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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to ____________
Commission file number 0-23268
AMERICAN TECHNOLOGIES GROUP, INC.
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(Name of small business issuer in its charter)
NEVADA 95-4307525
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1017 SOUTH MOUNTAIN AVENUE, MONROVIA, CA. 91016
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(Address of principal executive offices) (zip code)
Issuer's telephone number: (818) 357-5000
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
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As of November 29, 1996, the registrant had 18,312,640 shares of Common
Stock outstanding.
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TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Consolidated Balance Sheet as of October 31, 1996 and
July 31, 1996 3
Consolidated Statement of Operations for the Three Month Period
ended October 31, 1996 and the Fiscal Year ended July 31, 1996 5
Consolidated Statement of Cash Flows for the Three Month
Periods ended October 31, 1995 and October 31, 1996 6
Notes to Consolidated Financial Statements 7
ITEM 2 Management's Discussion and Analysis 11
PART II OTHER INFORMATION
ITEM 2 Changes in Securities 13
ITEM 6 Exhibits and Reports on Form 8-K 13
Signatures 14
Page 2
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American Technologies Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
as of July 31, 1996 and October 31, 1996 (unaudited)
July 31, October 31,
ASSETS 1996 1996
- --------------------------------------------------------------------------------
(unaudited)
CURRENT ASSETS
Cash and Cash Equivalents $ 2,486,313 $ 1,439,195
Accounts Receivable (net of $10,000 allowance) 43,326 79,880
Subscriptions Receivable 8,552 14,563
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Total Accounts & Subscriptions Receivable 51,878 94,443
Amounts Due From Shareholders 2,500 84,250
Marketable Securities - -
Deferred Tax 261,000 261,000
Inventory 43,961 110,366
Other Current Assets 412 15,107
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Total Other Current Assets 307,873 470,723
PROPERTY, EQUIPMENT AND MINERAL PROPERTIES
Mining Property and Equipment 5,470,089 5,613,304
Other Property and Equipment 511,747 531,949
Accumulated Depreciation (240,135) (261,700)
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Net Property, Equipment and Mineral Properties 5,741,701 5,883,553
GOODWILL, net of accumulated amortization of
$1,747,717 at July 31, 1996 and $1,877,717 at
October 31, 1996 1,394,023 1,264,023
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TOTAL ASSETS $ 9,981,788 $ 9,151,937
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The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
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American Technologies Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
as of July 31, 1996 and October 31, 1996 (unaudited)
July 31, October 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1996
- --------------------------------------------------------------------------------
(unaudited)
LIABILITIES
Accounts Payable $ 566,136 $ 643,727
Accrued Liabilities 31,297 54,028
Related Party Payables 76,000 58,000
Deferred Subscription Income 110,094 114,589
Subscription Production 40,720 -
Current Portion of N/P 180,472 180,472
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Total Current Liabilities 1,004,719 1,050,816
Deferred Tax Liability 1,347,224 1,347,224
Convertible Debentures - 700,000
Other L/T Liabilities 363,772 294,043
Long Term Portion of N/P 840,020 862,348
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2,551,016 3,203,615
Total Liabilities 3,555,735 4,254,431
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STOCKHOLDERS' EQUITY
Series A Preferred - $ .001 par value, 378 378
10,000,000 authorized,
378,061 issued and outstanding at
July 31, 1996
378,061 issued and outstanding at
October 31, 1996
Series B Preferred - $.001 par value, - -
500,000 authorized,
none issued and outstanding at July 31, 1996
none issued and outstanding at October 31, 1996
Series C Preferred - $.001 par value, 2 1
300,000 authorized
2,000 issued and outstanding at July 31, 1996
1,000 issued and outstanding at October 31, 1996
Common Stock: $.001 par value, 16,220 17,172
100,000,000 authorized,
16,220,264 issued and outstanding
at July 31, 1996
17,172,000 issued and outstanding at
October 31, 1996
Additional Paid in Capital 23,117,088 23,913,251
Stock Subscriptions 771,298 339,670
Deficit (17,478,933) (19,372,966)
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Total Stockholders Equity 6,426,053 4,897,506
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,981,788 $ 9,151,937
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The accompanying notes are an integral part of these condensed consolidated
balance sheets.
