Edgar Filing: ADVANCED MATERIALS GROUP INC

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INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

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ADVANCED MATERIALS GROUP, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------------------------
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ADVANCED MATERIALS GROUP, INC.
11420 Mathis Avenue
Dallas, Texas 75234

November 22, 2004

To our stockholders:

You are cordially invited to attend the 2004 annual meeting of
stockholders of Advanced Materials Group, Inc. (the "Company"), which will be
held at 10:00 a.m. local time, on Wednesday, December 15, 2004 at The Busch
Firm, 2532 Dupont Drive, Irvine, California 92612. All holders of the Company's
outstanding common stock as of November 2, 2004 are entitled to vote at the
annual meeting.

Enclosed is a copy of the Company's annual report, notice of annual
meeting of stockholders, proxy statement and proxy card. A current report on the
business operations of the Company will be presented at the meeting and
stockholders will have an opportunity to ask questions.

We hope you will be able to attend the annual meeting. Whether or not
you expect to attend, it is important you complete, sign, date and return the
proxy card in the enclosed postage prepaid envelope in order to ensure that your
shares will be represented at the annual meeting.

Sincerely,

/S/ ROBERT E. DELK
---------------------------------
ROBERT E. DELK
PRESIDENT AND CHIEF EXECUTIVE OFFICER

ADVANCED MATERIALS GROUP, INC.
11420 Mathis Avenue
Dallas, Texas 75234

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD WEDNESDAY, DECEMBER 15, 2004

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
Advanced Materials Group, Inc., a Nevada corporation (the "Company"), will be
held at 10:00 a.m. local time, on Wednesday, December 15, 2004 at The Busch
Firm, 2532 Dupont Drive, Irvine, California 92612, for the following purposes:

1. To elect four nominees to the Board of Directors;

2. To ratify the appointment of Whitley Penn as the independent
accountants for the Company for the fiscal year ending
November 30, 2005; and

3. To transact such other business as may properly come before
the annual meeting or any adjournments and postponements
thereof.

The Board of Directors has fixed the close of business on November 2,
2004 as the record date for the determination of stockholders entitled to notice
of and to vote at the annual meeting. Only holders of the Company's common stock
at the close of business on the record date are entitled to vote at the meeting.
A list of stockholders entitled to vote at the meeting will be available for
inspection at the Company's executive offices. Stockholders attending the
meeting whose shares are held in the name of a broker or other nominee should
bring with them a proxy or letter from that firm confirming their ownership of
shares as of the record date.

Accompanying this notice are a proxy and a proxy statement. PLEASE SIGN
AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
As described in the proxy statement, the proxy may be revoked at any time prior
to its exercise at the meeting.

By Order of the Board of Directors

/S/ ROBERT E. DELK
----------------------------------
ROBERT E. DELK
PRESIDENT AND CHIEF EXECUTIVE OFFICER

Dallas, Texas
November 22, 2004

YOUR VOTE IS IMPORTANT

YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS.
HOWEVER, EVEN IF YOU DO PLAN TO ATTEND, PLEASE PROMPTLY COMPLETE, SIGN, DATE AND
MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. RETURNING A SIGNED PROXY WILL
NOT PREVENT YOU FROM VOTING IN PERSON AT THE ANNUAL MEETING, IF YOU SO DESIRE,
BUT WILL HELP SECURE A QUORUM AND REDUCE OR ELIMINATE THE EXPENSE OF ADDITIONAL
PROXY SOLICITATION.

TABLE OF CONTENTS
Page
----

Voting and Proxy...............................................................1

Proposal 1 - Election of Directors.............................................3

Security Ownership of Certain Beneficial Owners and Management.................8

Executive Compensation........................................................10

Proposal 2 - Ratification of Appointment of Independent Accountants...........16

Other Matters.................................................................18

Stockholder Proposals.........................................................18

Available Information.........................................................18

Annual Report.................................................................19

Appendix A - Amended and Restated Audit Committee Charter....................A-1

Appendix B - Compensation Committee Charter..................................B-1

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ADVANCED MATERIALS GROUP, INC.
11420 Mathis Avenue
Dallas, Texas 75234

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

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD WEDNESDAY, DECEMBER 15, 2004

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

VOTING AND PROXY

This proxy statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Advanced Materials Group,
Inc. (the "Company") for use at the annual meeting of stockholders to be held at
10:00 a.m. local time, on Wednesday, December 15, 2004 at The Busch Firm, 2532
Dupont Drive, Irvine, California 92612 and at any adjournments or postponements
thereof. It is anticipated that this proxy statement and accompanying proxy card
will be mailed on or about November 24, 2004 to all stockholders entitled to
vote at the annual meeting.

In voting by proxy for directors, stockholders may vote in favor of all
director nominees, withhold their votes as to all nominees, or withhold their
votes as to specific nominees. Stockholders should specify their choices on the
accompanying proxy card.

The shares represented by each properly executed, unrevoked proxy will
be voted as directed by the stockholder with respect to the matters described in
the proxy. If no specific instructions are given with regard to the matters to
be voted upon, the shares represented by a signed proxy card will be voted "FOR"
the election of all director nominees named herein, and "FOR" the ratification
of the appointment of Whitley Penn as the Company's independent accountants for
the fiscal year ending November 30, 2005. If any other matters properly come
before the annual meeting, the persons named as proxies will vote upon these
matters in accordance with their best judgment. Any stockholder giving a proxy
has the power to revoke it at any time before it is voted by providing written
notice to the Secretary of the Company, by issuance of a subsequent proxy, or by
voting at the annual meeting in person.

At the close of business on November 2, 2004, the record date for
determining stockholders entitled to notice of and to vote at the annual
meeting, the Company had issued and outstanding 10,516,026 shares of common
stock, par value $.001 per share, held by approximately 2,800 holders of record.
Each share of common stock entitles the holder of record to one vote on any
matter coming before the annual meeting. Only stockholders of record at the
close of business on the record date are entitled to notice of and to vote at
the annual meeting or at any adjournments or postponements thereof.

The presence, in person or by proxy, of a majority of the outstanding
shares of common stock of the Company entitled to vote at the annual meeting,
regardless of whether a proxy has authority to vote on all matters presented at
the meeting, shall constitute a quorum at the annual meeting. The four nominees
for director who receive the highest number of votes shall be elected. On
matters other than the election of directors, the proposal will be approved if
the number of votes cast in favor of the proposal exceeds the number of votes
cast in opposition, unless for any particular proposal the vote of a greater
proportion of shares, or of any particular class of shares, or of each class, is
required by law or by the Company's articles of incorporation or bylaws.
Abstentions and broker non-votes on proposal 2 and on any other particular
proposal that will be approved if the number of votes cast in favor of the
proposal exceeds the number of votes cast in opposition, will not be treated as
a vote cast on the proposal and, therefore, will not affect the outcome of those
matters to be voted on at the meeting.

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The Company will pay the expenses of soliciting proxies for the annual
meeting, including the cost of preparing, assembling, and mailing the proxy
solicitation materials. Proxies may be solicited personally, or by mail or
telephone. Proxy solicitors may include directors, officers and regular
employees of the Company. Brokerage firms, nominees, custodians and fiduciaries
also may be requested to forward proxy materials to the beneficial owners of
shares held of record by them.

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PROPOSAL 1
ELECTION OF DIRECTORS

The Company's bylaws provide that its Board of Directors shall consist
of at least three directors, with the exact number of directors that constitute
the Board of Directors to be set by a resolution of the Board of Directors or by
a majority of the Company's stockholders. The number of directors on the Board
of Directors currently is set at five, and there is one vacancy to be filled
when a suitable candidate agrees to serve.

