Encompass Group Affiliates, Inc.(fka ECGA)

[sludgehound]

Chinese folly PMIC BK "for cause"

ADVC/PMIC Advanced Communications and Pacific Magtron Announce Business Reorganization And Voluntary Bankruptcy Filing for Pacific Magtron
PR Newswire - May 23, 2005 2:16 PM (EDT)

Transaction Will Provide Protection and Means to Operate While Filing is Pending Approval by the Court

NEW YORK, May 23, 2005 /PRNewswire-FirstCall via COMTEX/ -- Advanced Communications Technologies, Inc. (OTC Bulletin Board: ADVC), a technology and services holding company that specializes in the repair of computers, peripherals and consumer electronics, and its majority owned subsidiary, Pacific Magtron International Corp. (OTC Bulletin Board: PMIC), announced today that Pacific Magtron International Corp. and its wholly owned subsidiaries have filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court in the District of Nevada. Pacific Magtron is a California-based distributor and reseller of computer systems, components, peripherals and software.

In conjunction with the bankruptcy filing, Pacific Magtron, Inc., a wholly owned operating subsidiary of Pacific Magtron International Corp., is negotiating a proposed Interim Management Agreement with a privately held, California-based supplier of computer hardware, components and software. Under the terms of the proposed agreement, and with interim approval by the bankruptcy court, this company will manage the operations of Pacific Magtron's business for a period of 60 days or as determined by the court pending approval of a proposed joint venture (described below). This will enable the company to continue distributing computers, peripherals and components to its customers from its current location in Milpitas, California. In return for providing management to Pacific Magtron, the manager will receive a fee in the form of a percentage of the gross margin generated by Pacific Magtron's sales.

The manager, which currently primarily distributes to customers in Mexico, will have an opportunity to expand its U.S. customer base by joining forces with Pacific Magtron.

Pacific Magtron and the manager are also negotiating to enter into a proposed binding joint venture, to be named Pacific Connections, LLC, which will be structured under a proposed Limited Liability Company Operating Agreement. Under the terms of the proposed joint venture, Pacific Magtron will receive 50% of the profits generated by Pacific Connections during its first two years of operations in return for its trademarks, goodwill, customer relationships and access to staff. Pacific Magtron's profits generated through Pacific Connections will be used to satisfy creditors of Pacific Magtron and its subsidiaries. In addition, Pacific Connections will assist in selling Pacific Magtron's remaining inventory and collecting its accounts receivables without additional fees.

Martin Nielson, chairman and chief executive officer of Pacific Magtron, said, "This bankruptcy filing is necessary to the future success of Pacific Magtron and for our strategy for growth. Since the company could not sustain itself and continue operations under the circumstances, we were determined to find an operating partner to manage PMIC's legacy business and protect our creditors. I am confident that our methodology will lead to new and exciting developments for the company over the near term."

At the time of this announcement, the parties were finalizing both the Interim Management Agreement and the joint venture Limited Liability Company Operating Agreement, which will be subject to bankruptcy court approval.

The bankruptcy filing and proposed joint venture initiative was precipitated by a rapid decline in Pacific Magtron's financial condition caused in part by the draw back of vendor lines of credit. Pacific Magtron was eventually unable to replenish its inventory and forced to reduce its payroll costs, shut down its Georgia operation and liquidate certain assets in order to pay creditors. These unforeseen events followed the closing of the acquisition of a 62% majority interest in Pacific Magtron by Advanced Communications in December 2004.

When Advanced Communications acquired control of Pacific Magtron, its strategy was to use Pacific Magtron as a self-sustaining distribution and sourcing engine to support its expansion in the integrated supply of end-of- life-cycle technology products and services. Pacific Magtron's plan is to implement the same strategic initiatives in fields other than Pacific Magtron's historic business such as service parts distribution, asset recovery and electronics-waste recovery, while it seeks court approval to complete the reorganization. Announcements regarding these initiatives are expected to follow.

Wayne Danson, president and chief financial officer of Advanced Communications, said, "While we did not expect these series of events to occur, management has implemented a carefully planned crisis management strategy designed to preserve our investment and create future value to our business enterprise. We are committed to seeing the bankruptcy process through and taking whatever action is necessary to protect our investment and secure the financial stability of Pacific Magtron's business."

Immediately prior to the bankruptcy filing, Pacific Magtron terminated, for cause, Ted Li, chief financial officer, and Cynthia Lee, senior vice president.

Advanced Communications and Pacific Magtron will be announcing developments surrounding this bankruptcy transaction as information becomes available.

About Advanced Communications Technologies Inc.

Advanced Communications Technologies, Inc. is a publicly traded New York City-based technology and services holding company that, through its majority owned subsidiary Pacific Magtron International Corp., is a distributor of hardware components, computer systems and software products, and through its wholly owned subsidiary and principal operating unit Encompass Group Affiliates, Inc., is a provider of board-level repair of technical products to third-party warranty companies, OEMs, national retailers and national office equipment dealers. Service options include advance exchange, depot repair, call center support, parts and warranty management for office equipment, fax machines, printers, scanners, laptop computers, monitors and multi-function units, including high-end consumer electronics such as PDAs and digital cameras. Additionally, through its wholly owned investment subsidiary Hudson Street Investments, Inc., Advanced Communications makes strategic minority investments in public and private companies. For more information, visit Advanced Communications' website at http://www.advancedcomtech.net .

A profile for investors on Advanced Communications may be found at the website http://www.hawkassociates.com/advancedcommunications/profile.htm .

An online investor relations kit containing Advanced Communications' press releases, SEC filings, current Level II price quotes, interactive Java stock charts and other useful information for investors can be found at http://www.hawkassociates.com and http://www.hawkmicrocaps.com .

This release and oral statements made from time to time by the company's representatives concerning the same subject matter may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by introductory words such as "expects," "plans," "intends," "should," "believes," "will," "estimates," "forecasts," "projects" or words of similar meaning, and by the fact that they do not relate strictly to historical or current facts. Many factors may cause actual results to differ from forward- looking statements, including inaccurate assumptions and a broad variety of risks and uncertainties, some of which are known and others of which are not. Known risks and uncertainties include those identified from time to time in the reports filed by the company with the Securities and Exchange Commission, which should be considered together with any forward-looking statement. No forward-looking statement is a guarantee of future results or events, and one should avoid placing undue reliance on such statements.

Contact Information
Hawk Associates, Inc.
Frank N. Hawkins, Jr. or
Julie Marshall
Phone: [phone]
E-mail: [e-mail]

SOURCE Advanced Communications Technologies, Inc.

Frank N. Hawkins, Jr. or Julie Marshall, both of Hawk Associates, Inc.,
[phone], or [e-mail], for Advanced Communications Technologies

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