4
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American Technologies Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
for the three months ended October 31, 1995 and 1996 (unaudited)
Three Months Ended
October 31,
--------------------------
1995 1996
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(unaudited)
REVENUES
Publishing $ 17,592 $ 90,026
Rental Property 31,389 -
Product Sales 22,165 56,830
Other - 25,739
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Total Revenues 71,146 172,595
COSTS AND EXPENSES
Publishing Operations 83,633 96,976
Rental Operations 65,079 -
Product Sales and Marketing 54,219 515,279
Mining Operations 138,344 326,601
Research and Development 108,554 287,926
Officers' Compensation 133,222 223,939
General and Administrative 251,935 427,706
Interest Expense - 58,202
Amortization of Intangible Assets 130,000 130,000
Other 250 -
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Total Costs and Expenses 965,236 2,066,629
LOSS BEFORE PROVISION FOR INCOME TAXES 894,090 1,894,034
PROVISION FOR STATE INCOME TAXES - -
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NET LOSS $ 894,090 $ 1,894,034
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NET LOSS PER SHARE $ 0.07 $ 0.12
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 13,034,834 16,373,334
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The accompanying notes are an integral part of these condensed consolidated
statements.
5
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American Technologies Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
for the three months ended and October 31, 1995 and 1996 (unaudited)
Three Months Ended
October 31,
----------------------------
1995 1996
- --------------------------------------------------------------------------------
(unaudited)
CASH FLOW FROM OPERATING ACTIVITIES
Net Loss $ (894,090) (1,894,034)
Adjustments to reconcile net loss to net cash used:
Depreciation and Amortization 148,589 151,565
Stock Issued as Consideration for Debt Reduction 32,016 -
Stock Issued as Consideration for Services 2,001 223,100
Interest Earned on CD's - (15,662)
Interest Expense Added to Principal Balances - 34,006
Changes in Assets and Liabilities:
Accounts Receivable 42,765 (42,565)
Advances to Stockholders/Officers - (81,750)
Inventory - (66,405)
Other Current Assets 305 (14,695)
Accounts Payable and Accrued Expenses 372,744 (53,952)
Deferred Subscription Revenue - (4,495)
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Net Cash Provided by/(Used in) Operating
Activities (295,670) (1,764,887)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (71,741) (143,215)
Proceeds from Sale of Marketable Securities 9,996 -
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Net Cash Provided by/(Used in) Investing
Activities (61,745) (143,215)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Notes Payable (6,000) -
Payments on Capital Lease - (50,000)
Payments due Stockholder/Officer - (18,000)
Net Proceeds from Debenture Issuance - 563,500
Net Proceeds from Stock Issuance &
Stock Subscription 361,896 365,484
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Net Cash Provided by/(Used in) Financing
Activities 355,896 860,984
NET INCREASE (DECREASE) IN CASH (1,519) (1,047,118)
CASH AND CASH EQUIVALENTS, Beginning of Period 86,019 2,486,313
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CASH AND CASH EQUIVALENTS, End of Period $ 84,500 $ 1,439,195
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The accompanying notes are an integral part of these condensed consolidated
statements.
6
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AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. Operating results for the three
month period ended October 31, 1996 are not necessarily indicative of the
results that may be expected for the year ended July 31, 1997. For further
information, please refer to the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-KSB/A for
the year ended July 31, 1996.
2. ORGANIZATION, LINE OF BUSINESS AND SIGNIFICANT BUSINESS RISKS
a. ORGANIZATION AND LINE OF BUSINESS
American Technologies Group, Inc. (the Company or ATG) was formed on
September 27, 1988, and merged with an inactive publicly owned company
named One Stop Printing, Inc., a Minnesota corporation, formerly General
Cybernetics Corporation. General Cybernetics Corporation was incorporated
in September 1968 and was merged with and changed its name to One Stop
Printing, Inc. in December 1972. In February 1991, First Western
Acquisitions, Inc. (FWA), a newly-formed Nevada Corporation, acquired
effective control of the Company in a reverse merger transaction with the
inception of the new entity beginning in February 1991 using the name ATG.