Directors are elected annually and hold office until the next annual
meeting of stockholders or until their respective successors are duly elected
and qualified. It is intended that the proxies solicited by the Board of
Directors will be voted "FOR" election of the four nominees listed below unless
a contrary instruction is made on the proxy. If one or more of these nominees
should be unable or unwilling to serve for any reason, the persons named in the
accompanying proxy may vote for another candidate or candidates nominated by the
Board of Directors. However, the proxy holders may not vote proxies for a
greater number of persons than the number of nominees named on the proxy card.
All of the nominees listed below are presently directors of the Company.

THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE
FOUR NOMINEES LISTED BELOW.

DIRECTOR NOMINEES

TIMOTHY R. BUSCH, 50, has been the Chairman and a director of the
Company since February 1998 and September 1997, respectively. Mr. Busch is a tax
attorney and is president and managing partner of a professional services
practice, The Busch Firm, which he founded in 1979. He is a director of Radica
Games International, a publicly held company, and is a director of several
privately held companies. Mr. Busch is a licensed attorney in California,
Michigan, Texas and Washington, D.C. and is a licensed CPA in California and
Michigan.

N. PRICE PASCHALL, 56, has been a director of the Company since January
1994. Mr. Paschall has been Managing Director of Context Capital Group, an
investment-banking firm that serves clients in the medical and industrial
markets, since February 1992. Mr. Paschall was a partner of Shea, Paschall,
Powell-Hambros Bank, and its predecessor company, a firm specializing in mergers
and acquisitions, from January 1983 to January 1992. Mr. Paschall holds a B.A.
in Business Administration from California Polytechnic University at Pomona. He
currently serves on the Board of Directors of Xtrana, Inc. a publicly-held
medical device company.

MAURICE J. DEWALD, 64, has been a director of the Company since
February 1998. From June 1992 to the present, Mr. DeWald has been Chairman and
Chief Executive Officer of Verity Financial Group, Inc., a private investment
and financial advisory firm. Mr. DeWald is a former member of the KPMG Peat
Marwick Board of Directors and also served as the Managing Partner of the Los
Angeles office of KPMG Peat Marwick from 1986 to 1991. He currently serves on
the Boards of Directors of Dai-Ichi Kangyo Bank of California, Monarch Funds, a
publicly-held investment fund, and Quality Systems, Inc., a publicly-held
developer and marketer of healthcare information systems.

ROBERT E. DELK, 55, was appointed to the Company's Board of Directors
in January 2003 and became President, Chief Executive Officer and Secretary of
the Company in August 2003. Mr. Delk is a private investor and has been the
general partner of Delk Partners Ltd. since its formation prior to 1995 and a
significant stockholder of the Company since 1996. From 1980 to 1995, he was the
Chairman and Chief Executive Officer of the Struckmeyer Corporation, a medical

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products manufacturing business whose products were made from raw materials
similar to those used by the Company. Struckmeyer Corporation was based in
Dallas, Texas, and specialized in the development and manufacture of disposable
surgical products. Mr. Delk holds a B.S. degree in Business Administration from
Stephen F. Austin University and has experience in the banking, consumer
products, and advertising industries. He has served on numerous business and
civic boards.

EXECUTIVE OFFICERS

Following is information regarding the current executive officer of the
Company who is not a member of the Board of Directors.

WILLIAM G. MORTENSEN, 38, was appointed Chief Financial Officer and
Controller on June 1, 2004. Mr. Mortensen was employed by Cingular Wireless LLC
as Associate Director in Finance, and before the Cingular joint venture he was
with SBC, Inc. as a manager of SBC Services supporting the SBC Wireless division
since 1999. Before joining SBC, Inc. Mr. Mortensen worked for Frito-Lay, Inc. as
a manager of finance and for over eight years with EDS, Inc. holding various
financial positions. Mr. Mortensen holds a BBA degree in Business Administration
from Abilene Christian University and has experience in the telecommunications,
high-tech and manufacturing industries.

TERM OF OFFICE AND FAMILY RELATIONSHIPS

The Company's directors are elected at each annual stockholders'
meeting. Each of the Company's directors is to hold office until his successor
is elected and qualified or until his earlier death, resignation or removal.
Each of the Company's executive officers serves at the discretion of the
Company's Board of Directors. There are no family relationships among the
Company's executive officers, directors and director nominees.

DIRECTOR COMPENSATION

Each of the Company's directors is entitled to receive $500 and
reimbursement for out-of-pocket expenses in connection with his attendance at
each meeting of the Board of Directors or committee of the Board of Directors.
In addition, each director is entitled to receive non-qualified stock options,
pursuant to the Company's 2003 Stock Option Plan, to purchase 20,000 shares of
the Company's common stock at fair market value when first elected to the Board
of Directors, and 10,000 shares of common stock at fair market value each
January subsequent to their reelection to the Board of Directors. The options
become fully vested six months after their issuance. The Compensation Committee
is in the process of making recommendations to the Board of Directors regarding
changes to this policy.

BOARD OF DIRECTORS AND COMMITTEES

The Board of Directors held 12 meetings during fiscal 2003. During the
fiscal year ended November 30, 2003, no incumbent director attended fewer than
75% of the aggregate of: (1) the total number of meetings of the Board of
Directors (held during the period for which he has been a director); and (2) the
total number of meetings held by all committees of the Board of Directors on
which he served (during the periods that he served).

The Board of Directors has standing Compensation and Audit Committees,
but does not have a nominating committee because the Board of Directors has
determined that the entire Board of Directors can efficiently and effectively
fulfill this function by using a variety of methods for identifying and
evaluating nominees for director, including candidates that may be referred by
the Company's stockholders. Stockholders who desire to recommend candidates for
evaluation may do so by contacting the Company in writing, identifying the

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potential candidate and providing background information. See "Security Holder
Communications with the Board of Directors." Candidates may also come to the
attention of the Board of Directors through current members of the Board of
Directors, professional search firms and other persons. In evaluating potential
candidates, the Board of Directors takes into account a number of factors,
including among others, the following:

o independence from management;

o whether the candidate has relevant business experience;

o judgment, skill, integrity and reputation;

o existing commitments to other businesses;

o corporate governance background;

o financial and accounting background, to enable the Board of
Directors to determine whether the candidate would be suitable
for Audit Committee membership; and

o the size and composition of the Board of Directors.

The Compensation Committee currently is composed of Mr. Paschall and
Mr. DeWald, with Mr. Paschall serving as Chairman, and met two times during
fiscal 2003. The Compensation Committee evaluates the performance of the
Company's officers and makes recommendations to the Board of Directors
concerning compensation. The Compensation Committee also determines option
grants made pursuant to the Company's stock option plans based on
recommendations of management.

The Audit Committee currently is composed of Mr. DeWald and Mr.
Paschall, with Mr. DeWald serving as Chairman, and met four times during fiscal
2003. The Audit Committee operates under a written charter that is attached as
APPENDIX A to this proxy statement. The Board of Directors has determined that
each of the members of the Audit Committee is "independent" as that term is
defined in NASD Marketplace Rule 4200(a)(15) and that Mr. DeWald is an "audit
committee financial expert" as that term is defined in Item 401(h) of Regulation
S-K. The Audit Committee's principal functions are to monitor the Company's
financial reporting process and internal control system, review and appraise the
audit efforts of the Company's independent auditors and provide an open avenue
of communication among the Company's independent auditors, financial and senior
management and Board of Directors.

