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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS......................................................................................................................................................	1
ITEM 2. DESCRIPTION OF PROPERTY.....................................................................................................................................................	6
ITEM 3. LEGAL PROCEEDINGS.................................................................................................................................................................	6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................................................................	6
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.......................................................................................	7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..............................................................	7
ITEM 7. FINANCIAL STATEMENTS........................................................................................................................................................	11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..................................................................................................................................................................................................	11
ITEM 8A. CONTROLS AND PROCEDURES.............................................................................................................................................	11
ITEM 8B. OTHER INFORMATION............................................................................................................................................................	11
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.........................................................................	11
ITEM 10. EXECUTIVE COMPENSATION.................................................................................................................................................	13
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS........................................................................................................................................................................	14
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE........................	15
ITEM 13. EXHIBITS.......................................................................................................................................................................................	15
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................................................................................................	15
PART IV
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.......................................................................................	F-1
SIGNATURES.................................................................................................................................................................................................	16
INDEX TO EXHIBITS....................................................................................................................................................................................	17

 

 

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-KSB contains forward-looking statements. The words “intend,” “anticipate,” “believe,” “estimate,” “plan,” “expect” and similar expressions as they relate to us, identify these forward-looking statements. Forward-looking statements include those that address activities, developments or events that we expect or anticipate will or may occur in the future. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The actual outcome of the events described in these forward-looking statements could differ materially.

 

These factors expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We have chosen these assumptions or bases in good faith and we believe that they are reasonable. However, we caution you that assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Annual Report. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any intention or obligation to update forward-looking statements after we distribute this Annual Report.

Readers are referred to the caption “Risk Factors” appearing at the end of Item 1 of this Annual Report for additional factors that may affect our forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Annual Report may not occur. We undertake no obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.

 

YEARS ENDED NOVEMBER 30,		2007			2006
Net sales		$	10,672,786		$	9,996,280
Cost of sales (including depreciation of $109,102 and $144,165 for the years ended November 30, 2007 and 2006, respectively)			8,335,899			7,221,442
Gross profit			2,336,887			2,774,838
Operating expenses:
Selling, general and administrative			1,643,524			1,874,791
Depreciation and amortization			40,321			84,608
Total operating expenses			1,683,845			1,959,399
Income from operations			653,042			815,439
Other (expense) income:
Interest expense			(92,630)			(137,823)
Other, net			33,010			22,357
Total other expense, net			(59,620)			(115,466)
Income from operations before income tax benefit			593,422			699,973
Income tax benefit			219,113			634,000
Net income with income tax benefit		$	812,535		$	1,333,973
Net income per share basic and diluted		$	0.07		$	0.11
Weighted average common shares outstanding:
Basic			12,142,943			12,116,026
Diluted			12,372,229			12,195,704

 

See accompanying report of independent registered public accounting firm and notes to consolidated financial statements.

 

F-2

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ADVANCED MATERIALS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

 

YEARS ENDED NOVEMBER 30,		2007			2006
ASSETS
Current Assets:
Cash and cash equivalents		$	462,701		$	441,860
Accounts receivable			1,799,657			1,519,282
Inventories			1,086,968			815,422
Prepaid expenses and other assets			398,133			253,476
Deferred tax assets			858,064			634,000
Total current assets			4,605,523			3,664,040
Property and equipment, net			736,398			342,237
Other assets			69,395			75,703
Total assets		$	5,411,316		$	4,081,980
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable			251,301			405,493
Accrued liabilities			119,468			185,155
Notes payables - related parties			--			43,952
Line of credit			1,354,167			855,850
Current portion of capital lease obligations			59,782			19,728
Total current liabilities			1,784,718			1,510,178
Capital lease obligations, net of current portion			122,442			19,685
Total liabilities			1,907,160			1,529,863
Commitments and contingencies			--			--
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; 12,146,026 and 12,116,026 shares issued and outstanding at November 30, 2007 and 2006			12,146			12,116
Additional paid-in capital			8,494,971			8,355,497
Accumulated deficit		$	(5,002,961)		$	(5,815,496	)
Total stockholders' equity			3,504,156			2,552,117
Total liabilities and stockholders' equity		$	5,411,316,		$	4,081,980

See accompanying report of independent registered public accounting firm and notes to consolidated financial statements.

F-3

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ADVANCED MATERIALS GROUP, INC.

CONSOLIDATED STATEMENTS SHAREHOLDERS' EQUITY

	COMMON STOCK
	SHARES	AMOUNT	PAID-IN CAPITAL	ACCUMULATED DEFICIT	TOTAL STOCKHOLDERS' EQUITY
November 30, 2005	12,116,026	$      12,116	$        8,355,497	$     (7,149,469)	$        1,218,144
Net income				1,333,973	1,333,973
November 30, 2006	12,116,026	12,116	8,355,497	(5,815,496)	2,552,117
Exercise of common stock options	30,000	30	5,069		5,099
Stock based compensation			134,405		134,405
Net income				812,535	812,535
November 30, 2007	12,146,026	$       12,146	$        8,494,971	$      (5,002,961)	$       3,504,156

 

See accompanying report of independent registered public accounting firm and notes to consolidated financial statements.

