Advanced Materials Group Plans to Appeal Judgment
13 October 1998
Advanced Materials Group Plans to Appeal Judgment Against Condor Utility Products Subsidiary
RANCHO DOMINGUEZ, Calif.--Oct. 12, 1998-- Advanced Materials Group Inc. Monday announced that it plans to appeal a $382,500 judgment rendered against the company's Condor Utility Products subsidiary in a breach of requirements contract lawsuit, previously disclosed in the company's Form 10-KSB.
In addition to direct damages, the judgment also entitles the opposing party to interest and attorney's expenses.
Commenting on the results of the lawsuit, Advanced Materials Group CEO and President Steve F. Scott said: "In our opinion, the results of this lawsuit are inconsistent with the facts. We plan to appeal this judgment, and we are considering a number of options in our legal response."
Initial claims in this lawsuit were filed prior to Advanced Materials Group's acquisition of Condor in 1993. As part of the acquisition, Advanced Materials Group negotiated an indemnification agreement with Gary Valiska, the founder of Condor, requiring Valiska to indemnify Advanced Materials Group for 75 percent of any judgment. At this time, it is uncertain what, if any, amounts may be collected under the indemnification agreement.
In related litigation, Condor prevailed on a patent infringement claim. The jury was unable to reach a verdict in a separate claim by the opposing party against Condor and Valiska for intentional infliction of emotional distress, a claim now remanded to state court for retrial.
The company's Condor Utility Products subsidiary expects to reserve a total amount of up to $565,000, net of income taxes, to cover the cost of the judgment, pre-judgment interest and attorney's fees, to be accounted for as a special charge in the fiscal 1998 fourth quarter. The company is unable to reasonably determine pre-judgment interest and attorney's fees at this time.
The special charge is being made in accordance with GAAP requirements to record contingent liabilities immediately, regardless of the outcome of the appeals process. In addition, the company will write off $604,000 of goodwill related to Condor as a special charge in the company's fiscal 1998 fourth quarter.
Scott commented on the fiscal impact of Monday's announcement, saying: "The judgment and the write down of goodwill negate what had been a very profitable year for the company. However, we still anticipate a revenue increase in the fourth quarter over third quarter revenues, and we look forward to 1999 for opportunities to improve earnings."
About the Company
Advanced Materials Group is a leading manufacturer and fabricator of foams, foils, films and pressure sensitive adhesive components for a broad base of industrial and medical customers in the United States and abroad. The company also produces specialized systems for mixing, handling and dispensing multicomponent chemicals, sealants and adhesives.
This news release may contain forward-looking statements that involve a number of risks and uncertainties. In addition to the factors discussed, the following are among the other factors that could cause actual results to differ materially: general business conditions, competitive factors, concentration of sales in markets and customers, concentration of raw materials suppliers, delays or cancellations in orders, fluctuations in margins, timing of significant orders and other risks and uncertainties outlined by management in the company's recently filed Form 10-KSB.