SECURITY HOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

The Board of Directors has established a process to receive
communications from security holders. Security holders and other interested
parties may contact any member (or all members) of the Board of Directors, or
the independent directors as a group, any committee of the Board of Directors or
any chair of any such committee, by mail or electronically. To communicate with
the Board of Directors, any individual directors or any group or committee of
directors, correspondence should be addressed to the Board of Directors or any
such individual directors or group or committee of directors by either name or
title. All such correspondence should be sent "c/o Secretary" at Advanced
Materials Group, Inc., 11420 Mathis Avenue, Dallas, Texas 75234. To communicate
with any director electronically, security holders should send an e-mail "c/o
Secretary," at bdelk@ADVMATL.com.

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All communications received as set forth in the preceding paragraph
will be opened by the Company's Secretary for the sole purpose of determining
whether the contents represent a message to the directors. Any contents that are
not in the nature of advertising, promotions of a product or service, patently
offensive material or matters deemed inappropriate for the Board of Directors
will be forwarded promptly to the addressee. In the case of communications to
the Board of Directors or any group or committee of directors, the Company's
Secretary will make sufficient copies (or forward such information in the case
of e-mail) of the contents to send to each director who is a member of the group
or committee to which the envelope or e-mail is addressed.

POLICY WITH REGARD TO BOARD MEMBERS' ATTENDANCE AT ANNUAL MEETINGS

It is the Company's policy that members of the Board of Directors are
invited and encouraged to attend all of the Company's annual meetings. At the
time of the Company's 2003 annual meeting of stockholders, the Company had five
directors, all of whom were in attendance at the 2003 annual meeting of
stockholders.

REPORT OF THE AUDIT COMMITTEE

Pursuant to the proxy solicitation rules of the Securities and Exchange
Commission ("Commission"), the Audit Committee of the Board of Directors is
asked to report to the stockholders on certain matters each year in the
Company's proxy statement.

The Audit Committee represents the Board of Directors in discharging
its responsibilities relating to the accounting, reporting and financial
practices of the Company and its subsidiaries, and has the general
responsibility for the surveillance of internal controls and accounting and
audit activities of the Company and its subsidiaries. Management has the primary
responsibility for preparing the Company's financial statements and for its
financial reporting process, and the Company's independent auditors are
responsible for expressing an opinion on the conformance of the Company's
financial statements to accounting principles generally accepted in the United
States. The Audit Committee is responsible for, among other things, reviewing
and discussing with management and the Company's independent auditors the
Company's annual and quarterly financial statements and financial reporting
process, including an analysis of the auditors' judgment as to (a) the quality
of the Company's accounting procedures and practices, (b) any significant
changes in the accounting policies of the Company and (c) any accounting and
financial impact on the Company's financial reports.

In this context, the Audit Committee reviewed and discussed with
management and the independent auditors the Company's quarterly and audited
annual financial statements for the fiscal year ended November 30, 2003. The
Audit Committee also discussed with the independent auditors the matters that
the independent auditors are required to discuss with the Audit Committee
pursuant to Statement on Auditing Standard No. 61 (Communication with Audit
Committees). In addition, the Audit Committee received from the independent
auditors the written disclosures and the letter required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees)
and actively engaged in a dialogue with the independent auditors with respect to
any and all disclosed relationships or services that may impact the objectivity
and independence of the independent auditors. In reviewing and discussing such
matters, the Audit Committee considered whether the auditors' provision of
non-audit services during fiscal 2003 was compatible with maintaining the
auditors' independence.

Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 2003, for filing with the Commission.

Members of the Audit Committee:
Maurice J. DeWald and N. Price Paschall

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Busch, one of the Company's directors, is a partner in The Busch
Firm, which firm acted as the Company's outside legal advisor but did not
receive more than 5% of its 2003 gross revenues from the Company.

On April 22, 2004, each of Mr. Busch and Mr. Delk loaned the Company
$150,000 in exchange for the issuance of unsecured promissory notes bearing
interest at the rate of 10.0% per annum and warrants to purchase up to 50,000
shares of the Company's common stock at an exercise price of $0.363 per share.
Interest and principal on the notes were due July 21, 2004 but were not paid
timely. As a result, the interest rate of the notes increased to the default
rate of 12.0% per annum on July 22, 2004, and in October 2004, the Company paid
to each of Mr. Busch and Mr. Delk $50,000 of principal plus interest accrued
through July 21, 2004 on the entire principal balances of their notes and issued
as a penalty to each of Mr. Busch and Mr. Delk an additional warrant to purchase
up to 50,000 shares of the Company's common stock at an exercise price of $0.363
per share. Each of the warrants issued to Mr. Busch and Mr. Delk expires May 13,
2008.

On June 7, 2004, the Company issued a total of 595,239 shares to Delk
Partners, Ltd., Plus 4 LLC, and the Lenawee Trust in exchange for an aggregate
of $250,000 cash. Mr. Delk is the general partner of Delk Partners, Ltd. and is
a director and executive officer of the Company. Mr. Busch is a beneficiary of
the Lenawee Trust and a director of the Company. Richard H. Pickup is a partner
of Plus 4 LLC and a member of a group beneficially owning more than 10% of the
outstanding shares of the Company's common stock. The sale of shares was
effected to cover a $250,000 settlement paid to Wilshire Technologies, LLC in
connection with the settlement of a lawsuit between the Company, two of its
former employees, and Wilshire Technologies, LLC. Each of Delk Partners, Ltd.,
Plus 4 LLC, and the Lenawee Trust contributed $83,333.33 to the Company and
received 198,413 shares of the Company's common stock. The number of shares
issued was based upon the common stock price of $0.42 per share, which was the
closing sale price in the Pink Sheets as of May 28, 2004, the day the settlement
was negotiated. The sale of shares was approved by all of the members of the
Company's Board of Directors.

The Company is or has been a party to employment, consulting and
compensation arrangements with related parties, as more particularly described
above under the headings "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" and "Compensation of Directors."

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the common
stock beneficially owned as of November 2, 2004 by:

o each person who is known by the Company to own beneficially or
exercise voting or dispositive control over 5% or more of the
common stock;

o each of the Company's directors and director nominees;

o each of the Company's current Named Executive Officers; and

o all current executive officers and directors as a group.

There were 10,516,026 shares of the Company's common stock outstanding
as of the close of business on November 2, 2004, the record date.

Beneficial ownership is determined in accordance with Rule 13d-3
promulgated by the Commission under the Securities Exchange Act of 1934
("Exchange Act") and generally includes voting or investment power with respect
to securities. Except as indicated below, the Company believes each holder
possesses sole voting and investment power with respect to all of the shares of
voting stock owned by that holder, subject to community property laws where
applicable. In computing the number of shares beneficially owned by a holder and
the percentage ownership of that holder, shares of common stock subject to
options or warrants held by that holder that are currently exercisable or are
exercisable within 60 days after the date of the table are deemed outstanding.
Those shares, however, are not deemed outstanding for the purpose of computing
the percentage ownership of any other person or group.

The inclusion of shares in this table as beneficially owned is not an
admission of beneficial ownership. Except as indicated below, the address for
each named beneficial owner is the same as the Company's. Ownership of less than
1.00% is indicated with an asterisk.

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AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP OUTSTANDING SHARES(2)
---------------------------------------- -------------------- ---------------------

Dito Caree LP, Dito Devcar LP, Plus 4 LLC and
Richard H. Pickup 1,750,567(2) 16.65%
Gregory J. Spagna 904,500(3) 8.6%
Delk Partners Ltd., Robert E. Delk and Ann Struckmeyer Delk 2,384,930(4) 20.77%
Timothy R. Busch and the Lenawee Trust 1,655,180(5) 15.52%
N. Price Paschall 270,000(6) 2.51%
Maurice J. DeWald 50,000(7) *
William G. Mortensen 10,000(7) *
All current executive officers and directors as a group (5
persons) 1,949,607(11) 21.6%

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

(1) Mr. Delk, Mr. Busch, Mr. Paschall and Mr. DeWald are directors of the
Company. Mr. Delk and Mr. Mortensen are executive officers of the
Company.