 

F-4

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ADVANCED MATERIALS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED NOVEMBER 30,		2007			2006
Cash flows from operating activities:
Net income		$	812,535		$	1,333,973
Adjustments to reconcile net income to net cash provided by (used) in operating activities:
Depreciation and amortization			149,423			228,773
Stock based compensation			134,405			--
Deferred tax expenses			(224,064)			(634,000)
Changes in operating assets and liabilities:
Accounts receivable			(280,375)			(48,477)
Inventories			(271,546)			269,635
Prepaid expenses and other assets			(144,657)			(35,234)
Other assets			6,308			5,262
Accounts payable and accrued liabilities			(219,879)			(492,353)
Net cash provided by (used in) operating activities			(37,850)			627,579
Cash flows from investing activities:
Purchases of property and equipment			(360,584)			(51,122)
Net cash used in investing activities			(360,584)			(51,122)
Cash flows from financing activities:
Borrowings (payments) under line of credit, net			498,317			(313,029)
Payments on debt obligations			(84,141)			(228,607)
Exercise of stock options			5,099			--
Net cash provided by (used in) financing activities			419,275			(541,636)
Net change in cash and cash equivalents			20,841			34,821
Cash and cash equivalents, beginning of year			441,860			407,039
Cash and cash equivalents, end of year		$	462,701		$	441,860
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest		$	92,630		$	137,823
Income taxes		$	--		$	--
Fixed assets acquired under capital leases		$	183,000			--

 

See accompanying report of independent registered public accounting firm and notes to consolidated financial statements.

 

F-5

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ADVANCED MATERIALS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1-ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

 

Advanced Materials Group, Inc. (the "Company") develops, manufactures and markets a wide variety of products from a base of flexible materials. The Company's principal subsidiary, Advanced Materials, Inc. (formerly known as Wilshire Advanced Materials, Inc.) ("AM"), is the successor to a 50 year old business that converted specialty materials including foams, foils, films and adhesive composites into components and finished products. The Company is making a transition from the foam fabricator / contract manufacturing business to proprietary medical and consumer products. Examples of the products AM is currently manufacturing include non-skid surgical instrument pads and applicators for medical use, soap impregnated surgical prep kit sponges, protective units for arthoroscopic and orthopedic instruments, printer cartridge inserts and inking felts, automobile insulators, water and dust seals. These products are made for a number of customers in various markets including medical, technology, aerospace, automotive and consumer.

Principles of Consolidation

The consolidated financial statements include the accounts of Advanced Materials Group, Inc. and its wholly owned subsidiary, Advanced Materials, Inc. and Advanced Materials, Ltd. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

The Company considers highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Fair Value of Financial Instruments

 

The Company's cash and cash equivalents, accounts receivable, accounts payable and line of credit approximated fair value at November 30, 2007 and 2006 because of the relatively short maturity of these instruments. The carrying value of debt approximated fair value at November 30, 2007 and 2006 as these instruments bear market rates of interest.

 

F-6

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Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market. Cost includes raw materials, labor, manufacturing overhead and purchased products. Market is determined by comparison with recent purchases or net realizable value. Net realizable value is based on forecasts for sales of the Company's products in the ensuing years. Should demand for the Company's products prove to be significantly less than anticipated, the ultimate realizable value of the Company's inventories could be substantially less than the amount shown on the accompanying consolidated balance sheets.

Property and Equipment

Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Repairs and maintenance costs are charged to operations as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and gains or losses from retirements and dispositions are credited or charged to operations.

Depreciation and amortization are computed using the straight-line method over estimated useful lives of five 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 and amortization expense was approximately $149,000 and $229,000, for the years ended November 30, 2007, and 2006 respectively, of which $109,000 and $144,000, respectively, is included in cost of sales in the accompanying consolidated statements of operations.

Impairment of Long-Lived Assets

 

Management reviews long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable and would record an impairment charge if necessary. Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset and are significantly impacted by estimates of future prices for the Company’s products, capital needs, economic trends and other factors. No impairment charges were recorded for the years ended November 30, 2007 and 2006.

Revenue Recognition

 

The Company recognizes revenue from product sales when it is realized or realizable and earned, which is generally at the time of shipment and passage of title. Revenue is considered to be realized or realizable and earned when there is persuasive evidence of a sales arrangement in the form of a contract or a purchase order, the product has been shipped, the sales price is fixed or determinable and collectibility is reasonably assured. The Company records revenue for shipping costs charged to customers. The related shipping costs incurred are recorded in cost of sales.

Concentrations of Credit Risk

 

CASH AND CASH EQUIVALENTS

At November 30, 2007, the Company maintained cash balances at certain financial institutions in excess of federally insured limits. At November 30, 2007, the Company had approximately $362,701 in cash in excess of federally insured limits. The Company has experienced no losses related to uninsured deposits.

 

CUSTOMERS

The Company provides credit in the normal course of business to customers throughout the United States and foreign markets. The Company performs ongoing credit evaluations of its customers. The Company maintains reserves for potential credit losses based upon the Company's historical experience related to credit losses. Based on the Company's evaluation of its accounts receivable it has determined a reserve is not necessary at November 30, 2007 and 2006.

