UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date of
Report (Date of earliest event reported): June 7, 2009
ADVANCED MATERIALS GROUP,
INC.
(Exact
name of registrant as specified in its charter)
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Nevada
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0-16401
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33-0215295
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(State
of other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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2364
Merritt Drive, Suite A, Garland, Texas 75041
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(Address
of Principal Executive Offices)
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Registrant’s
telephone number, including area code: (469)
246-4100
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Not
Applicable
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(Former
name or former address, if changed since last
report)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2 below):
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425).
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Soliciting
material pursuant to Rule 14A-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR
240.13e-4(c)) |
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Entry into a Material
Definitive Agreement.
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On March
1, 2007, Advanced Materials Group, Inc. (the “Company”), through its
wholly-owned subsidiary Advanced Materials, Inc. (AMI), obtained a $2,000,000
credit facility (the “Credit Facility”) from JPMorgan Chase Bank, N.A.
(“Lender”). The Credit Facility was established pursuant to a Credit Agreement
between AMI and Lender and evidenced by a Line of Credit Note executed by
AMI. This Line of Credit Note was amended on July 14, 2008 to extend
the credit facility to $2,500,000. Effective on or about March 31,
2009, the Credit Facility was converted to a term loan (“Term Loan”) the
principal balance of which became due and payable on May 31, 2009. On
June 8, 2009, the Company was informed that it was in default under the Term
Loan due to nonpayment of the outstanding principal balance, approximately
$2,460,000, and accrued interest thereon by the May 31, 2009 due
date. In addition, the Company has an outstanding term note for
equipment in the approximately principal amount of $200,000 which came due on
May 31, 2009 and a note in the approximate principal amount of $66,000
relating to a previously cancelled corporate credit card which also came due on
May 31, 2009.
The
Lender has not initiated any of the default provisions under the Term Loan or
other defaulted obligations, and instead the Lender has given the Company until
June 19, 2009 to assemble a plan to become current on the Term
Loan. All of the Company’s assets are pledged as collateral for the
Term Loan.
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Termination
of a Material Definitive
Agreement.
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Creation
of a Direct Financial Obligation or
an Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
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As
described under Item 1.01 above, which discussion is incorporated herein by this
reference, effective March 31, 2009, the Company’s Credit Facility was converted
into a Term Loan which became due and payable on May 31, 2009.
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Item
2.04
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Triggering
Events That Accelerate or Increase a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet
Arrangement.
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As
described under Item 1.01 above, which discussion is incorporated herein by this
reference, the Company’s Term Loan was due and payable on or before May 31,
2009. The outstanding principal balance of approximately $2,460,000,
together with any accrued interest thereon, was not repaid by the May 31, 2009
due date and the Company is currently in default under the Term Loan
and its other obligations to the Lender.
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Item 4.02
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Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or
Completed Interim Report.
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(a)
On or about June 2, 2009,
the Chairman of the Audit Committee of the Company Board of Directors and
the Company’s Chairman of the Board received an anonymous tip pursuant to the
Company's whistleblower policy which alleged that there may have
been financial irregularities at the Company. Following a preliminary
investigation, on June 8, 2009, the Audit Committee and full Board of Directors
of the Company determined that restatements of the Company’s consolidated
financial statements for the fiscal year ended November 30, 2008 and for the
interim quarterly periods ended May 31, 2008, August 31, 2008, and
February 28, 2009 were necessary. Accordingly, the reports the Company filed on
Form 10-KSB for the fiscal year ended November 30, 2008, and on Form 10-Q for
the quarters ended May 31, 2008, August 31, 2008, and February 28, 2009 with the
United States Securities and Exchange Commission (“SEC”) should no longer be
relied upon.
Restatements
will be required due to verified falsification and recording of customer
invoices for sales which did not occur to one or more Company customers that
resulted in a material overstatement of Company revenues during the period
commencing with the second quarter of 2008
thru and including the first quarter ending February 28,
2009. Because the investigation has not yet been completed, the
extent of the revenue and accounts receivable overstatements during the forgoing
period have not yet been fully quantified.
The
Company has not yet completed its investigation nor determined if reports filed
with the SEC for other periods will require restatement nor is the Company
currently in a position to quantify the restatement
adjustments. Consequently, the Company is not yet in a position to
determine the magnitude of the material revenue overstatement during the above
periods, whether reported revenues for earlier periods are similarly materially
overstated, or whether other balance sheet or income statement accounts have
been materially misstated.
The
Company’s current management and Audit Committee of the Board of Directors have
not had an opportunity to discuss the matters disclosed in this Item 4.02
with the Company’s independent registered public accounting firm, Fei-Fei
Catherine Fang, CPA because its principal, Ms. Fang, is currently out
of the country and cannot be reached. The
Company intends to contact Ms. Fang upon her return in order to discuss the
matters disclosed in this Item 4.02. In addition, as soon as
practical after the date of the filing of this Form 8-K, the Company intends to
file an amended Form 10-KSB for the fiscal year ended November 30, 2008, which
will include the restatement of the Company’s financial information for the
quarters ended May 31, 2008 and August 31, 2008, and amend its Form 10-Q
for the interim period ended February 28, 2009, and file such amended reports
with the SEC.
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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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On June
7, 2009, the Company’s Board of Directors unanimously determined to terminate
William G. Mortensen’s appointment as President and Chief Financial Officer of
the Company.
On June
7, 2009, the Company’s Board of Directors appointed Marty Lehman, age 60, as the
Company’s Interim President effective June 7, 2009, replacing Mr.
Mortensen. Mr. Lehman will be in charge of overseeing the Company’s
day-to-day operations and will report to the Company’s Board of
Directors. Prior to joining the Company, Mr. Lehman was semi-retired
and served as a consultant for several privately held companies. From 1993
to 2005, Mr. Lehman served as the Chairman of the Board, Chief Executive Officer
and President of Entronix International, an electronics remanufacturing,
manufacturing, refurbishing and reverse logistics company specializing in
cellular and appliance products headquartered in Rogers,
Minnesota. Mr. Lehman holds a Bachelor of Science Business
Administration degree in Marketing from the University of
Minnesota.
Mr.
Lehman’s employment with the Company is “at will” and he will be paid an annual
base salary of $120,000. Mr. Lehman will also be eligible to
participate in the Company’s standard employee benefits programs. The
Company has not entered into a formal employment agreement with Mr. Lehman at
this time.
The
Company’s Board of Directors has not yet initiated the search for a replacement
Chief Financial Officer but expects that such search will commence within the
next 30 days.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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ADVANCED
MATERIALS GROUP, INC. |
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Date:
June 9, 2009
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By:
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/s/ Timothy
Busch |
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Timothy
Busch
Chairman
of the Board
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