(2) Represents 986,300 shares held by Dito Caree LP, 200,000 shares held by
Dito Devcar LP and 764,067 shares held by Plus 4 LLC. Mr. Pickup holds
voting and dispositive power over these shares as general partner of each
of the three entities. Mr. Pickup's address is c/o David Hehn, 3753
Howard Hughes Parkway #200, Las Vegas, Nevada 89109-0938.

(3) Represents 617,000 shares held by Mr. Spagna and 287,500 shares held
jointly by Mr. Spagna and his spouse and children, as reported on a
Schedule 13D/A filed with the Commission on February 5, 2003. Mr.
Spagna's address is 515 Airport Executive Park, Nanuet, New York 10954.

(4) Represents 1,419,218 shares held by Delk Partners Ltd., 865,712 shares
underlying options held by Mr. Delk and 100,000 shares underlying
warrants held by Delk. Voting and dispositive power over the shares held
by Delk Partners Ltd. is shared by Mr. Delk and Ann Struckmeyer Delk as
partners of Delk Partners Ltd.

(5) Represents 1,505,180 shares held by the Lenawee Trust, of which Mr. Busch
and his spouse are beneficiaries and hold voting and dispositive power,
100,000 shares underlying warrants held by Mr. Busch, and 50,000 shares
underlying options held by Mr. Busch.

(6) Represents 10,000 shares outstanding and 260,000 shares underlying
options.

(7) Represents shares underlying options.

(8) Represents 2,934,398 shares outstanding, 200,000 shares underlying
warrants and 2,190,000 shares underlying options, as described above.

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EXECUTIVE COMPENSATION

The following table sets forth certain information regarding
compensation paid by the Company for services rendered to the Company by its
current and former Chief Executive Officers and to each of the other most highly
compensated executive officers of the Company who earned more than $100,000 in
salary and bonus during the fiscal year ended November 30, 2003 (the "Named
Executive Officers").

SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------- ------------------
OTHER SECURITIES
FISCAL ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) OPTIONS GRANTED(3)
--------------------------- ---- --------- ----- --------------- ------------------

Robert E. Delk, President, Chief 2003 -- -- $ 3,396 1,770,000
Executive Officer and 2002 -- -- -- --
Secretary(4) 2001 -- -- -- --

Steve F. Scott(4) 2003 $183,206 -- $12,964 10,000
Former President and Former Chief 2002 $187,144 -- $17,980 10,000
Executive Officer 2001 $243,526 -- $12,947 10,000

David Lasnier(4) 2003 $131,750 -- $12,421 --
Former Senior Vice President 2002 $131,750 -- $12,421 --
2001 $155,745 -- $14,425 25,000

Tom Lane(4) 2003 $155,475 -- $14,524 --
Former Chief Executive, Europe 2002 $155,475 $28,947 $14,524 --
2001 $116,618 $35,073 $11,662 100,000

(1) Mr. Scott and Mr. Lasnier accepted voluntary salary reductions of 25% and
15%, respectively, in October 2001 to help facilitate the operations of
the Company.

(2) For Mr. Delk, represents health insurance reimbursement for fiscal 2003.
For Mr. Scott, includes automobile allowances of $7,165 for fiscal 2003
and $10,350 for fiscal 2002 and fiscal 2001, respectively, and medical
insurance of $5,799, $7,630 and $2,597 for fiscal 2003, fiscal 2002 and
fiscal 2001, respectively. For Mr. Lasnier, includes automobile
allowances of $8,401 for each of fiscal 2003, fiscal 2002 and fiscal 2001
and medical insurance of $4,020, $4,020 and $6,024 for fiscal 2003,
fiscal 2002 and fiscal 2001, respectively. For Mr. Lane, includes pension
contributions of $14,524, $14,524 and $12,138 for fiscal 2003, fiscal
2002 and fiscal 2001, respectively.

(3) Includes options to purchase up to 30,000 shares of common stock and
10,000 shares of common stock, respectively, granted to Mr. Delk and Mr.
Busch in connection with their service on the Company's Board of
Directors.

(4) Mr. Delk was appointed as the Company's President, Chief Executive
Officer and Secretary in August 2003. Mr. Scott's employment terminated
in August 2003. Mr. Lasnier's employment terminated in January 2003. Mr.
Lane's employment terminated in November 2003.

-10-

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information with respect to
stock options granted to each of the Named Executive Officers during the fiscal
year ended November 30, 2003. This information includes hypothetical potential
gains from stock options granted during the fiscal 2003. These hypothetical
gains are based entirely on assumed annual growth rates of 5% and 10% in the
value of the Company's common stock price over the five-year life of the stock
options granted during fiscal 2003. These assumed rates of growth were selected
by the Commission for illustrative purposes only, and are not intended to
predict future stock prices, which will depend upon market conditions and the
Company's future performance and prospects.

INDIVIDUAL GRANTS
-----------------
PERCENT
OF TOTAL POTENTIAL REALIZABLE
OPTIONS AT ASSUMED ANNUAL RATES OF
NUMBER OF GRANTED TO STOCK PRICE
SECURITIES EMPLOYEES EXERCISE APPRECIATION FOR OPTION TERM (2)
GRANT UNDERLYING IN FISCAL PRICE PER EXPIRATION -------------------------------
NAME DATE OPTIONS GRANTED YEAR (1) SHARE DATE 5% 10%
---- ------- ---------------- ----------- --------- ---------- ----------- --------

Robert E. Delk..... 1/19/2003 20,000 (3) 1.06% $0.20 1/19/2008 $ 1,880 $ 2,160
Robert E. Delk..... 1/19/2003 10,000 (4) 0.53% $0.20 1/19/2008 $ 940 $ 1,080
Robert E. Delk..... 9/1/2003 435,000 (5) 23.02% $0.28 8/31/2008 $ 6,090 $ 12,180
Robert E. Delk..... 9/1/2003 435,000 (6) 23.02% $0.56 8/31/2008 $ -- $ --
Robert E. Delk..... 9/1/2003 435,000 (6) 23.02% $1.12 8/31/2008 $ -- $ --
Robert E. Delk..... 9/1/2003 435,000 (6) 23.02% $2.24 8/31/2008 $ -- $ --
Steve F. Scott..... 1/19/2003 10,000 (4) 0.53% $0.20 8/1/2003 $ -- $ --

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

(1) Based on options to purchase up to an aggregate of 1,890,000 shares of
common stock granted to employees during fiscal 2003, including options
granted to employee directors to purchase up to an aggregate of 40,000
shares of common stock.

(2) Calculated using the potential realizable value of each grant.

(3) Granted in connection with Mr. Delk's appointment to the Board of
Directors. Option vested six months after the date of grant.

(4) Granted in connection with service on the Board of Directors. Options
vested six months after the date of grant. Mr. Scott's option
terminated upon his employment termination in August 2003.

(5) Granted in lieu of payment of cash compensation during Mr. Delk's first
year of employment. Option vested during the first year after the date
of grant.

(6) Granted in lieu of payment of cash compensation during Mr. Delk's first
year of employment. Options vest one-fifth on the first anniversary of
the date of grant and one sixtieth each month thereafter.

-11-

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth certain information regarding the
exercise of options by the Named Executive Officers during fiscal 2003 and
unexercised stock options held by the Named Executive Officers as of November
30, 2003. Options held by Mr. Scott, Mr. Lasnier and Mr. Lane terminated upon
termination of their employment prior to November 30, 2003.