 

The Company formed Advanced Materials Foreign Sales Corporation Ltd., a wholly-owned subsidiary of the Company, to enter into a strategic manufacturing agreement in Singapore. The Company entered into a ten-year agreement with Foamex Asia in January 1998. Terms of the agreement call for the Company to lease production equipment and provide certain technology to Foamex Asia. Foamex Asia will in turn provide its manufacturing facilities and work force to fabricate foam products at Foamex Asia's Singapore facility. The manufacturing agreement has a profit sharing provision that changes annually. The profit sharing split is as follows (in percentages):

 

F-7

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YEAR	THE COMPANY	FOAMEX
1998	65	35
1999	60	40
2000	50	50
2001	50	50
2002	45	55
2003	40	60
2004 - 2007	35	65

 

 

Revenues and profits as reported relating to the Singapore manufacturing agreement were $476,985 and $584,020 for each of the two years ended November 30, 2007 and 2006, respectively. Under the amended agreement, only the Company's shares of the profit are reported as revenue.

The lower sales in Singapore are primarily attributable to an amendment to the Company's manufacturing agreement in Singapore with Foamex Asia to change the vendor of record for the customer supplied under the agreement from the Company to Foamex Asia effective July 17, 2003. Although this change does not affect the Company's share of the profitability under the agreement, it does cause a significant reduction in its reported revenues. Previously, the Company purchased the raw materials for the production of product and billed the end customer and therefore recognized the gross sales and cost of sales on its financials. Under the amended agreement, it no longer purchases the raw materials or bills the end customer and only recognizes its portion of profit as revenue. Management believes this change has been beneficial to the Company as it stills maintains a share of the profits from the Singapore agreement, while it has significantly reduced its capital requirements since it no longer needs to purchase raw materials several months in advance of realizing sales.

Risks and Uncertainties

 

ENVIRONMENTAL REGULATION AND OPERATING CONSIDERATIONS

The manufacture of certain products by the Company 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 is 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. 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"), impose 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, governed by the law, which contains the California counterparts of CERCLA and RCRA. The Company believes that its manufacturing activities are in substantial compliance with all material Federal and state laws and regulations governing its operations. Amendments to existing statutes and regulations could require the Company to modify or alter methods of operations at costs, which could be substantial. There can be no assurance that the Company will be able, for financial or other reasons, to comply with applicable laws and regulations.

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.

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 and local laws and regulations regarding safe working conditions.

 

F-8

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SUPPLIERS

Foamex International, Inc. ("Foamex") accounted for 43% and 38% of consolidated purchases for the years ended November 30, 2007 and 2006, respectively. Management believes that the loss of Foamex as a major supplier of foam could adversely affect the Company's business.  If another supplier's products were to be substituted by the Company's customers in critical applications, there are no assurances that the Company would retain the favorable supply position that it has earned through over 25 years as an authorized converter/fabricator for Foamex.

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

 

On December 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123(R), Share-Based Payment (“SFAS 123(R)”) , and has elected to use the modified prospective method, which requires the application of the accounting standard to all share-based awards issued on or after December 1, 2006 and any outstanding share-based awards that were issued but not vested as of November 30, 2006. Accordingly, the consolidated financial statements as of November 30, 2006 and for the twelve months then ended have not been restated to reflect the impact of SFAS 123(R).

          

For the year ended November 30, 2007, the adoption of FAS 123(R) resulted in incremental stock-based compensation expense of approximately $134,000. This amount includes (i) compensation expense related to stock options granted prior to November 30, 2006, but not yet vested as of November 30, 2006, based on the grant date fair value estimated in accordance with the pro-forma provisions of SFAS 123 (ii) compensation expense related to stock options granted during the year ended November 30, 2007. The $134,000 of compensation expense has been recorded as selling, general and administrative expense in the accompanying consolidated statement of income.

 Prior to the adoption of SFAS 123(R), the Company applied APB 25 to account for its stock-based awards. The following table details the effect on net income and earnings per share had compensation expense for employee stock-based awards been recorded in the year ended November 30, 2006 based on the fair value method under FAS 123:

YEARS ENDED NOVEMBER 30:		2007			2006
Net income available to common shareholders		$	812,535	$	1,333,973
Plus: Stock-based employee compensation expense included in reported net loss		$	--	$	--
Less: Total stock-based employee compensation reversals (expense) determined using fair value based method		$	147,000	$	(12,900)
Pro forma net income available to common shareholders		$	959,535	$	1,321,073
Net income per common share, as reported Basic and diluted		$	0.07	$	0.11
Net income per common share, pro forma Basic		$	0.07	$	0.11
Diluted		$	0.07	$	0.11

 

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 exclude dilution and are computed by dividing net income by the weighted average of common shares outstanding during the period. Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. The difference between basic and diluted weighted average shares outstanding for the years ended November 30, 2007 and 2006 relates to dilutive stock options and warrants.