Prior to February 1991, the Company was inactive. ATG was in the
development stage until July, 1994 at which time it acquired the publishing
business of Final Frontier Publishing, Inc., now named ATG Media, Inc., a
Minnesota corporation (ATG Media).
In July, 1994, ATG acquired an 85 percent interest ATG Media in an
acquisition accounted for by the purchase method of accounting with
the results of operations of ATG Media consolidated with the results of
the Company from the date of acquisition (July 29, 1994). In August
1994, ATG completed the acquisition of the remaining 15 percent interest
of ATG Media at which time it became a wholly-owned subsidiary.
In April 1995, ATG acquired 100 percent of the common stock of New Concept
Mining, Inc. (New Concept Mining) a Nevada corporation. The acquisition of
New Concept Mining was accounted for by the purchase method of accounting
with the results of operations of New Concept Mining consolidated with the
results of the Company from the date of acquisition (April 21, 1995).
ATG is a research and development company principally involved in
developing, through in-house research or acquisitions, proprietary energy
and environmental systems and services which offer cost-effective solutions
to reduce, and in some cases eliminate, hazardous chemical by-products or
emissions resulting from industrial production and combustion processes.
ATG Media develops and markets space and technology related publications,
books and merchandise for the space professional, space enthusiast and
educational markets. ATG Media's principal publication is Final Frontier
Magazine which was first published in 1986.
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New Concept Mining was formed for the purpose of acquiring mineral
properties with the long-term goal of developing and mining these
properties. Some of the mineral properties acquired are currently
non-producing and have either never been mined or mining activities were
ceased in excess of ten years ago.
b. SIGNIFICANT BUSINESS RISKS
Since its inception, the Company has incurred significant operating losses.
The ability of the Company to successfully carrying out its business plan
is dependent upon (1) its ability to obtain sufficient additional capital,
(2) generate significant revenues through its existing assets and operating
business which it has acquired, and (3) overcome significant product
development issues.
The Company plans to raise additional working capital through private
offerings, as well as attain listing on a national exchange. The
successful outcome of future activities cannot be determined at this time
and there are no assurances that if achieved, the Company will have
sufficient funds to further develop its mineral properties and execute their
business plans or generate positive operating results.
3. DEBENTURES
In September, 1996, the Company issued $700,000 of 8 percent Convertible
Debentures (8% Debentures), maturing September 30, 1998. The accrued
interest is due quarterly and both the accrued interest and the principal
is payable in cash or Common Stock at the Company's discretion. Up to 50
percent of the original principal amount of the 8% Debentures is
convertible into Common Stock commencing 45 days after issuance and up to
100 percent of the original principal amount of the 8% Debentures is
convertible into Common Stock commencing 75 days after issuance. The
conversion price is equal to the lower of $1.68 or 80 percent of the average
closing bid price of the Common Stock for the five trading days prior to
conversion. In November, 1996, $350,000 of the 8% Debentures were
converted into 209,874 shares of Common Stock.
4. CAPITAL STOCK
a. COMMON STOCK
During the three months ended October 31, 1996, the Company issued 125,814
shares of Common Stock for services rendered valued at $223,100. All
shares issued were valued at estimated market value at date of issuance.
b. PREFERRED STOCK
ATG's authorized preferred stock is 50,000,000 shares, par value $0.001 per
share. The preferred stock may be issued from time to time in series
having such designated preferences and rights, qualifications and
limitations as the Board of Directors may determine.
The Company has designated a series of preferred stock called Series A
Convertible Preferred Stock (Series A Stock) and has authorized 10,000,000
shares. The Series A Stock receives a ten percent higher dividend than the
Common Stock, is entitled to one vote per share, shares equally with the
Common Stock upon liquidation and is convertible into one share of Common
Stock at any time at least five years after issuance upon the payment of
$3.00 per share. As of
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October 31, 1996, 378,061 shares of Series A Stock were outstanding, no
shares having been converted. The outstanding shares were issued under the
CAP agreement.