NUMBER OF SHARES UNDERLYING
---------------------------- VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
NOVEMBER 30, 2003 AT NOVEMBER 30, 2003(2)
SHARES --------------------------- ---------------------------
ACQUIRED VALUE
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------- ----------- ----------- ----------- ------------- ----------- -------------

Robert E. Delk............. -- -- 102,500 1,649,500 $2,400 $0

-------------
(1) Market value of underlying securities on the date of exercise, minus
the exercise price.

(2) Based on the last reported sale price ($0.28 per share) on the Pink
Sheets on November 28, 2003 (the last trading day of fiscal 2003).

EMPLOYMENT CONTRACT, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

The Company was party to an employment agreement with Steve F. Scott,
its President and Chief Executive Officer, dated July 1, 1998, which provided
Mr. Scott with an annual salary of $250,000 per year. The employment agreement
was to be effective through June 30, 2004. In August 2003, Mr. Scott's
employment with the Company terminated and the employment agreement with Mr.
Scott was amended whereby he is to be paid in monthly installments of $7,555
from August 2003 through August 2005. Accrued severance costs relating to the
amendment aggregating $156,000 are included in the Company's financial
statements as of November 30, 2003.

In August 2003, the Company entered into an employment agreement with
its newly appointed President, Chief Executive Officer and Secretary, Robert E.
Delk. The agreement is to be effective through July 31, 2005, subject to renewal
for automatic successive additional one-year periods if neither the Company nor
Mr. Delk provides written notice of termination at least 30 days prior to the
end of the then current term. In lieu of salary during the first year of the
term of the employment agreement, Mr. Delk received common stock purchase
options described in the "Option Grants in Last Fiscal Year" table above and
also received reimbursement of approximately $8,300 for health insurance
premiums. In fiscal 2003, compensation expense of $42,000 pertaining to the
employment agreement was recorded as an adjustment to paid in capital.

The employment agreement with Mr. Delk provides for a base salary of at
least $125,000 per year beginning in August 2004. The Company and Mr. Delk are
in the process of negotiating a replacement employment agreement. Accordingly,
effective as of August 1, 2004, the Company began booking an accrued payroll
liability for the $125,000 annual salary. The Company intends to pay this
liability to Mr. Delk in a lump sum if negotiations are successfully completed.
The Company also continues to reimburse Mr. Delk for health insurance premiums.

-12-

STOCK PERFORMANCE GRAPH

Set forth below is a line graph comparing the yearly percentage change
in the cumulative total stockholder returns on the Company's common stock, based
on its market price, over a five-year period with the cumulative total return of
the Nasdaq Composite Index and the S&P 600 Small Cap Index as a peer group
comparison, assuming reinvestment of dividends. The Company has selected the S&P
600 Small Cap Index on the basis that it believes that it cannot reasonably
identify a reasonable pool of peer issuers in the same line of business. This
graph assumes that the value of the investment in the Company's common stock and
each of the comparison groups was $100 at the beginning of the measurement
period.

[graph of CUMULATIVE TOTAL RETURN here]

Cumulative Total Return
------------------------------------------------------------------------
11/98 11/99 11/00 11/01 11/02 11/03
------------------------------------------------------------------------

ADVANCED MATERIALS GROUP, INC. $100.00 $ 59 $116 $ 30 $ 32 $ 35
NASDAQ STOCK MARKET (COMPOSITE INDEX) 100.00 171 78 58 44 59
S&P 600 SMALL CAP INDEX 100.00 110 107 119 111 145

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee consisted of the following non-employee
directors during fiscal 2003: Mr. Paschall, Mr. Busch and Mr. DeWald. No
director who was a member of the Compensation Committee during fiscal 2003 was
an officer or employee of the Company or its subsidiaries during fiscal 2003,
was formerly an officer of the Company or its subsidiaries, or had any
relationship requiring disclosure pursuant to Item 404 of Regulation S-K under
the Securities Act of 1933 ("Securities Act"), except that Mr. Busch, one of the
Company's directors, is a partner in The Busch Firm, which firm acted as the
Company's outside legal advisor but did not receive more than 5% of its 2003
gross revenues from the Company.

None of the Company's executive officers serves as a member of a
compensation committee of another corporation (or other Board committee of such
company performing equivalent functions or, in the absence of any such
committee, the entire Board of Directors of such corporation), one of whose
executive officers served on the Company's Compensation Committee. None of the
Company's executive officers served during fiscal 2003 as a director of another
corporation, one of whose executive officers served on the Company's
Compensation Committee. None of the Company's executive officers served during
fiscal 2003 as a member of a compensation committee of another corporation (or
other Board committee of such corporation performing similar functions or, in
the absence of any such committee, the entire Board of Directors), one of whose
executive officers served as one of the Company's directors.

-13-

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors, composed of Mr.
Paschall and Mr. DeWald, has the authority to administer the Company's executive
compensation programs, including the Company's stock incentive plans. The
Company's executive compensation program is designed to provide competitive
levels of base compensation in order to attract, retain and motivate high
quality employees, tie individual total compensation to individual performance
and success of the Company, and align the interests of the Company's executive
officers with those of its stockholders.

EXECUTIVE COMPENSATION PROGRAM

The Company's executive compensation program consists of three
principal elements: base salary, cash bonus and stock options. The Board of
Directors sets the annual base salary for executives after consideration of the
recommendations of the Compensation Committee. Prior to making its
recommendations, the Compensation Committee reviews historical compensation
levels of the executives, evaluates past performance, and assesses expected
future contributions of the executives. In making the determinations regarding
base salaries, the Company considers generally available information regarding
the salaries prevailing in the industry.

The Company maintains incentive plans under which executive officers
may be paid cash bonuses at the end of each fiscal year. The bonuses under these
incentive plans depend upon individual performance and the achievement by the
Company of certain financial targets established by the Board of Directors prior
to the start of each fiscal year.

Total compensation for executive officers also includes long-term
incentives offered in the form of stock options, which are generally provided
through initial stock option grants at the date of hire and periodic additional
stock options grants. Stock options align the interests of the executive officer
with the interests of stockholders due to the fact that the executive can
realize a gain only if the Company's stock appreciates in value. In determining
the amount of such grants, the Compensation Committee considers the
contributions of each executive to the overall success of the Company in the
past fiscal year, the responsibilities to be assumed in the upcoming fiscal
year, appropriate incentives for the promotion of the long-term growth of the
Company, and grants to other executives in the industry holding comparable
positions as well as the executive's position within the Company.

CHIEF EXECUTIVE OFFICER COMPENSATION

The Company is a party to an employment agreement with Steve F. Scott,
its former President and form Chief Executive Officer, dated July 1, 1998, which
provided Mr. Scott with an annual salary of $250,000 per year. The employment
agreement was to be effective through June 30, 2004. In August 2003, Mr. Scott's
employment with the Company terminated and the employment agreement with Mr.
Scott was amended whereby he is to be paid in monthly installments of $7,555
beginning August 2003 through August 2005.

-14-

In determining the Chief Executive Officer compensation, the
Compensation Committee considers the Company's overall performance, as measured
by sales revenue, profitability, earnings per share and share valuation. After
considering these indicia of performance, the Compensation Committee awarded no
cash bonuses for fiscal 2003.

This report was furnished by
Mr. Paschall and Mr. DeWald

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the officers and directors
of the Company as well as persons who own more than 10% of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Commission. Officers, directors and greater-than-10%
stockholders are required by the regulations of the Commission to furnish the
company with copies of all Section 16(a) forms that they file.

Based solely on a review of the copies of such reports furnished to the
Company, the Section 16(a) requirements applicable to our officers, directors
and greater-than-10% stockholders were satisfied for fiscal 2003, except that
Mr. Scott, Mr. Paschall, Mr. DeWald and Mr. Busch each failed to file a Form 4
reporting one option grant, and Mr. Delk failed to file a Form 3 and two Form 4s
reporting a total of five option grants.