 

F-9

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There were 218,000 and 235,000 potentially dilutive options and warrants outstanding at November 30, 2007, and 2006, respectively, that were not included in the computation of the net income per share because they would be anti-dilutive.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes , an Interpretation of FAS109, Accounting for Income Taxes (FIN 48), to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN 48 as of December 1, 2007, as required. The cumulative effect of adopting FIN 48 will be recorded in retained earnings. The Company has not determined the effect, if any, the adoption of FIN 48 will have on the Company’s financial position and results of operations.

In 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("FAS 157").  FAS 157 defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements.  FAS 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value.  FAS 157 does not expand or require any new fair value measures, however the application of this statement may change current practice.  The requirements of FAS 157 are first effective for our fiscal year beginning December 1, 2008.  However, in February 2008 the FASB decided that an entity need not apply this standard to nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis until the subsequent year.  Accordingly, our adoption of this standard on December 1, 2008 is limited to financial assets and liabilities.  We do not believe the initial adoption of FAS 157 will have a material effect on our financial condition or results of operations.  However, we are still in the process of evaluating this standard with respect to its effect on nonfinancial assets and liabilities and therefore have not yet determined the impact that it will have on our financial statements upon full adoption.

NOTE 2 - INVENTORIES

Inventories consist of the following at November 30:

 

		2007			2006
Raw materials		$	562,236		$	355,773
Work-in-progress			148,104			94,949
Finished goods			376,628			364,700
			1,086,968			815,422
Less allowance for obsolete inventory			--			--
		$	1,086,968		$	815,422

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at November 30:

 

		2007			2006
Machinery and equipment		$	2,771,358		$	2,314,627
Furniture and fixtures			1,533,202			1,451,649
Transportation equipment			76,540			76,540
Leasehold improvements			500,708			485,954
Construction in progress			-			9,450
			4,881,808			4,338,220
Less accumulated depreciation			(4,145,410)			(3,995,983	)
		$	736,398		$	342,237

 

The assets held under capital leases have been included in property and equipment and total $243,358 and $90,263 with accumulated depreciation of $49,378 and $18,623 for the years ended November 30, 2007 and 2006, respectively.  Amortization costs related to assets under capital leases are charged to depreciation expense.

 

F-10

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NOTE 4 - LINE OF CREDIT

 

On March 1, 2007, AMG, through its wholly-owned subsidiary 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. The proceeds under the Credit Facility will be used primarily for working capital needs in the ordinary course of business.

AMI can borrow, pay and reborrow principal under the Credit Facility from time to time during its term, but the outstanding principal balance under the Credit Facility may not exceed the lesser of the borrowing base or $2,000,000. For purposes of the Credit Facility, “borrowing base” is calculated by adding 80% of AMI's eligible accounts receivable to 50% of the lower of cost or wholesale market value of all of AMI's eligible inventory.

The outstanding principal balance under the Credit Facility bears interest at the rate of interest per annum announced from time to time by the Lender as its prime rate, and will be computed on the unpaid principal balance from the date of each borrowing. Accrued interest payments on the unpaid principal balance under the Credit Facility are payable quarterly commencing on May 1, 2007, and all outstanding principal under the Credit Facility, together with all accrued but unpaid interest, is due at maturity, or April 1, 2008.

 

The Credit Facility is secured by a first priority lien on all of AMI's currently owned and subsequently acquired accounts receivable, chattel paper, deposit accounts, documents, equipment, general intangibles, instruments, inventory, investment property and letter of credit rights pursuant to a Continuing Security Agreement between AMI and Lender.

The Credit Agreement contains certain covenants with which AMI must comply. Subject to Lender's consent, AMI is prohibited under the Credit Agreement from, among other things, declaring or paying dividends on its capital stock, issuing, selling or otherwise disposing of any shares of its capital stock and incurring, assuming or permitting to remain outstanding any indebtedness for borrowed money, subject to certain exceptions. Additionally, AMI is prohibited from engaging in any business activities substantially different from those in which it is currently engaged and from merging or consolidating with any other entity or selling any of its assets outside of the ordinary course of business.

The line of credit agreement requires the Company to maintain certain financials covenants including maintaining tangible net worth no less than $1,500,000 as of each fiscal quarter end.

 

If a default occurs under the Credit Agreement, the Line of Credit Note or any other related documents, Lender may declare all amounts outstanding under the Credit Facility immediately due and payable. In such event, Lender may exercise any rights and remedies it may be provided by law or agreement, including the ability to cause all or any part of the collateral under the Continuing Security Agreement to be transferred to Lender or registered in Lender's or any other designated entity's name. Any such event may materially impair AMI's and the Company's ability to conduct its business. Borrowings outstanding under the Line of Credit at November 30, 2007 were $1,354,167

 

In order to facilitate the Company's obtaining the Credit Facility, on April 2, 2007, the Company terminated its existing $1,500,000 line of credit agreement with Textron Financial Corporation, which was evidenced by a Loan and Security Agreement dated October 9, 2003, as amended.