The Company has designated a second series of preferred stock called
Series B Convertible Preferred Stock (Series B Stock) and authorized
500,000 shares. The Series B Stock has a liquidation preference of $8.00
per share, is entitled to one vote per share and is convertible upon
holders request without the payment of any additional consideration during
the first year following issuance into the number of shares of Common Stock
equal to the quotient of $8.00 per share and the Market Value per Share for
the ten trading days immediately preceding conversion and in subsequent
years into one share of Common Stock for each share of Series B stock. Of
the 224,204 Series B Stock subscriptions originally issued in connection
with the ATG Media acquisition, 111,704 subscriptions were converted into
301,141 shares of Common Stock in fiscal year 1995 and 78,750 subscriptions
were converted in fiscal year 1996 into 206,135 shares of Common Stock.
During the three month period ended October 31, 1996, an agreement was
reached in which all the remaining Series B Stock subscriptions were
canceled in exchange for 15,000 shares of Common Stock.
The Company has designated a third series of preferred stock called Series
C Convertible Preferred Stock (Series C Stock) and authorized 2,000 shares.
The Series C Stock has a liquidation preference of $1,000 per share, an 8
percent coupon payable at the time of conversion, is non-voting and is
convertible upon holders request without the payment of any additional
consideration up to 50 percent on the forty-fifth day following the
original issuance and is fully convertible on the seventy-fifth day
following the original issuance into the number of shares of Common Stock
equal to $1,000 per share plus accrued dividends divided by 70 percent of
the Market Value per share for the five trading days immediately preceding
conversion. The Series C Stock automatically convert on the second
anniversary of the date of issuance. As of October 31, 1996, all of the
outstanding shares of Series C Stock were converted into 1,490,702 shares
of Common Stock.
c. STOCK OPTION PLANS
During fiscal 1994, the Company adopted the 1993 Incentive Stock Option
Plan (Incentive Plan) and the 1993 Non-Statutory Stock Option Plan
(Non-Statutory Plan) to grant options to purchase up to a maximum of ten
percent of the total outstanding Common Stock of the Company. Options are
issued at the discretion of the Board of Directors to employees only under
the Incentive Plan and to non-employees under the Non-Statutory Plan.
Under the Incentive Plan, the exercise price of an Incentive Stock Option
shall not be less than the fair market value of the Common Stock on the
date the option is granted. However, the exercise price of an Incentive
Stock Option granted to a ten percent stockholder (as defined in the
Incentive Stock Option Plan), shall be at least one hundred ten percent of
the fair market value of Common Stock on the date the option is granted.
Exercise prices of options granted under the Non-Statutory Plan may be less
than fair market value. Each option expires at the date fixed by the Board
upon issuance but in no event more than ten years. The plans expire
December 2002.
As of October 31, 1996, there were 1,402,000 outstanding options
exercisable at between $1.50 and $6.25 per share. There were no options
granted or exercised since July 31, 1996. As of October 31, 1996, 698,500
options granted under the Plans have vested.
d. STOCK SUBSCRIPTIONS
During the three months ended October 31, 1996, the Company issued
163,600 shares of Common Stock valued at $563,860 which were included
within stock subscription as of July 31, 1996. As of October 31, 1996,
the Company had not issued (i) 125,814 shares of Common Stock owed for
services rendered prior to October 31, 1996, valued at $223,100 and (ii)
67,207 shares of Common Stock sold under private placements during fiscal
1996 for an aggregate of $116,570 in cash received during fiscal 1996.
These amounts have been included within stock subscriptions in the
accompanying balance sheets.
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5. SUBSEQUENT EVENT
In November, 1996, the Company issued $1,400,000 of 7 percent Convertible
Debentures (7% Debentures), maturing November 1, 1999. The accrued
interest is due upon the earlier of conversion or maturity. Up to 50
percent of the original principal amount of the 7% Debentures is
convertible into Common Stock commencing 45 days after issuance and up to
100 percent of the original principal amount of the 7% Debentures is
convertible into Common Stock commencing 75 days after issuance. The
conversion price is equal the lower of $2.775 or 70 percent of the average
closing bid price of the Common Stock for the five trading days prior to
conversion.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Total assets decreased by $829,900 from $9,981,800 to $9,151,900 at July 31,
1996 and October 31, 1996, respectively. This decrease was the net result of a
decrease in current assets of $841,700, primarily consisting of a cash decrease
of $1,047,100 partially offset by increases in receivables ($42,500), amount due
from shareholders ($81,700) and other current assets ($81,100) and a decrease
of Goodwill of $130,000 and an increase in Property, Equipment and Mineral
Properties of $141,900.