CODE OF ETHICS

The Company has adopted a code of ethics that is applicable to all of
the Company's directors, officers and employees and is intended to meet the
definition of a "code of ethics" as set forth in Item 406(b) of Regulation S-K
of the Commission. The Company will provide a copy of the code of ethics to any
person without charge, upon written request to Advanced Materials Group, Inc.,
Attention: Investor Relations, 11420 Mathis Avenue, Dallas, Texas 75234.

-15-

PROPOSAL 2
RATIFICATION OF
APPOINTMENT OF INDEPENDENT ACCOUNTANTS

GENERAL

The Company is asking its stockholders to ratify the Audit Committee's
appointment of Whitley Penn as its independent auditors for the fiscal year
ending November 30, 2004. If the Company's stockholders fail to ratify the
appointment, the Audit Committee may reconsider this appointment. Even if the
appointment is ratified, the Audit Committee, in its discretion, may direct the
appointment of a different independent auditing firm at any time if the Audit
Committee determines that such a change would be in the best interests of the
Company and its stockholders.

Representatives of Whitley Penn and BDO Seidman, LLP ("BDO") are not
expected to be present at the meeting.

CHANGE IN INDEPENDENT AUDITORS

On May 25, 2004, the Company notified BDO, the independent accounting
firm that had been engaged as the Company's independent public accountant to
audit the Company's consolidated financial statements for the fiscal years ended
November 30, 2003 and 2004, that it intended to engage new independent public
accountants and dismissed BDO as the Company's independent accountants.

The audit reports of BDO on the consolidated financial statements of
the Company as of and for the fiscal years ended November 30, 2003 and 2002 did
not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles,
except that BDO's report dated February 25, 2004, except for the third paragraph
of Note 6 which is as of March 1, 2004 and Note 8 which is as of April 17, 2004,
on the consolidated financial statements of the Company as of and for the fiscal
years ended November 30, 2003 and 2002 contained an uncertainty paragraph
stating:

"The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the consolidated financial statements, the
Company has sustained significant operating losses in 2003, 2002 and
2001, has had a significant decline in sales, and has working capital
and stockholders' deficits as of November 30, 2003. The Company is also
in technical default under the compliance provisions of its line of
credit and term loan. These matters, among others, raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties."

The Company's decision to change independent public accountants was
approved by the Company's Audit Committee and Board of Directors. In connection
with the audits of the two most recent fiscal years ended November 30, 2003 and
2002, and through May 25, 2004, there were no disagreements with BDO on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to BDO's
satisfaction, would have caused BDO to make reference to the subject matter of
the disagreements in connection with their reports on the Company's consolidated
financial statements for such periods. For the fiscal years ended November 30,
2003 and 2002 and through May 25, 2004, there were no reportable events as
described in Item 304(a)(1)(v) of Regulation S-K.

-16-

On May 26, 2004, the Company provided BDO with a copy of the
disclosures it made in response to Item 304(a) of Regulation S-K. The Company
requested that BDO furnish the Company with a letter addressed to the Commission
stating whether BDO agreed with the statements made by the Company in response
to Item 304(a) and, if not, stating the respects in which it did not agree. A
copy of BDO's letter is attached to the Company's Form 8-K for May 25, 2004.

On May 25, 2004, the Company engaged Whitley Penn as its new
independent public accountants. During the fiscal years ended November 30, 2003
and 2002 and through May 24, 2004, the Company had not consulted with Whitley
Penn with respect to the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's consolidated financial statements or any
other matters or reportable events as defined in Item 304(a)(2)(i) and (ii) of
Regulation S-K.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table presents fees for professional audit services
rendered by BDO for the audit of the Company's annual financial statements for
fiscal years 2003 and 2002 and fees billed for other services rendered by BDO
for those periods:

2003 2002
---- ----

Audit Fees..................... $ 115,000 $ 95,500
Audit-Related Fees............. 18,900 13,300
Tax Fees....................... 34,000 30,835
----------- --------
All Other Fees................. $ 167,900 $139,635

AUDIT FEES. Consists of fees billed for professional services rendered
for the audit of the Company's consolidated financial statements and review of
the interim consolidated financial statements included in quarterly reports and
services that are normally provided in connection with statutory and regulatory
filings or engagements.

AUDIT-RELATED FEES. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's consolidated financial statements and are not reported under
"Audit Fees." These services include employee benefit plan audits and
consultations concerning financial accounting and reporting standards.

TAX FEES. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning. These services include assistance
regarding federal, state and international tax compliance.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITORS

The Audit Committee's policy is to pre-approve all audit and
permissible non-audit services provided by the independent auditors. These
services may include audit services, audit-related services, tax services and
other services. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of services
and is generally subject to a specific budget. The independent auditors and
management are required to periodically report to the Audit Committee regarding
the extent of services provided by the independent auditors in accordance with
this pre-approval, and the fees for the services performed to date. The Audit
Committee may also pre-approve particular services on a case-by-case basis.

-17-

OTHER MATTERS

The Board of Directors knows of no other matters to be brought before
the annual meeting. However, if other matters should come before the annual
meeting, it is the intention of each person named in the proxy to vote such
proxy in accordance with his or her judgment on such matters.

STOCKHOLDER PROPOSALS

Pursuant to Rule 14a-8 of the Exchange Act, proposals by stockholders
which are intended for inclusion in the Company's proxy statement and proxy and
to be presented at the Company's 2005 annual stockholders' meeting must be
received by the Company by July 25, 2005 in order to be considered for inclusion
in the Company's proxy materials relating to the Company's 2005 annual
stockholders' meeting. Such proposals should be addressed to the Company's
Secretary and may be included in next year's annual stockholders' meeting proxy
materials if they comply with rules and regulations of the Commission governing
stockholder proposals.

For all other proposals by stockholders to be timely, a stockholder's
notice must be delivered to, or mailed and received at, the Company's principal
executive offices not later than October 10, 2005. If a stockholder fails to
notify the Company of any such proposal prior to that date, management will be
allowed to use its discretionary voting authority with respect to proxies held
by management when the proposal is raised at the annual meeting, without any
discussion of the matter in the Company's proxy statement.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Exchange Act. In accordance with the Exchange Act, the Company files reports,
proxy statements and other information with the Commission. These materials can
be inspected and copied at the Public Reference Room maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. Copies of these materials can also be obtained
from the Commission at prescribed rates by writing to the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Company's common stock is traded in the pink sheets under the symbol "ADMG.PK."

-18-

ANNUAL REPORT

A copy of the Company's annual report on Form 10-K for the fiscal year
ended November 30, 2003, as filed with the Commission (exclusive of exhibits),
accompanies this proxy statement. The annual report is not incorporated by
reference into this proxy statement and is not deemed to be a part of this proxy
solicitation material.

An additional copy of the Company's annual report (without exhibits)
will be furnished by first class mail, without charge, to any person from whom
the accompanying proxy is solicited upon written or oral request to Advanced
Materials Group, Inc., Attention: Investor Relations, 11420 Mathis Avenue,
Dallas, Texas 75234, telephone (972) 432-0602. If exhibit copies are requested,
a copying charge of $.20 per page will be made. In addition, all of the
Company's public filings, including its annual report, can be found free of
charge on the worldwide web at http://www.sec.gov.

By the Order of the Board of Directors

/S/ ROBERT E. DELK
------------------------------------
Robert E. Delk
PRESIDENT AND CHIEF EXECUTIVE OFFICER

Dallas, Texas
November 22, 2004

-19-

APPENDIX A

AMENDED AND RESTATED CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
ADVANCED MATERIALS GROUP, INC.