 

At November 30, 2007 $100,819 is available for borrowing under this line-of-credit.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

Leases

 

The Company leases approximately 56,000 square feet of manufacturing and office space in Rancho Dominguez, California at approximately $29,600 per month through November 2010.  Effective November 1, 2005 the Company rented office space in Dallas for its corporate Headquarters. The Company pays approximately $5,439 per month and the lease expires in October 2010

 

Approximate future minimum operating and capital lease obligations at November 30, 2007, are as follows:

			OPERATING LEASES				CAPITAL LEASES
2008		$	422,000		$		89,000
2009			422,000				61,000
2010			422,000				56,000
2011			--				--
2012			--				--
Total minimum lease obligations		$	1,266,000		$		206,000
Less amounts representing interest								(24,000)
Present value of capital lease payments							182,000
Current portion							(60,000)
Long-term portion					$		122,000

 

Interest expense incurred under capital lease obligations was insignificant for the years ended November 30, 2007, and 2006.

 

F-11

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Employment Contracts

 

On August 22, 2005, AM entered into Employment Agreements with William G. Mortensen ("Mortensen") and Michael Bowen ("Bowen"). Pursuant to these Employment Agreements, Mortensen serves as President and Chief Financial Officer of AM and Bowen served as Executive Vice President of AM. The terms of employment are at will; however, if either is terminated without cause (as defined in the Employment Agreements), they receive severance pay equal to six months' base salary if the termination occurs within the first year of the term, and equal to three months' base salary if the termination occurs thereafter. Mortensen's base annual salary is set at $120,000 and Bowen's base annual salary is set at $135,000. Mortensen and Bowen are each entitled to bonuses calculated by formulas based upon AM's income from continuing operations before taxes. In 2005 upon entering into his employment agreement, Bowen also received a grant of an incentive stock option to purchase up to 200,000 shares of AM's common stock for $0.20 per share. The option vests 20% per year for five years, beginning one year from the date of the grant. If Bowen's employment with AM terminates for any reason other than for cause or his voluntary resignation, the option does not terminate and vesting continues. Due to Bowen's resignation as of July 7, 2006, all stock options have expired.

In January 2006, the Company entered into an at-will employment arrangement with Ricardo G. Brutocao to fill the Company's open Chief Executive Officer Position. Mr. Brutocao has an unwritten agreement to be compensated by the Company at the rate of $125,000. Compensation was increased in 2007 to $140,000 per year based on recommendations by the Compensation Committee.  In November 2005, Mr. Brutocao was elected to the Company's board of directors. Prior to that Mr. Brutocao had been providing consulting services to the Company and as a result was granted 100,000 options at $.20 per share of which 20% vested immediately and the remaining vest ratably over a four year period. Vesting is contingent on continued service to the Company.

 

Litigation

 

On or about October 18, 2007, the Company filed suit in the Superior Court of the State of California, County of Orange, Central Justice Center, against Foamtec (Singapore) Pte. Ltd., a private limited company incorporated in Singapore, and Foamex Asia Ltd., a private company incorporated in Burma, formerly the Kingdom of Thailand (collectively, “Foamtec”). In December of 1998, the Company and Foamtec entered into a Manufacturing Agreement, whereby the Company and Foamtec agreed to work cooperatively to manufacture and sell certain foam components to Hewlett Packard Company and certain other buyers. As part of the Manufacturing Agreement, Foamtec agreed to act as fiduciary agent for the Company in distributing the manufactured product to Hewlett Packard, its successors and assigns. The term of the Manufacturing Agreement was for ten years, which could be extended by either party for an additional five years. Foamtec had the option to purchase the Company’s interest in the Manufacturing Agreement by paying a price to be calculated on the profits expected under the entire remaining term which, by definition, included its entire term, including the additional five years if the Company exercised its extension right. In 2006, the Company gave notice to Foamtec of its election to extend the term of the Manufacturing Agreement for an additional five years in accordance with its rights under the Manufacturing Agreement. Thereafter, Foamtec gave notice of its election to purchase the Company’s interest in the Manufacturing Agreement, and tendered certain funds in claimed discharge of its payment obligations thereunder. Foamtec asserted that this payout right only applied to the initial term, and not the extended term, and therefore remitted funds that represented the expected profits through the end of the initial term. The Company therefore sued Foamtec for breach of contract for Foamtec’s failure to pay the Company the amount of expected profits for the extended term, as well as for breach of fiduciary duty. The Company is seeking compensatory damages in excess of $1,000,000, exemplary damages in an amount subject to proof, interest as provided by law and costs associated with the suit.

 

 

NOTE 6 - RELATED PARTY DEBT

 

On April 22, 2004, the Company's President and CEO and the Company's Chairman of the Board each loaned $150,000 to the Company pursuant to certain promissory notes. The notes were payable on July 21, 2004 and bear interest at 10%. Upon certain events of default, including the nonpayment of principal, the interest rate increases to a default rate of 12%. The outstanding balance as of November 30, 2007 is $0.

 

In conjunction with the promissory notes, the Company issued warrants to purchase an aggregate of 100,000 shares of the Company's common stock at an exercise price of $0.363 per share. The warrants are exercisable at any time and expire on May 13, 2008. Upon certain events of default, including the nonpayment of principal, the Company shall issue warrants to purchase an additional 100,000 shares of the Company's common stock with the same terms. As a result of the default on this debt, the Company issued an additional 100,000 warrants for a total of 200,000.

NOTE 7 - STOCKHOLDERS' EQUITY

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. This stock option plan has been closed for future grants as of 2007.