Total liabilities increased by $698,700 from $3,555,700 to $4,254,400 at July
31, 1996 and October 31, 1996, respectively. This increase was principally
the result of the sale of $700,000 of debentures while accounts payable
($77,600) and accrued liabilities ($22,700) also increased principally in New
Concept due to increased expenditures incurred in completing the mill on the
Manhattan mining property. Related party payables and subsription production
decreased by a total of $58,700.
Total assets decreased by $920,300 from $10,072,200 to $9,151,900 at October 31,
1995 and 1996, respectively. This decrease was the net result of a decrease in
Goodwill of $745,000 as a result of accelerated amortization and the sale of
Commercial Property of $2,623,500, partially offset by an increase in current
assets of $1,770,000, primarily consisting of increases of cash ($1,325,300),
receivables ($35,500), deferred tax asset ($261,000), inventory ($45,900) and
amount due from shareholders ($81,700) and an increase in Property, Equipment
and Mineral Properties of $678,400.
Total liabilities decreased by $3,248,300 from $7,502,300 to $4,254,000 at
October 31, 1995 and 1996, respectively. This decrease was the net result of
a reduction in accounts payable ($917,900), which was comprised of a
combination of negotiated cash payments and write-offs, and decreases in
current and long term notes payable ($2,721,300) resulting from the disposal
of commercial properties and the payment of other obligations partially
offset by the sale of $700,000 of debentures.
The Company's consolidated revenue increased by $101,500 from $71,100 to
$172,600 for the quarters ended October 31, 1995 and 1996, respectively.
This increase in revenue was primarily attributable to increases in
publishing of $72,400 due to no issues of Final Frontier Magazine being
published during the quarter ended October 31, 1995, and product sales of
$34,600 partially offset by the absence of rental income as a result of the
sale of the Company's commercial property. ATG's consolidated loss increased
$999,900 from $894,100 to $1,894,000 for the quarters ended October 31, 1995
and 1996, respectively. This increased loss was the result of increases in
all categories of expenses due to increased business operations made possible
by the improved liquidity of the Company.
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The Company's cash flow used in operations increased from $295,700 to
$1,764,900 for the three months ended October 31, 1995 and 1996,
respectively. The primary source of working capital during the three months
ended October 31, 1996 was the sale of $700,000 of 8 percent Convertible
Debentures for net proceeds of $563,500 and net proceeds from the sale of
stock and stock subscriptions of $365,500. In the comparable period in 1995,
the primary source of working capital was the sale of Common Stock for net
proceeds of $361,896. The Company anticipates that it will be able to
continue its operations at the current level for the remainder of the fiscal
year without the sale of additional securities or generating significant
revenues from existing operations, however, there can be no assurance to this
effect.
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PART II
OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES
(a) Not applicable.
(b) Not applicable.
(c) During September, 1996, an aggregate of seven thousand (7,000) shares of
Common Stock were issued to two individuals in consideration of services
rendered. These are claimed to be exempt from registration under the Securities
Act of 1933, as amended (the "Act"), pursuant to Section 4(2) thereof, as
transactions not involving a public offering, in that the purchasers had full
access to all material information concerning the Company and were acquiring the
shares for investment and not with a view to distribution. There were no
underwriting discounts or commissions paid in connection with the issuance of
the Common Stock nor was any advertising or other form of general solicitation
used by the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
None.
(b) REPORTS ON FORM 8-K.
None.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN TECHNOLOGIES GROUP, INC.
By: /s/ John Collins
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John Collins
Chairman of the Board,
Chief Executive Officer and
Treasurer
Date: January 7, 1997
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