (7)
    10.9                Form of Equity Warrant between Advanced Materials Group,
                          Inc. and Trilon Dominion Partners, L.L.C. (8)
    10.10               Form of Debt Warrant between Advanced Materials Group, Inc.
                          and Trilon Dominion Partners, LLC. (9)
    10.11               Loan Agreement dated as of November 26, 1996, between
                          Advanced Materials, Inc. And Wells Fargo National
                          Association. (10)
    10.12               First Amendment to Loan Agreement dated as of September 1,
                          1996, between Advanced Materials, Inc. and Wells Fargo
                          National Association. (11)
</TABLE>

                                       44
<PAGE>

<TABLE>
<CAPTION>
         NO.                                      EXHIBITS
         ---                                      --------
<C>                     <S>
    10.13               Asset Purchase and Sale Agreement dated as of September 1,
                          1996, between Advanced Materials, Inc. and Gasket and
                          Molded Products, Inc. and Shareholders. (12)
    10.14               Amendment One to Lease dated as of September 27, 1996,
                          between Advanced Materials Group, Inc. And Riggs National
                          Bank of Washington, D.C. as Trustee of the Multi-Employer
                          Property Trust. (13)
    10.15               The 1997 Stock Option Plan of Advanced Materials Group, Inc.
                          (14)
    10.16               Industrial sublease agreement executed September 1, 1997
                          between Advanced Material, Inc. as landlord and S-Line as
                          tenant. (15)
    10.17               Manufacturing agreement dated January 30, 1998 by and
                          between Advanced Materials FSC Ltd. and Foamtec
                          (Singapore) Pte. Ltd. (16)
    10.18               Form of Warrant Assignment agreement dated September 15,
                          1997 between Trilon Dominion Partners, LLC. and certain
                          individuals. (17)
    10.19               Credit Agreement dated as of February 27, 1998 between
                          Advanced Materials Group, Inc. and Wells Fargo Bank,
                          National Association. (18)
    10.20               The 1998 Stock Option Plan of Advanced Materials Group, Inc.
                          (19)
    10.21               Legal settlement with a former employee of Condor Utility
                          Products, Inc. (13)
    10.22               Employment agreement dated September 11, 1998 between
                          Advanced Materials Group, Inc. and Steve F. Scott, Chief
                          Executive Officer, President and Director. (16)
    10.23               Consulting Agreement dated March 31, 1997 between Advanced
                          Materials Group, Inc. and Paschall and Company. (16)
    10.24               Industrial Lease Agreement executed August 31, 1995 between
                          Riggs National Bank of Washington, D.C. as Trustee of the
                          Multi-Employer Property Trust as Landlord and Advanced
                          Materials, Inc., as Tenant.
    10.25               Employment agreement dated August 1, 1999 between Advanced
                          Materials Group, Inc. and David A. Lasnier, Senior Vice
                          President, General Manager.
    10.26               Employment agreement dated August 1, 1999 between Advanced
                          Materials Group, Inc. and James Douglas Graven, Vice
                          President, Chief Financial Officer.
     21.                List of Subsidiaries.
     27.                Financial Data Schedule
</TABLE>

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

(1) Filed as a like-numbered exhibit to the Company's Registration Statement on
    Form SB-2 dated December 6, 1993 (Registration No. 33-72500).

(2) Filed as Exhibit 10.10 to the Company's Registration Statement on Form SB-2
    dated December 6, 1993 (Registration No. 33-72500)

(3) Filed as Exhibit 10.18 to Amendment No. 1 dated March 1, 1994 to the
    Company's Registration Statement on Form SB-2 dated December 6, 1993
    (Registration No. 33-72500)

(4) Filed as Exhibit 10.23 to Amendment No. 2 dated May 6, 1994 to the Company's
    Registration Statement on Form SB-2 dated December 6, 1993 (Registration
    No. 33-72500)

(5) Filed as Exhibit 10.24 to Amendment No. 2 dated May 6, 1994 to the Company's
    Registration Statement on Form SB-2 dated December 6, 1993 (Registration
    No. 33-72500)

(6) Filed as Exhibit 10.2 to Form 10-QSB dated August 31, 1995.

(7) Filed as Exhibit 10.3 to Form 10-QSB dated August 31, 1995.

(8) Filed as Exhibit 2.2 to Form 8-K filed January 5, 1996.

(9) Filed as Exhibit 2.3 to Form 8-K filed January 5, 1996.

(10) Filed as Exhibit 10.18 to Form 10-KSB dated November 30, 1996.

                                       45
<PAGE>
(11) Filed as Exhibit 10.19 to Form 10-KSB dated November 30, 1996.

(12) Filed as Exhibit 10.20 to Form 10-KSB dated November 30, 1996.

(13) Filed as Exhibit 10.21 to Form 10-KSB dated November 30, 1996.

(14) Filed as Exhibit 10.21 to Form 10-KSB dated November 30, 1997.

(15) Filed as Exhibit 10.22 to Form 10-KSB dated November 30, 1997.

(16) Filed as Exhibit 10.23 to Form 10-KSB dated November 30, 1997.

(17) Filed as Exhibit 10.24 to Form 10-KSB dated November 30, 1997.

(18) Filed as Exhibit 10.1 to Form 8-K filed February 27, 1998.

(19) Filed as Exhibit A to Form DEF-14A dated April 8, 1998.

    (b) Reports on Form 8-K

    None.

                                       46
<PAGE>
                                   SIGNATURES

    In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

<TABLE>
<S>                                                    <C>  <C>
                                                       ADVANCED MATERIALS GROUP, INC.

Dated: February 28, 2000

                                                       By:              /s/ STEVE F. SCOTT
                                                            -----------------------------------------
                                                                          Steve F. Scott
                                                              PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

    In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

<TABLE>
<C>                                                    <S>                           <C>
                                                       Chief Executive Officer,
                 /s/ STEVE F. SCOTT                      President and Director
     -------------------------------------------         (PRINCIPAL EXECUTIVE        February 28, 2000
                   Steve F. Scott                        OFFICER)

                                                       Vice President/Chief
                /s/ J. DOUGLAS GRAVEN                    Financial Officer and
     -------------------------------------------         Secretary                   February 28, 2000
                  J. Douglas Graven                      (PRINCIPAL FINANCIAL
                                                         OFFICER)

                 /s/ JOHN L. WATKINS
     -------------------------------------------       Controller (PRINCIPAL         February 28, 2000
                   John L. Watkins                       ACCOUNTING OFFICER)

                /s/ TIMOTHY R. BUSCH
     -------------------------------------------       Chairman and Director         February 28, 2000
                  Timothy R. Busch

                /s/ MAURICE J. DEWALD
     -------------------------------------------       Director                      February 28, 2000
                  Maurice J. DeWald

                /s/ MICHAEL A. LEDEEN
     -------------------------------------------       Director                      February 28, 2000
                  Michael A. Ledeen

                /s/ ALLAN H. MELTZER
     -------------------------------------------       Director                      February 28, 2000
                  Allan H. Meltzer

                /s/ N. PRICE PASCHALL
     -------------------------------------------       Director                      February 28, 2000
                  N. Price Paschall
</TABLE>

                                       47