 

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2003 STOCK PLAN

 

In December 2003, the stockholders of the Company approved the 2003 Stock Plan ("2003 Plan"). The Plan authorizes the granting of various options and rights to purchase up to 3,000,000 shares of common stock of the Company. The 2003 Plan provides for the grant by the Company of options to purchase shares of the Company's common stock to its employees, directors and consultants. The 2003 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 2003 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 2003 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 2003 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 2003 Plan has to be at least equal to the fair market value of the common stock as of the date of grant.

In January 2006, the Company entered into an at-will employment arrangement with Ricardo G. Brutocao to fill the Company's open Chief Executive Officer Position. Mr. Brutocao has an unwritten agreement to be compensated by the Company at the rate of $125,000. Compensation was increased in 2007 to $140,000 per year based on recommendations by the Compensation Committee.  In November 2005, Mr. Brutocao was elected to the Company's board of directors. Prior to that Mr. Brutocao had been providing consulting services to the Company and as a result was granted 100,000 options at $.20 per share of which 20% vested immediately and the remaining vest ratably over a four year period. Vesting is contingent on continued service to the Company. This stock option plan has been closed for future grants as of 2007.

 

2007 STOCK PLAN

 

As part of the Company’s executive compensation program, executives are eligible to receive incentive stock options, nonstatutory stock options, stock appreciation rights and restricted shares (collectively, “Awards”) pursuant to the Advanced Materials Group, Inc. 2007 Stock Incentive Plan (the “2007 Incentive Plan”). The 2007 Incentive Plan was approved by the Company’s stockholders in May 2007, and is an unfunded plan that provides for the granting of Awards to employees, directors and consultants of the Company or an affiliate. The Compensation Committee believes that the 2007 Incentive Plan strengthens the Company’s ability to attract, retain, and reward executives, as well as other employees, directors and consultants, by enabling such persons to acquire or increase a proprietary interest in the Company, strengthening the mutuality of interests between such persons and the Company’s stockholders, and providing such persons with performance incentives to expend their maximum efforts in the creation of stockholder value.

 

Administration

 

The 2007 Incentive Plan is administered by the Compensation Committee. The Compensation Committee, as the plan administrator, is vested with full and final authority to administer and interpret the 2007 Incentive Plan and to make all determinations necessary or advisable for the administration of the 2007 Incentive Plan. Subject to the terms of the 2007 Incentive Plan, the Compensation Committee determines who will receive Awards, the time or times at which Awards will be granted, the type of Awards to be granted, the number of shares of common stock covered by each Award, vesting schedules and other limitations on the vesting of the Awards, and such other terms and conditions of each Award as are not inconsistent with the provisions of the 2007 Incentive Plan.

 

Shares Subject to the Plan

 

The aggregate number of shares of common stock subject to the 2007 Incentive Plan is 3,000,000. Shares subject to Awards under the 2007 Incentive Plan include authorized and unissued shares, as well as previously issued shares that have been reacquired by the Company. The total number of shares authorized under the 2007 Incentive Plan will be subject to increase or decrease in order to reflect any stock split, stock dividend, recapitalization, merger, consolidation, reorganization, combination or exchange. If any Award granted under the 2007 Incentive Plan expires, terminates or is canceled for any reason without having been exercised in full, or if any Shares issued in connection with an Award are repurchased by the Company, the corresponding number of Shares will again be available for Awards under the 2007 Incentive Plan.

 

Description of Stock Options

 

Types of Options. The types of stock options (“Options”) that may be granted under the 2007 Incentive Plan include: (i) options which meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)(“Incentive Stock Options”), and (ii) stock options that do not qualify as Incentive Stock Options (“Nonstatutory Stock Options”). Incentive Stock Options may only be granted to employees; however, Nonstatutory Stock Options may be granted to employees, directors or consultants of the Company. The exercise price per share for common stock subject to an Option will be determined by the Compensation Committee, as the plan administrator, at the date of grant; provided, that the exercise price for any Option shall not be less than 100% of the fair market value of the common stock at the date of grant, as determined by the Board, and if the participant of an Incentive Stock Option owns more than 10% of the total combined voting power of all classes of stock of the Company and its affiliates, as described in Section 422(b)(6) of the Code, the exercise price of any Incentive Stock Option granted to such participant shall not be less than 110% of the fair market value of the common stock at the date of grant.

 

Payment on Exercise. Payment for shares of common stock purchased upon the exercise of an Option may, subject to the terms of the applicable award agreement, be made in cash or by wire transfer or check, by execution of a promissory note, by withholding shares that would otherwise be issued upon exercise of the Option (“cashless exercise”), or by delivery of shares of common stock of the Company then owned by the participant at the time of the exercise of the Option; provided, that the participant shall have held such shares for a period of six months prior to such exercise (or such shorter or longer period of time as is necessary for the Company to avoid a charge to earnings).

 

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Term of Options. The term of each Option will be of such period as may be determined by the Compensation Committee; provided, that in no event will the term of any Option exceed a period of ten years (or, in the case of an Incentive Stock Option granted to an employee who owns more than 10% of the total combined voting power of all classes of stock of the Company and its affiliates, five years). The Compensation Committee shall determine on the date of grant what conditions shall apply to the exercise of an Option granted under the 2007 Incentive Plan in the event the participant shall cease to be employed or retained as a director or consultant by the Company or its affiliates for any reason.