AS AMENDED AND RESTATED ON NOVEMBER 2, 2004

PURPOSE

The purpose of the Audit Committee (the "Audit Committee") of Advanced
Materials Group, Inc. (the "Corporation") is to assist the Board of Directors of
the Corporation in fulfilling its oversight responsibilities by:

o Serving as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system;

o Reviewing and appraising the audit efforts of the
Corporation's independent accountants; and

o Providing an open avenue of communication among the
independent accountants, financial and senior management and
the Board of Directors.

COMPOSITION

The Audit Committee shall consist of two or more directors, each of
whom shall be independent as and to the extent required by federal securities
laws and applicable requirements of the principal exchange, system or market on
which the Corporation's common stock is traded, and free from any relationship
that, in the opinion of the Board of Directors, would interfere with the
exercise of his or her independent judgment as a member of the Audit Committee.
Directors who are affiliates of the Corporation, or are officers or employees of
the Corporation or of its subsidiaries, will not be considered independent.

All members of the Audit Committee must be able to read and understand
fundamental financial statements, including a corporation's balance sheet,
income statement, and cash flow statement, at least one member of the Audit
Committee is to have past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in the member's financial sophistication,
including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities, and
at least one member of the Audit Committee shall qualify as an "audit committee
financial expert" as defined by the Securities and Exchange Commission pursuant
to Section 407 of the Sarbanes-Oxley Act of 2002.

The members of the Audit Committee are to be selected by the Board of
Directors and shall serve until their successors are duly elected and qualified.
Unless a Chairman of the Audit Committee is elected by the full Board of
Directors, the members of the Audit Committee may designate a Chairman by
majority vote of the full Audit Committee membership.

MEETINGS

The Audit Committee shall meet on at least a quarterly basis and shall
hold regular meetings as may be necessary and special meetings as may be called
by the Chairman of the Audit Committee. As part of its job to foster open
communication, the Audit Committee should meet at least annually with management

A-1

and the independent accountants in separate executive sessions to discuss any
matters that the Audit Committee or either of these groups believe should be
discussed privately. The Audit Committee should meet with the independent
accountants and management quarterly to review the Corporation's financial
statements.

RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS

The Corporation's independent accountants are to be ultimately
accountable to the Audit Committee, and the Audit Committee shall have the
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the independent accountants (or nominate the outside
auditor to be proposed for stockholder approval in any proxy statement).

RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties the Audit Committee shall:

DOCUMENTS/REPORTS REVIEW
------------------------

1. Review and assess the adequacy of this Charter at least
annually, and otherwise as conditions dictate.

2. Review the Corporation's annual financial statements and any
reports or other financial information submitted to the
Securities and Exchange Commission or the public, including
any certification, report, opinion or review rendered by the
independent accountants.

3. Review with financial management and the independent
accountants the Corporation's filings with the Securities and
Exchange Commission on Form 10-Q prior to their filing and
prior to the release of earnings.

4. Review and discuss with management and the independent
accountants any material financial or non-financial
arrangements of the Corporation that do not appear on the
financial statements of the Corporation.

INDEPENDENT ACCOUNTANTS
-----------------------

1. Select the independent accountants, considering their
independence and effectiveness, and approve the fees and other
compensation to be paid to the independent accountants.

2. At least annually, obtain from the independent accountants,
and review and discuss with the independent accountants, a
formal written statement delineating all relationships the
independent accountants and their related entities have with
the Corporation and its related entities, consistent with
Independence Standards Board Standard No. 1 (or any successor
thereto), and actively engage in a dialogue with the
independent accountants with respect to any disclosed
relationships or services that in the independent accountants'
professional judgment may reasonably be thought to bear on the
objectivity and independence of the independent accountants.

3. At least annually, obtain written confirmation from the
independent accountants that, in the independent accountants'
professional judgment, the independent accountants are
"independent" of the Corporation within the meaning of the
federal securities laws.

A-2

4. Take or recommend that the Board of Directors take, any
appropriate action to oversee the independence of the
independent accountants.

5. Review the performance of the independent accountants and
approve any proposed discharge of the independent accountants
when circumstances warrant.

6. Periodically consult with the independent accountants out of
the presence of management about internal controls and the
fullness and accuracy of the Corporation's financial
statements.

7. Pre-approve all auditing services to be provided by the
independent accountants to the Corporation (including comfort
letters in connection with securities underwriting).

8. Pre-approve all non-audit services to be provided by the
independent accountants to the Corporation unless: (a) the
aggregate amount of all such non-audit services constitutes
not more than 5% of the total amount of revenues paid by the
Corporation to its independent accountants during the fiscal
year in which the non-audit services are provided; (b) such
services were not recognized by the Corporation at the time of
the engagement to be non-audit services; and (c) such services
are promptly brought to the attention of the Audit Committee
and approved prior to completion of the audit by the Audit
Committee or by one or more members of the Audit Committee to
whom authority to grant such approvals has been delegated by
the Audit Committee.

9. The Audit Committee shall have the authority to delegate to
one or more designated members of the Audit Committee the
authority to grant pre-approvals of audit and non-audit
services. The decisions of any such member to pre-approve such
services shall be presented to the full Audit Committee at its
scheduled meetings.

10. Discuss with any registered public accounting firm that
performs an audit for the Corporation (1) all critical
accounting policies and practices to be used, (2) all
alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management officials of the Corporation,
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the registered
public accounting firm; and (3) other material written
communications between the registered public accounting firm
and the management of the Corporation, such as any management
letter or schedule of unadjusted differences.

FINANCIAL REPORTING PROCESSES
-----------------------------

1. In consultation with the independent accountants, review the
integrity of the organization's financial reporting processes,
both internal and external.

2. Consider the independent accountant's judgments about the
quality and appropriateness of the Corporation's accounting
principles as applied in its financial reporting.

3. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices
as suggested by the independent accountants or management.

4. Establish regular and separate reporting to the Audit
Committee by each of management and the independent
accountants regarding any significant judgments made in
management's preparation of the financial statements and the
view of each as to appropriateness of such judgments.

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5. Following completion of the annual audit, review separately
with each of management and the independent accountants any
significant difficulties encountered during the course of the
audit, including any restrictions on the scope of work or
access to required information.

6. Review and resolve any significant disagreement among
management and the independent accountants in connection with
the preparation of the financial statements.

7. Review with the independent accountants and management the
extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have
been implemented.

8. Prior to the filing of any periodic report of the Corporation
under the Securities Exchange Act of 1934, receive
confirmation from the Corporation's principal executive and
principal accounting officers that they have disclosed to the
Corporation's independent accountants and the Audit Committee:
(1) all significant deficiencies in the design or operation of
internal controls that are reasonably likely to adversely
affect the Corporation's ability to record, process,
summarize, and report financial information; (2) any material
weaknesses in internal controls; and (3) any fraud, whether or
not material, that involves management or other employees who
have a significant role in the Corporation's internal control
over financing reporting.

9. Establish procedures for the receipt, retention and treatment
of complaints received by the Corporation regarding
accounting, internal accounting controls, or auditing matters.

10. Establish procedures for the confidential, anonymous
submission by employees of the Corporation of concerns
regarding questionable accounting or auditing matters.

ETHICAL AND LEGAL COMPLIANCE
----------------------------

1. Review and approve all related-party transactions after
reviewing each such transaction for potential conflicts of
interest and other improprieties.

2. The Audit Committee shall have the authority to retain and
compensate such independent counsel, experts and other
advisors as it determines necessary to carry out its duties.