 

Description of Restricted Share Award

 

Grant of Restricted Shares. Restricted Shares may be granted alone or in addition to other Awards granted pursuant to the 2007 Incentive Plan. Each Award of Restricted Shares will be evidenced by an award agreement, which will describe the price to be paid for the shares, if any, and the restrictions applicable to the shares received thereunder.

 

Effect of Restrictions. The Restricted Shares may be subject to such restrictions as may be provided under the applicable award agreement. The Compensation Committee may accelerate the lapse of all or a portion of the restrictions on an Award of Restricted Shares at any time. Upon the lapse of the restrictions on Restricted Shares, the Compensation Committee shall cause the stock certificate to be delivered to the participant with respect to such shares, free of all restrictions under the 2007 Incentive Plan.

 

Description of Stock Appreciation Rights

 

Grant of Stock Appreciation Rights. Stock appreciation rights (“SARs”) may be granted alone or in addition to other Awards. SARs are rights to be paid an amount equal to no more than 100% of the difference between the value of a specified number of shares of common stock of the Company on the date on which the SARs are granted and the value of such common stock on the date on which the SARs are exercised. This amount may be paid in cash or shares of common stock, as described in the applicable award agreement.

 

Ownership Rights. SARs do not generally provide voting, dividend or other rights associated with stock ownership.

 

Term of SARs. The term of each SAR will be of such period as may be determined by the Compensation Committee. The Compensation Committee shall determine on the date of grant what conditions shall apply to the exercise of an SAR granted under the 2007 Incentive Plan in the event the participant shall cease to be employed or retained as a director or consultant by the Company or its affiliates for any reason.

 

Amendment or Termination

 

The Company’s Board of Directors may amend, suspend or terminate the 2007 Incentive Plan at any time, so long as such action does not impair any Award then outstanding without the consent of the affected participant. Without the approval of the stockholders, however, the Company’s Board of Directors may not amend the 2007 Incentive Plan to expand the types of Awards available under the 2007 Incentive Plan or otherwise materially revise the 2007 Incentive Plan, increase the number of shares reserved for issuance under the 2007 Incentive Plan (other than pursuant to capitalization adjustments set forth in the 2007 Incentive Plan), modify the class of individuals eligible to receive Awards under the 2007 Incentive Plan or change the identity of the granting company or the shares to be issued upon the exercise of Incentive Stock Options.

 

The Compensation Committee may amend, modify or terminate any outstanding Award in any manner not inconsistent with the terms of the 2007 Incentive Plan as long as such action does not impair the rights of the participant without his or her consent.

 

Absent any earlier termination by the Board of Directors, no Award will be granted under the 2007 Incentive Plan after the tenth anniversary of its effective date or, if later, the tenth anniversary of any action by the Board of Directors or approval of shareholders, if later, to (i) increase the number of shares reserved for issuance under the 2007 Incentive Plan, (ii) modify the class of persons eligible to receive Awards under the 2007 Incentive Plan, or (iii) change the identity of the granting company or the shares issued upon exercise of 2007 Incentive Stock Options.

 

Change in Control

 

Unless the Compensation Committee determines otherwise, upon or following a “Change in Control” of the Company, as such term is defined in the 2007 Incentive Plan, Awards shall accelerate and all restrictions shall immediately lapse. In addition, Options that remain unexercised on the effective date of the Change in Control may be immediately forfeited or, in the event the Company is not the surviving company, all outstanding Options and SARs may be substituted or assumed by the surviving company. Pursuant to the 2007 Incentive Plan, a Change in Control is generally deemed to have occurred upon (i) the sale, transfer or other conveyance of all or substantially all of the Company’s assets, (ii) the acquisition of beneficial ownership, directly or indirectly, by a person of the securities representing 50% or more of the total number of votes that may be cast for the election of directors of the Company; or (iii) the failure at any annual or special meeting of the Company's stockholders held during the three-year period following a "solicitation in opposition" as defined in Rule 14a-6 promulgated under the Exchange Act, of a majority of the persons nominated by the Company in the proxy material mailed to shareholders by the management of the Company to win election to seats on the Board (such majority calculated based upon the total number of persons nominated by the Company failing to win election to seats on the Board divided by the total number of Board members of the Board as of the beginning of such three-year period), excluding only those who die, retire voluntarily, are disabled or are otherwise disqualified in the interim between their nomination and the date of the meeting.

 

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The following table summarizes options granted and outstanding:

 

			NUMBER OF SHARES			WEIGHTED AVERAGE EXERCISE PRICE
Outstanding, November 30, 2005 (466,000 exercisable at a weighted average price of $1.04)			846,000		$	0.69
Canceled/Expired			(371,000	)	$	0.37
Outstanding, November 30, 2006 (466,000 exercisable at a weighted average price of $1.04)			475,000			0.94
Granted (weighted average fair value of $0.70)			183,200			0.90
Exercised			(30,000	)		0.17
Canceled/Expired			(200,000)			1.51
Outstanding, November 30, 2007 (368,200 exercisable at a weighted average price of $0.78)			428,200			$ 0.71

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, 2006.