3. The Audit Committee shall have the authority to conduct or
authorize investigations into any matters within its scope of
responsibilities and shall have the authority to retain
outside advisors to assist it in the conduct of any
investigation.

4. Establish, review and update periodically one or more codes of
conduct and ethics and ensure that management has established
a system to enforce these codes.

5. Review, with the Corporation's counsel, any legal matter that
could have a significant impact on the Corporation's financial
statements.

6. Perform any other activities consistent with this Charter, the
Corporation's bylaws and governing law, as the Audit Committee
or the Board of Directors deems necessary or appropriate.

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APPENDIX B

CHARTER OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
OF
ADVANCED MATERIALS GROUP, INC.

AS ADOPTED ON NOVEMBER 2, 2004

PURPOSE

The purpose of the Compensation Committee of Advanced Materials Group,
Inc. (the "Company") governed by this charter is to (i) act as administrator of
the Company's various stock option plans and stock plans (collectively, the
"Plans") as described in each of the Plans, (ii) review forms of compensation to
be provided to the officers and employees of the Company, including stock
compensation, (iii) grant options to purchase common stock of the Company to
employees and executive officers of the Company and (iv) review and make
recommendations to the Board of Directors regarding all forms of compensation to
be provided to the directors of the Company, including stock compensation. The
Compensation Committee has the authority to undertake the specific duties and
responsibilities listed below and will have the authority to undertake such
other specific duties as the Board of Directors from time to time prescribes.

MEMBERSHIP

The Compensation Committee shall consist solely of a minimum of two (2)
"non-employee directors" of the Company as such term is defined in Rule
16b-3(b)(3)(i) of the Securities Exchange Act of 1934 (the "Exchange Act"). The
members of the Compensation Committee will be outside directors within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and
will meet the independence requirements of the principal exchange, system or
market on which the Company's common stock then trades. The members of the
Compensation Committee are nominated and appointed by and serve at the
discretion of the Board of Directors.

RESPONSIBILITIES

The responsibilities of the Compensation Committee are set forth below:

o The Compensation Committee shall review and make
recommendations to the Board of Directors regarding the
compensation policy for executive officers and directors of
the Company, and such other officers of the Company as
directed by the Board of Directors.

o The Compensation Committee shall review and approve the
Company's compensation policy regarding all forms of
compensation (including, to the extent relevant, all "plan"
compensation, as such term is defined in Item 402(a)(7) of
Regulation S-K promulgated by the Securities and Exchange
Commission, and all non-plan compensation) to be provided to
the officers and employees of the Company.

o The Compensation Committee shall review recommendations from
the Chief Executive Officer of the Company regarding all forms
of compensation (including, to the extent relevant, all "plan"
compensation, as such term is defined in Item 402(a)(7) of
Regulation S-K promulgated by the Securities and Exchange
Commission, and all non-plan compensation) to be provided to
the non-employee directors of the Company.

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o The Compensation Committee shall review and make
recommendations to the Board of Directors regarding general
compensation goals and guidelines for the Company's employees
and officers and the criteria by which bonuses to the
Company's employees and officers are determined.

o The Compensation Committee shall review recommendations from
the Chief Executive Officer of the Company regarding all bonus
and stock compensation to all employees of the Company.

o The Compensation Committee shall act as administrator (as
described in each of the Plans) of the Plans within the
authority delegated by the Board of Directors. In its
administration of the Plans, the Compensation Committee may,
(i) grant stock options or stock purchase rights to
individuals eligible for such grants (including grants to
individuals subject to Section 16 of the Exchange in
compliance with Rule 16b-3 hereunder) and (ii) amend such
stock options or stock purchase rights in accordance with the
terms of the Plans.

o The Compensation Committee shall review and make
recommendations to the Board of Directors with respect to
amendments to the Plans and changes in the number of shares
reserved for issuance hereunder.

o The Compensation Committee shall review and make
recommendations to the Board of Directors regarding other
plans that are proposed for adoption or adopted by the Company
for the provision of compensation to employees of, directors
of and consultants to the Company.

o The Compensation Committee shall prepare a report, if
required, (to be included in the Company's proxy statement)
that describes: (a) the criteria on which compensation paid to
the Chief Executive Officer for the last completed fiscal year
is based; (b) the relationship of such compensation to the
Company's performance; and (c) the Compensation Committee's
executive compensation policies applicable to executive
officers.

o The Compensation Committee shall review and reassess the
adequacy of this Charter annually and recommend any proposed
charges to the Board of Directors for approval.

MEETINGS

It is anticipated that the Compensation Committee will meet at least
once each year. However, the Compensation Committee may establish its own
schedule, which it will provide to the Board of Directors in advance. At a
minimum of one of such meetings annually, the Compensation Committee will
consider stock plans, performance goals and incentive awards, and the overall
coverage and composition of the compensation package.

MINUTES

The Compensation Committee will maintain written minutes of its
meetings, which minutes will be filed with the minutes of the meetings of the
Board of Directors.

REPORTS

The Compensation Committee will provide written reports to the Board of
Directors of the Company regarding recommendations of the Compensation Committee
submitted to the Board of Directors for action, and copies of the written
minutes of its meetings.

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APPENDIX C

ADVANCED MATERIALS GROUP, INC.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

2004 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD DECEMBER 15, 2004

The undersigned hereby appoints William G. Mortensen as the attorney,
agent and proxy of the undersigned, with the power to appoint his substitute, to
represent and vote, as designated on the reverse side, all shares of common
stock of Advanced Materials Group, Inc. (the "Company") held of record by the
undersigned at the close of business on November 2, 2004, at the 2004 annual
meeting of stockholders to be held on Wednesday, December 15, 2004 at 10:00 a.m.
local time, at The Busch Firm located at 2532 Dupont Drive, Irvine, California
92612 and at any and all adjournments and postponements thereof.

(Continued and to be signed on the reverse side)

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ANNUAL MEETING OF STOCKHOLDERS OF

ADVANCED MATERIALS GROUP, INC.

DECEMBER 15, 2004

Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.

Please detach along perforated line and mail in the envelope provided.
________________________________________________________________________________

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" FOR THE
ELECTION OF DIRECTORS AND "FOR" PROPOSAL 2.

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
________________________________________________________________________________

1. To consider and vote upon a proposal to elect four nominees to the
Company's board of directors:

NOMINEES:
[ ] FOR ALL NOMINEES 0 Timothy R. Busch
0 Robert E. Delk
[ ] WITHHOLD AUTHORITY 0 N. Price Paschall
FOR ALL NOMINEES 0 Maurice J. DeWald

[ ] FOR ALL EXCEPT
(See instructions below)

INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here: |X|

2. To consider and vote upon a proposal to ratify the section of Whitley
Penn as the independent accountants for the Company for the fiscal year
ending November 30, 2005:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

The proxy holder(s) are authorized to vote in their discretion upon such other
business as may properly come before the meeting or any adjournments and
postponements of the meeting. This proxy, when properly executed, will be voted
in the manner directed by the undersigned stockholder. If no direction is made,
this proxy will be voted "FOR ALL NOMINEES" and "FOR" proposal 2. All other
proxies previously given by the undersigned in connection with the action
proposed on this proxy are hereby expressly revoked. This proxy may be revoked
at any time before it is voted by written notice to the Secretary of the
Company, by issuance of a subsequent proxy or by voting at the meeting in
person.
________________________________________________________________________________

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To change the address on your account, please check the box at right and [ ]
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.

________________________________________________________________________________

Signature of Stockholder __________________________________ Date: _____________
Signature of Stockholder __________________________________ Date: _____________

NOTE: Please sign exactly as your name or names appear on this proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.

MARK "X" HERE IF YOU PLAN TO ATTEND THE MEETING. [ ]

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