 

EXERCISE PRICE	OUTSTANDING	EXERCISABLE	WEIGHTED AVERAGE CONTRACTUAL LIFE REMAINING
NUMBER OF OPTIONS
$ 0.20 - 0.40	210,000	150,000	5.6 years
0.90	183,200	183,200	9.6
1.75 - 3.69	35,000	35,000	0.6
	428,200	368,200

As of November 30, 2007 there was approximately $11,000 of total unrecognized stock based compensation related to nonvested share-based compensation awards granted under the stock option plans. This cost is expected to be recognized over a weighted average period of approximately 1.5 years.

The aggregate intrinsic value of options outstanding and options exercisable at November 30, 2007 was $107,000 and $76,200 respectively.    The total intrinsic value of options exercised during the year ended November 30, 2007 was $9,900 resulting in a tax benefit of $3,400.

The Company uses the Black-Scholes Option Pricing Model (“BSOPM”) to determine the fair value of option grants. During the year ended November 30 2007, the Company granted 183,200 fully vested options at the grant date market price to directors at an exercise price of $0.90. The options were valued using the BSOPM and the following assumptions: stock price on date of grant - $0.90, exercise price - $0.90, expected life - 5 years, volatility - 101% and a risk free rate of 5.07%. The calculated fair value of each option was approximately $0.70.

NOTE 8 - INCOME TAXES

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

 

YEARS ENDED NOVEMBER 30:		2007			2006
Current:
Federal		$	--		$	--
State			5,000			2,000
			5,000			2,000
Deferred:
Federal			(224,000)			(636,000)
State			--			--
						--
Total income tax provision		$	(219,000)		$	(634,000)

 

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

 

		2007			2006
Deferred tax assets:
Tax (under) over book depreciation		$	100,000		$	85,000
Accrued expenses			22,000			19,000
Federal net operating loss carryforwards			2,064,000			2,148,000
State net operating loss carryforwards			127,000			151,000
Goodwill and other intangible assets			108,000			218,000
Stock options			46,000			--
Total deferred tax assets			2,467,000			2,621,000
Less valuation allowance for deferred tax assets			(1,609,000	)		(1,987,000	)
Net deferred tax assets		$	858,000		$	634,000

At November 30, 2007 and 2006, the Company had a valuation allowance of $1,609,000 and $1,987,000, respectively, 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 realizable could be adjusted in the future if estimates of taxable income are revised due to changes in circumstances.

As of November 30, 2007, the Company has net tax operating loss carryforwards of approximately $6,072,000 available to offset future Federal tax liabilities. The carryforwards expire through 2026. As of November 30, 2007, the Company has net operating tax loss carryforwards of approximately $1,428,000 available to offset future state income tax liabilities, which expire through 2012.

 

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

 

YEARS ENDED NOVEMBER 30:			2007			2006
Income tax benefit at statutory rates		$	200,000		$	238,000
Permanent timing differences and other items			(42,000)			(62,000	)
Change in federal valuation allowance and other permanent items			(382,000)			(812,000	)
State and local income taxes, net of federal income tax			5,000			2,000
Total		$	(219,000)		$	(634,000	)

 

NOTE 9 - 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 Company may contribute an amount determined in its sole judgment. Total expense from this plan related to continuing operations was approximately $0 and $0 for the years ended November 30, 2007 and 2006, respectively.  All employees, including executive officers, may participate in this plan according to the rules set forth by the IRS.

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NOTE 10 - FASB 131 SEGMENT REPORTING

The Company's foreign operations consist of a sales joint venture located in Singapore, which began operations in fiscal 1998. All of their sales are made to unaffiliated customers. The following is a summary of operations by entities within geographic areas for the year ending November 30, 2007, and 2006:

 

			AMI-US OPERATIONS			AMI-SINGAPORE			CONSOLIDATED
NET SALES
2007		$	10,195,801		$	476,985		$	10,672,786
2006		$	9,412,260		$	584,020		$	9,996,280
SEGMENT INCOME BEFORE CORPORATE ALLOCATION
2007		$	167,132		$	476,985		$	644,117
2006		$	115,953		$	584,020		$	699,973
			AMI-US OPERATIONS			AMI-SINGAPORE			CONSOLIDATED
CORPORATE ALLOCATION
2007			$ 47,699		$	(47,699)		$	644,117
2006		$	58,402			(58,402	)		--
NET INCOME (LOSS)
2007		$	214,831		$	378,591		$	593,422
2006		$	174,355		$	525,618		$	699,973
DEPRECIATION AND AMORTIZATION
2007		$	(149,423)		$	--		$	(149,423)
2006		$	(228,773	)	$	--		$	(228,773	)
INCOME TAXES BENEFIT (EXPENSE)
2007		$	219,000		$	--		$	219,000
2006		$	634,000		$	--		$	634,000
TOTAL ASSETS
2007		$	5,411,316		$			$	5,411,316
2006		$	4,081,980		$	--		$	4,081,980

 

 

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